Oceana Gold Corp, which plans to buy El Salvador gold prospector Pacific Rim Mining Corp for C$10.2 million, says a number of small gold miners are struggling to raise cash -- making them potential takeover targets.
“There are smaller companies struggling to raise money as equity capital has dried up and they are distressed,” Oceana Gold’s chief executive Michael Wilkes told DataRoom. “We are staying in the game, looking for opportunities, but will not acquire anything that comes along.”
Wilkes says he’s only interested in acquiring gold miners whose all-in sustainable cost is no more than US$1,050 an ounce. At 1405 AEST the spot price of gold was US$1,317.97 an ounce, down 21 per cent this year.
Oceana Gold is issuing 0.04006 of its shares for each Pacific Rim share, resulting in Oceana Gold issuing 6.76 million of its stock to Pacific Rim shareholders. Oceana says the all-scrip offer values Pacific Rim shares at a little more than 6 Canadian cents, or a 73 per cent premium to Pacific Rim’s closing share price on the Toronto Stock Exchange on October 7.
Oceana Gold has also agreed to advance $1 million to Pacific Rim for working capital.
In 2009, Pacific Rim filed an arbitration claim with the International Center for the Settlement of Investment Disputes in Washington DC. The company is seeking monetary compensation.
El Salvador’s government has refused to issue a decision on Pacific Rim’s application for mining and environmental permits. Wilkes says it may be two years before agreement with the government and local communities can be reached. The El Salvador government is due to make a submission on the issue by January 10, 2014.
The El Salvador site, El Dorado, may hold as much as 1,430,500 ounces of gold equivalent. Oceana Gold has mines in New Zealand and the Philippines.