gold market happenings

  1. 708 Posts.
    Today ST BARBARA Mines announced that it is to merge with Canadian junior Geomaque Exploration and Midas Gold to form Defiance Mining Corp, a company being tagged as a growth-orientated, international gold producer to be headquartered in Canada and with listings on the Toronto Stock Exchange, the Australian Stock Exchange and London's AIM market.

    I've copied most parts of an article on about this three-way merger and its posted below. Two things I want to say about this story today and how it relates to LSG/EAGM and the rationalisation story in Africa. LSG shareholders (I know of whiteyg, gaweb) especially should take note:

    Firstly, EAGM will be listing this way, I'm certain. While Robin Widdup of LSG has been coy about it, he admitted to me in a recent conversation that they were looking at the option of not only listing EAGM on the ASX but also on the Toronto Stock Exchange. The rationale for this is quite well explained in the article below. The bonus for LSG shareholders is basically higher multiples for EAGM.

    Secondly, you are going to see more deals like this three-way merger, as this gold bull run continues & as the smaller guys look to get bigger and become targets of the big gold producers.

    In Africa, there are currently four Aussie producers - GGN, RBK, RSG & SPX, that could be merged into one and provide at least a new Aussie large cap gold producer to be reckoned with.

    The X-Factor, as with the St. Barbara merger announced today, could be a venture capitalist investor, that wants to realise the true value of the investment. LSG is the X-factor with the four African companies above, as it owns a majority stake in 3 of them & a minority in 1. (RSG)

    In the St. Barbara merger, the X-Factor was the Resource Capital Fund. This fund is a Denver-based resource equity investor with interests in both St Barbara and Geomaque.

    This is the article that I mentioned:

    St Barbara's Miller eyes Canadian pot of gold
    Michael Quinn
    09 January 2003

    THE chief executive of St Barbara Mines and the soon-to-be-created Defiance Mining, Stephen Miller, says the principal reason for the merger and move to Canada is access to debt and equity markets on better terms than in Australia.

    Defiance will require at least US$50-60 million over the next couple of years to develop the two projects - Paulsens in Australia and Tasiast in Mauritania - that will contribute the bulk of the planned 350,000 ounces per annum production profile by the end of 2005.

    Miller said Canadian junior gold investors (including institutions) have been far more supportive of the sector than their Australian counterparts.

    "This is witnessed by their support for over C$2 billion of new equity issues for junior and intermediate gold stocks in 2002," he said.

    "Not only is there support [for new equity issues], they [Canadian companies] trade on multiples far superior to what we trade down here.

    "Australian companies generally trade at 0.5-0.8 NAV [net asset value], but the guys in the north typically trade at 1.5 to two times NAV. There is quite a disparity.

    "Clearly, St Barbara/Defiance has a pipeline of growth projects [and] having access to debt and equity markets on far better terms clearly leads to benefits to shareholders."

    The fact of the matter is what you've got in North America is a well-experienced capital market which supports aspiring junior and intermediate gold stocks," Miller said.

    Full story is here:

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