Hi folks,Thought you may be interested in the following article...

Hi folks,

Thought you may be interested in the following article published in Fairfax media today:


Avoca defends merger
Barry FitzGerald
September 10, 2010

AVOCA Resources chief Rohan Williams has a job ahead of him in persuading the local market of the merits of the group's agreed $US2 billion ($A2.2 billion) merger with Canada's Turkey gold specialist, Anatolia Minerals.

The merger continues the theme of consolidation in the gold sector in response to near record prices for the metal but received a lukewarm response in the Australian market.

Avoca shares fell 14 to $3.20 yesterday in response to the ''merger of equals,'' reflecting disquiet that Avoca was giving up more for the marriage than Anatolia was. Each Avoca shareholder will receive 0.4453 Anatolia shares for each Avoca share, implying a 9 per cent premium to Avoca's share price before the merger was announced.

Anatolia is developing the 6 million-ounce Copler gold mine in Turkey. But first production is not due until the December quarter. Avoca in the meantime is producing from three mines in Western Australia (280,000 ounces of gold in the 2011 financial year) and has a ground position on the Kalgoorlie-Norseman belt that has given the market confidence in its stand-alone plans to be producing 400,000 ounces a year from 2013.

Argonaut Securities analyst Troy Irvin said the merger deal would ''battle to get off the ground in its current form''.

''With Avoca now in play, better value proposals may emerge. One potential player is Eldorado Gold, the recently spurned suitor of Andean, which is active in Turkey and armed with arguably highly priced paper,'' Mr Irvin said.

A key player in the merger proposal is Swiss-based private equity fund investor in resources Pala Investments. It holds 22 per cent of Avoca and just under 20 per cent of Anatolia. It has indicated it supports the merger in the absence of a superior proposal emerging.

On the bid's merits, Mr Williams said it had to be realised that the Copler mine was probably going to make about $US120 million to $US130 million a year when in full production. ''It is going to be very profitable and I think it will become a lot bigger than it currently is, and Avoca shareholders are getting in on the ground floor,'' he said.

The combined group is expected to have total production next calendar year of 437,000 ounces at a cash cost of $US403 an ounce.

''Then in four years we are going to be an 800,000-a-year producer, making us a very significant mid-tier gold producer. And I think Avoca shareholders will benefit dramatically from that,'' Mr Williams said.