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Barrick Gold offers $354-million to buy Cadence Energy

2008-07-14 07:00 MT - News Release

Mr. Jamie Sokalsky reports

BARRICK PROPOSES INNOVATIVE TRANSACTION TO MITIGATE ENERGY COST PRESSURES

Barrick Gold Corp. has proposed to make an all-cash offer of $6.00 per share to acquire Cadence Energy Inc. for a total cost of $354-million.

Cadence's production was approximately 3,600 barrels(1) of oil equivalent per day. The production consists of over 70 per cent light crude oil, which has historically tracked diesel prices. Cadence's properties have a long production history and a reserve life index of approximately 13.8 years(1) consistent with the long life nature of Barrick's core gold mining operations.

"We are confronting the energy cost challenges facing our industry through this long-term economic hedge of about one-quarter of our direct oil consumption and a significant portion of our direct natural gas consumption," said Jamie Sokalsky, executive vice-president and chief financial officer. "This unique approach is enabled by the proposed acquisition of quality, long life reserves of approximately 18.2 million boe(1) at an acquisition cost of approximately $20 per boe."

The acquisition of Cadence is expected to form a long-term strategy to economically hedge oil exposure at lower rates than currently available in the forward market. In addition, the acquisition is expected to have break-even cash flow at oil prices that are less than one-half of current market prices.

"This initiative follows on our other innovative programs such as our investment in our own power plant and hedging of our input costs and currency exposures," added Mr. Sokalsky. Barrick is assured a cost-effective energy supply from its Western 102 natural gas power plant in Nevada. Barrick is also investing $70-million (U.S.) for a 36-megawatt wind farm in Chile as part of its long-term energy strategy.

Cadence is currently party to an arrangement agreement with Daylight Resources Trust, and Barrick's proposed offer represents a 10-per-cent premium to the closing price of Cadence's shares on July 11, 2008. Barrick's offer is contingent on the completion of customary due diligence and entering into customary agreements to support the offer. The offer is not subject to any financing condition.

Full details of the offer will be included in the formal offer and takeover bid circular to be filed with the securities regulatory authorities and mailed to Cadence shareholders. Barrick expects to have the takeover bid documents filed as soon as possible. The offer will be open for acceptance for at least 35 days following the commencement of the offer. The offer will be subject to certain conditions, including receipt of all necessary regulatory clearances, absence of material adverse changes and acceptance of the offer by Cadence shareholders owning not less than 66-2/3 per cent of the Cadence common shares on a fully diluted basis. Once the 66-2/3-per-cent acceptance level is met, Barrick intends, but is not required, to take steps to acquire all outstanding Cadence common shares.

Barrick has been developing its overall energy strategy over the course of the last few years and has been advised in this proposed transaction by Mustang Capital Partners, RBC Capital Markets, Sproule Associates, Davies, Ward Phillips and Vineberg LLP and Fraser Milner Casgrain LLP.