Mergers: More Gold In The Market

The urge to merge in the medium to small end of the Australian gold sector continues with Focus Minerals making a friendly bid for Crescent Gold to create a company with a value of around $350 million.

Focus (ASX code: FML) and Crescent Gold Ltd (CRE) revealed the merger plans in a statement to the ASX yesterday.

A week ago today, Catalpa Resources and Conquest Mining announced their intention to create a 300,000-ounce a year producer across their WA and Qld assets, with Newcrest Mining adding mines in Queensland for a 33% stake after a $150 million capital raising.

That deal will create a company with a merged value of around $1.1 billion.

Both companies in yesterday's deal operate on the WA goldfields, Focus in the Coolgardie region and in the Laverton district.

Focus is offering one share for every 1.18 Crescent shares, representing a 30.5% premium to Crescent's closing price last Friday of 5c a share.

Focus shares closed at 56.8c, up 0.8 of a cent, or 16% (boom). Focus shares slipped to 7.6c, down 1.3% on the day.

In a pre-bid agreement Focus said it had grabbed a 19.9% stake in Crescent from its major shareholder Deutsche Bank Group.

As a prelude to this deal Focus provided a $3 million secured loan in May and in mid June gave Focus a $10 million working capital facility.

Focus had around $40 million in cash on hand before the merger, so it is in effect keeping Crescent alive while the deal goes through. It also makes it very hard for a rival bidder to disrupt the bid,

Focus said in yesterday's announcement that the combined group will have a JORC resource inventory of 4.3 million ounces of gold, with the Focus open cut and underground operations in and around Coolgardie working largely on mid to high grade ore, while Crescent has open cuts grading around 2 grams/tonne.

The merged group will produce 230,000 ounces in 2012 -- 100,000 ounces from Crescent's recently re-opened Summit open-pit mine at Laverton and 130,000 ounces from Focus's Tindals underground mine.

"The merger of Crescent and Focus provides a unique opportunity for both businesses to fast track their growth aspirations making Focus one of Australia's top five gold producers,'' Campbell Baird, CEO of Focus, said in yesterday's statement.

Crescent's managing director Mark Tory said the company's board considered the transaction to be a compelling opportunity for its shareholders.

"Post-acquisition, Crescent shareholders will be part of an entity with an exciting production and exploration growth profile, strong balance sheet, diversified asset portfolio, and a strong track record in mine operations,'' he said.

Copyright Australasian Investment Review.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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