b2gold 1.72, page-25

I've been a holder of PIR on/off for a couple of years. Unfortunately, I wasn't holding before today's news, but I did buy some this morning. I reckon this is a low ball offer that has a great chance of being trumped. Randgold would top my list of potential acquirers, but with an asset of this quality, I reckon there may be a few interested parties. I think/hope I can short B2G so I can hedge myself, as I reckon the gold price could go either way over coming months.

Here's a snippet from today's AFR:

Highly rated gold junior Papillon Resources says the merger proposal with Canadian company B2Gold will remove any uncertainty over how to fund development of its Fekola project in Mali.

The long-expected $615 million deal will see shareholders in ASX-listed Papillon represent about one quarter of the merged entity, after being given 0.661 B2Gold shares for every Papillon share.

The deal offers a premium of 20.6 per cent when compared to Papillon’s last closing price, but the premium is closer to 36.5 per cent when compared to Papillon’s closing price on May 23; the day before offer was received.

The premium is higher again when measured over the 20-day volume weighted average price.

B2Gold is a $1.68 billion company with three operating mines and assets in South America, Asia and Africa.

It is currently developing the Otjikoto gold project in Namibia, which will begin production in the December quarter of this year.

The deal is designed to give Papillon shareholders exposure to immediate gold production while retaining exposure to its flagship Fekola gold project in Mali.

Papillon chief executive Mark Connelly said it would also clarify the funding puzzle for Fekola, which is a large gold resource an expected to produce at around 300,000 ounces per year..

‘’We are really excited about this combination...it is a growth story,” he said this morning. “With the development of Fekola it provides certainty around funding.”

B2Gold chairman and chief executive Clive Johnson said financiers were happier to fund new gold mines if they were within companies that already had operating mines and cashflow.

“There is a lot of money out there for gold companies if you have cashflow and credibility,” he said.

Papillon shares were 5.5 cents higher at $1.425 in early trading on Wednesday.

Papillon shareholders will vote on the proposal in September, and approval from 75 per cent of votes is required.

Mr Johnson said Papillon and B2Gold had a lot of shareholders in common, and the company would not proceed with development of Fekola until Otjikolo was complete later this year.

“As long as I’m around, we won’t be building two mines at the same time,” he said.

Curiously, Mr Johnson said the timing for the merger would have better suited B2Gold in early calendar 2015, in comments that potentially suggest another suitor was shaping up for a tilt at Papillon.

Mr Connolly did not elaborate when asked whether another suitor had been working up a takeover or merger offer for Papillon.

Papillon’s share price has gyrated at times in response to political ructions in Mali, including a coup that took place in 2012

But Mr Connolly said those ructions had never affected the operations at Fekola, and the government was now very supportive of mining and foreign investment.