JUNIOR West African gold company Papillon Resources will merge with Canadian gold developer B2Gold Corp in a confirmed $615 million deal. Perth-based Papillon said the definitive merger agreement would remove any funding uncertainty for development at its flagship Fekola project in Mali.
The companies announced the agreed merger consideration in early June, which would comprise 0.661 B2Gold common shares for each Papillon share, equating to a purchase price of $1.72 per Papillon share. The deal offered a 36.5 per cent premium on Papillon’s last closing price, before the offer was placed and the company entered a two-week trading halt.
Although Vancouver-based B2Gold’s offer was well below the $2 per share mark Papillon had previously targeted, Papillon chief executive Mark Connelly told The Australian the arrangement was a “good offer in a challenging market”. “We’re very comfortable with the premium,” he said. “Don’t underestimate the volatility of the gold price. The entire gold sector is down because of the gold price.”
B2Gold is a $1.68 billion company with three operating mines and assets in South America, Asia and Africa. The deal is expected to give Papillon shareholders exposure to immediate gold production, while retaining benefits from the Fekola investment.
“Shareholders can participate in a very solid growth stock,” Mr Connelly said. “The combination of Papillon and B2Gold provides Papillon shareholders with the opportunity to gain immediate exposure to a significant, growth orientated and profitable producer with diversified operations whilst still retaining material exposure to the upside potential of Fekola.
“B2Gold’s track record of successful mine development and operation, coupled with its balance sheet, cashflows and funding capacity will de-risk the development of Fekola and should maximise the value of the project for both Papillon and B2Gold shareholders.”
Fekola ranks as one of the premier gold development assets in the market, with a current mineral resource estimate of 40.1 million tonnes of ore at an average grade of 2.4g per tonne of gold, for 3.14 million ounces of contained gold. Average annual production is expected to reach 245,000oz of gold across a minimum 11-year mine life, with commissioning to occur within the next 18 to 24 months.