Northgate Minerals Corp (NXG)

[fazoolius]

Nice article:

http://www.theage.com.au/news/business/canadian-rescue-for-victorian-goldminer-550-jobs/2007/10/29/1193618796176.html

Canadian rescue for Victorian goldminer, 550 jobs
Barry Fitzgerald
October 30, 2007

CANADIAN miner Northgate Minerals has come to the rescue of Perseverance Corp, Victoria's biggest gold producer from mines at Fosterville, near Bendigo, and Stawell that employ 550 workers.

In an agreed equity and debt takeover deal that values Perseverance at $282 million, Northgate's support for Victoria's rocky gold revival removes the risk that Perseverance could be brought down by operational shortcomings at Fosterville and its heavily out of the money gold hedge book.

Northgate's 20¢-a-share bid values Perseverance's ordinary shares at about $180 million. But the cashed-up Canadian — it is essentially debt free and is holding cash of more than $340 million — will also acquire debt and bank guarantees with ANZ of $33.5 million, as well as ANZ's $48 million hedge book exposure.

The entry of Northgate completes a trifecta of disappointments for the local industry, with production halted at the Bendigo project of Bendigo Mining because of grade concerns and Ballarat Goldfields having sold itself to PNG gold producer Lihir Gold when it found old-timers had mined expected shallow ore positions.

The entry of Northgate and Lihir means that the Fosterville/Stawell and Ballarat projects are now on more solid footings while Bendigo has ample cash to explore/develop new ore positions on its goldfields.

Perseverance told its shareholders that the deal with Northgate was in their best interests, even if the bid price was less than half the 44¢ a share that Perseverance was trading at in February. The full extent of Perseverance's operational problems at Fosterville became clear in June.

The impact of the rising gold price on the group's hedge book did not help. In July, Perseverance raised $26.5 million at a heavily discounted price to see it through its cash flow problems. It was then that other companies began circling.

Northgate has extracted "no shop" and "no talk" undertakings from Perseverance in an attempt to ward off other would-be bidders, as well as a $2.5 million break fee if the takeover does not proceed under certain circumstances.

Perseverance shares rose 4.5¢ to 19¢ in response to the takeover deal.

Perseverance chairman John Quinn said: "In addition to providing our shareholders with a significant premium, I expect that the operational expertise and financial resources of Northgate should allow the assets to prosper going forward."

He said the alternative was to raise substantial capital to restructure company finances.