B2Gold to Buy CGA - C$1.07 Billion Dollar to Take Over Philippine Gold Mine

Clive Johnson, chief executive officer of Vancouver-based B2Gold. Photographer: Suzanne Plunkett/Bloomberg

B2Gold Corp. (BTO), a Canadian company with assets in Latin America and Africa, agreed to buy CGA Mining Ltd. (CGA) to gain control of the largest operating gold project in the Philippines.

The deal is worth about C$947 million ($966 million), or C$2.80 a share, in stock as of yesterday's close, down from its announced value of C$1.07 billion. CGA's Australian-traded shares rose 4.7 percent to A$2.67 at the close in Sydney today.

Buying Perth, Australia-based CGA will give B2Gold the Masbate mine in the Philippines, which has total resources of about 7.7 million ounces, according to the company's website. Adding Masbate would increase B2Gold's output by 57 percent, making it reliant on production from the Southeast Asian nation.

"It's a vote of confidence in the Philippines," the nation's Mines and Geosciences Bureau Director Leo Jasareno said in a phone interview today. The government has just renewed for another five years the license for processing in the Masbate gold mine south of Manila, Jasareno said.

Holders of CGA will get 0.74 of a B2Gold share for each they own, the companies said in a joint statement yesterday.

CGA rose 2.3 percent to C$2.71 at the close in Toronto yesterday. B2Gold fell 12 percent to C$3.79, its biggest decline since October 2008. CGA has gained 32 percent this year and B2Gold climbed 22 percent. The Philadelphia Stock Exchange Gold and Silver Index (XAU), which includes 30 mining companies, has gained 7.9 percent this year.

Immediate Leverage

B2Gold is currently forecast to produce about 350,000 ounces from three mines in 2012, according to yesterday's statement. The Masbate mine, which began operating in 2009, is expected to produce about 200,000 ounces of gold in the year through June.

"CGA and its flagship Masbate mine offers B2Gold shareholders immediate leverage to a significantly larger combined production profile," Clive Johnson, chief executive officer of Vancouver-based B2Gold, said in the statement.

Gold futures, which have gained 13 percent this year, reached a six-month high of $1.781.80 an ounce on the Comex in New York yesterday. Gold has risen for 11 straight years, reaching a record $1,923.70 an ounce on Sept. 6, 2011, in New York, as investors buy the metal as a store of value and a hedge against inflation.

"B2Gold is taking advantage of a strong share price and valuation to add a steady producing asset with a long mine life at what appears to be an attractive purchase price," Steven J. Green, a Toronto-based analyst at TD Securities Inc., wrote in a note yesterday.

Gold Deals

Excluding the B2Gold purchase, there have been $2.54 billion of takeovers of gold companies valued at $200 million or more announced this year, with an average premium of 43 percent, according to data compiled by Bloomberg. There were about $11.6 billion of deals in the same period last year, the data show.

Investment in mining in the Philippines may miss a $16 billion target by 2016 after the government stopped issuing new mining permits in January 2011, Philip Romualdez, president of the Chamber of Mines business group, said at a forum in Manila yesterday. An order from President Benigno Aquino in July extended that moratorium and expanded a mining ban until Congress passes a law giving the government a bigger share in resource contracts.

The B2Gold takeover requires 75 percent of CGA shareholders to vote in favor.

B2Gold was founded in 2007 by the former management team of Bema Gold Corp., which was sold that year to Kinross Gold Corp. (K) for C$3.67 billion. The company operates in Nicaragua, is developing a mine in Namibia and has a joint-venture project with AngloGold Ashanti Ltd. (ANG) in Colombia.

CGA is being advised by BMO Capital Markets and Haywood Securities Inc. and its legal counsels are Blake, Cassels & Graydon LLP in Canada and Middletons on Australia. Genuity Canaccord Corp. is B2Gold's financial adviser while its legal counsels are Lawson Lundell LLP in Canada and Squire Sanders in Australia.


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