American Barrick's $2.1-Billion Bid Pits Cash-Rich Miner Against Lac Minerals Chairman

Strategic Insights -

Canadian mining giant American Barrick Resources Corp. has jumped into the battle for Lac Minerals Ltd. with a $2.1-billion bid, making it the world's third-largest gold producer if combined with Lac. The sudden bid pits cash-rich American Barrick against Royal Oak Mines Inc. in the fight for Lac's shareholders. Lac chairman James Pitblado wants the company to remain independent so shareholders can benefit from its future growth potential.

Key Takeaways:

  • American Barrick's bid is worth $2.1 billion, making it the world's third-largest gold producer if combined with Lac Minerals Ltd.
  • The bid pits cash-rich American Barrick against Royal Oak Mines Inc. in the fight for Lac's shareholders.
  • Lac chairman James Pitblado wants the company to remain independent to benefit from its future growth potential.
  • The American Barrick bid was put together quickly over the weekend, and the company has the financial capacity to develop Lac's gold reserves in Chile and North America into producing mines.
  • The combined entity would produce almost three million ounces of gold per year, making American Barrick the third-largest gold producer in the world.
  • Lac's chairman remains independent by expressing concerns over American Barrick's offer, which would result in shareholders owning shares in American Barrick rather than Lac.
  • Royal Oak Mines Inc. has also made a hostile takeover offer for Lac Minerals, which American Barrick's bid might eliminate.
  • Potential suitors for Lac Minerals include TVX Gold Inc. and Homestake Mining Co., which might be in an alliance with Kinross Gold Corp.

Statistics:

  • The combined entity would produce almost three million ounces of gold per year.
  • American Barrick's Goldstrike mine in Nevada is generating cash of about $1 million per day.
  • Lac's possible doubling of its geologic reserves to 27 million ounces of gold, and an increase to 13.5 million ounces of proven, probable, and possible reserves, is a significant step for the company.
  • The Canadian mining giants face the task of replacing about one million ounces of gold annually, which can be challenging and expensive.
  • Shares of American Barrick fell $1 to $31.37 a share on the Toronto Stock Exchange, while shares of Lac rose 87 cents to $14.25.
  • Arbitragers bought Lac's shares and sold American Barrick's shares to take advantage of the price spread.
  • American Barrick expects to mail its offer this week, and shareholders will have 21 days to decide.
  • Lac directors have 10 days to respond to the American Barrick bid, and the Royal Oak bid is set to expire on Aug. 9 unless extended.

Sources:

  • "Byline: ALLAN ROBINSON Mining Reporter" (undated)
  • Gold Fields Mineral Services Ltd., 1994 report (specifically, the "1993 production" table)