eResearch | With the price of gold up over 16% year-to-date and almost 23% year-over-year, the time seems to be right for Chinese mining companies to buy up Canadian gold companies.
In the past month, three Canadian-listed companies have been acquired by two Chinese companies.
The transactions tag the value of the assets in the US$44 to US$102 per Reserve gold ounce.
TMAC Resources / Shandong Gold
In May, Shandong Gold Mining Co. Ltd. agreed to buy TMAC Resources Inc. for C$1.75 per share in cash at an implied Enterprise Value of C$384.2 million (US$281.4 million) or US$80 per reserve gold ounce or US$39 per resource gold ounce.
Shandong Gold Mining Co., Ltd. (SHSE: 600547) is owned (47%) by Shandong Gold Mining (Hong Kong), a state-owned Chinese gold mining company.
In connection with the transaction, Shandong Gold agreed to provide TMAC with interim funding of US$15 million (C$21 million) million by subscribing to 12 million shares of TMAC at $1.75 per share.
TMAC operates the Hope Bay property in Nunavut, Canada with 3.5 million gold ounces in Ore Reserves and an additional 3.8 million gold ounces in resources. TMAC began producing gold from the Doris Gold Mine in early 2017.
Guyana Goldfields / Zijin Mining Group
On June 3, Zijin Mining Group Company Limited (SEHK:2899) agreed to acquire Guyana Goldfields Inc. (TSX:GUY) for C$1.85 (US$1.33) per share in cash and values the transaction at an implied Enterprise Value of C$307.1 million (US$224.9 million) or US$102 per reserve gold ounce or US$39 per resource gold ounce.
Guyana Goldfields owns and operates the Aurora Gold Mine in Guyana with an Ore Reserve of 2.2 million ounces of gold with an additional 3.5 million ounces of gold Resources.
Zijin acquired Guyana Goldfields after a protracted takeover battle with bidders Silvercorp Metals Inc. (TSX:SVM) and a consortium of Gran Colombia Gold Corp. (TSX:GCM) & Gold X Mining Corp. (TSXV:GLDX).
Zijin has been active in the capital markets, making strategic investments and acquisitions in Canadian mining companies. In April 2019, Zijin invested C$67 million in Ivanhoe Mines Ltd. (TSX:IVN) and in December 2019, Zijin acquired Continental Gold Inc. (TSX:CNL) for C$1.1 billion in cash.
Cardinal Resources / Shandong Gold
On June 18, Shandong Gold agreed to acquire 100% of the issued and outstanding shares in Cardinal Resources Limited (TSX: CDV ; ASX: CDV) at a price of A$0.60 (US$0.41) per share in cash and values the transaction at an implied Enterprise Value of A$327.28 million (US$223 million) or US$44 per reserve gold ounce.
The Shandong Gold offer is a 31% premium to the Nord Gold SE proposal of A$0.45775 per share that was offered on March 16, 2020.
After the Nord Gold offer, Cardinal’s Board of Directors was exploring potential transactions to maximize shareholder value and believes that the Shandong Gold offer was the best option for shareholders.
In connection with the transaction, Shandong Gold has agreed to provide Cardinal with interim funding of $11.96 million by subscribing to 26 million shares of Cardinal at $0.46 per share.
Cardinal’s main project is the Feasibility-Stage Namdini Gold Project in Ghana with an Ore Reserve of 5.1 million ounces of gold.
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