Gold One market cap seen at R5.9bn after deal Gold One...

Gold One market cap seen at R5.9bn after deal
Gold One International said on Monday that the offer by a Chinese consortium for all of its shares implied a post-transaction enterprise value of 5.9 billion rand or about AU$800 million.

"This is a company-changing transaction," said Christopher Chadwick, Gold One's chief financial officer.

"Just a couple of weeks ago we were a gold junior bringing our first production from Modder East online and today we have the potential to become one of the world's top five producers," Chadwick said.

Gold One said a consortium of Chinese investors had accepted the company's invitation to become a long-term strategic partner in its business.

To ensure that the consortium was successful in its aim to secure at least 60% of Gold One, the takeover transaction had been structured as several interdependent transactions that would see the Chinese investors increase its stake in the company in two or three stages.

The consortium - which is made up of China's biggest state-owned investment company, the Citic Group, which is involved through the Baiyin Non-Ferrous Group and China Development Bank through its China-Africa Development Fund, as well as Long March Capital - already hold a 17.7% stake in Gold One.

In its next step, the consortium will take its stake up to 37% through an initial subscription of shares.

This step will see the new strategic partners, which will pay AU$0.40 or 2.97 rand a share, inject AU$150 million or 1.1 billion rand into Gold One.

Gold One CEO Neal Froneman said that, while the board had not yet decided what to do with the capital, it would not sit on the company's balance sheet.

It would be used to minimise the cost of funding, particularly in light of the company's recent US$250 million or 1.69 billion rand acquisition of Rand Uranium.

The second part of the transaction is the cash takeover offer.

Pitched at AU$0.55 or 4.08 rand a share, the offer is anticipated to take the consortium's stake to between 60% and 75% of Gold One - thereby triggering the change of control.

Should the consortium not achieve its desired 60% to 75%, a further additional subscription would see the new investors pay AU$0.53 a share for shares up to AU$100 million or 742 million rand.

There is also an adjustment subscription or claw-back comprising an additional placement of shares at no additional cost should Gold One not achieve its 2011 forecast production of 120,000 ounces of gold.

Gold One's flagship mine is the Modder East operation near Johannesburg, which produced 26,188 ounces of gold in the March quarter. This was an improvement of almost 22% on the previous quarter.

The company has forecast that the mine will produce 120,000 ounces this year and grow its annual output to 150,000 ounces for three years from 2012.

Gold One is also bedding down its Rand Uranium transaction, which is expected to double its gold production to 300,000 ounces a year.

Froneman said it was unfortunate that Rand Uranium was given its name since it had not produced a pound of uranium since it was established as a uranium producer.

Rand Uranium was spun out of Harmony Gold Mining (HAR) three years ago when it sold the Cooke 1, 2 and 3 underground operations and the surface assets of Randfontein Estates Gold Mine, excluding the Doornkop Section, to Rand Uranium's current shareholders.

Announcing the transaction last month, Gold One said the acquisition would add about three million ounces of gold mineral reserves as well as 13.5 million ounces of gold mineral resources.

It would also allow Gold One the opportunity to consider gold and uranium co-product optimisation when undertaking production planning. This should reduce the cost of gold production to about US$400 an ounce, suggested Froneman.

Rand Uranium hosts a uranium mineral resource and mineral reserve base of about 90 million pounds and 41 million pounds respectively.

Gold One only expects to start producing uranium by 2015. In the meantime, it plans to invest 200 million rand to recapitalise the mine and re-engineer the processing plant.

Froneman said Gold One management, which had pledged to stay on board for the next three to five years, had agreed not to tender more than 50% of their options.

Chinese interest in Gold One was triggered by its move to spin off its deeper level mining assets into Goliath Gold last year.

By establishing the new medium-depth gold exploration and development company through a reverse takeover of investment holding company White Water Resources (WWR), Gold One was able to ringfence its shallow low-cost ounces and strong operational cash flows while unlocking value in Gold One's deeper resources.

Froneman said the Chinese consortium wanted Gold One to grow into one of the world's largest gold companies.

Baiyin, who leads the consortium with a 60% stake, said its strategic partnership with Gold one was part of its "ongoing global strategy".

"Baiyin has been seeking opportunities to invest in precious metals assets, in particular in Africa," said Baiyin chairman Li Peiping.

Dubbed the Jintu transaction - Jintu means golden path in Mandarin - the deal should accelerate Gold One's growth strategy by giving it a strong international partner and access to capital.

"Gold One will continue to position itself as an active participant in the consolidation of the African and the global gold mining industry," the company said in its statement announcing the transaction.

Gold one is to retain its listings on the JSE and Australian Stock Exchange and said it might seek a listing in Hong Kong should the deal go to plan.

But if the new partners secured 90% or more of the company as part of its offer, it was likely that Gold One could be delisted.

Gold One shareholders will be asked to vote on the deal on July 22 and the transaction is seen as closing by the end of September this year.