Vancouver — Bema Gold’s (BGO-T, BGO-N) second-largest shareholder, Tradewinds Global Investors, says it will oppose the US$3.1-billion takeover offer by Kinross Gold (K-T, KGC-N ) because it undervalues the mining company.
“We intend to vote against the offer,” unless Kinross increases its bid for Bema by at least 10%, said Paul Hechmer, who helps manage $30 billion at Tradewinds. He made the comments during an interview with Bloomberg news service.
A unit of Nuveen Investment, Tradewinds owned 32 million Bema shares, or about a 6.6% stake, as of Sept. 30 and has bought more Bema shares since then, Hechmer said.
Toronto-based Kinross, Canada’s third-largest gold producer, has no intention of changing its Dec. 22 cash-and-stock bid, said spokesman James Toccacelli in an interview with Bloomberg.
The proposal was valued at $6.44 per Bema share as of Jan. 19, when Bema rose 4 to $6.46 and Kinross gained 2 to close at $14.49.
Kinross also said it would keep some South African mines previously planned to be spun off into a company run by Bema CEO Clive Johnson.
Johnson said Hechmer’s objection to the Kinross deal isn’t shared by investors who have tendered shares so far. He declined to say how many have done so. The final vote is slated for Jan. 30, and Kinross needs the support of at least two-thirds of the votes cast.
“The voting so far is more than ninety-five per cent in favour,” Johnson said. “They (Tradewinds) are the only significant shareholder that I’ve talked to that has indicated to date that they are not in favour of the deal.”
“The offer undervalues the assets as of today,” Tradewinds gold analyst Nathaniel Velarde said. “There are not too many properties out there or gold companies out there with the reserves and resource base — and the potential to grow that resource base — that Bema has. Bema is a scarce property in a consolidating gold market.”
Bema investors would get 0.4447 of a Kinross share and C1 for each Bema share. Kinross still plans to spin off some of Bema’s exploration prospects in Russia and northern Colombia to B2Gold Corp., the new exploration company to be led by Johnson, for $15 million.
“Instead of the value of those properties being given to Bema Gold shareholders, they’ve been spun out to a different entity,” Hechmer said. “We think that those are part of our properties as shareholders.”
Hechmer suggested that the structure of the transaction with B2Gold — the entity owned by Bema executives, including Johnson — may be “part of the reason they are able to get the company cheaply.”
The six Bema executives in B2Gold are chief financial officer Mark Corra; Thomas Garagan, vice-president of exploration; Dennis Stansbury, vice-president of production and development; Roger Richer, vice-president of administration; and Ian MacLean, vice-president of investor relations, said Johnson, a Bema founder and the CEO since 1989.
“This is, in my view, an arm’s-length negotiation between Kinross and B2Gold,” said Johnson, who owns more than 100,000 Bema shares and 5 million share options.
“Frankly, they’ve obviously gotten much more market value if you look at what was paid for the assets.”
Johnson said he plans to list B2Gold over the next year. Bema paid about $2.4 million for the two exploration licences adjacent to the Kupol gold-silver project in Russia and has invested $3 million in the Colombian joint venture with South Africa’s AngloGold Ashanti (AU-N).
The arrangement would allow Kinross to “capitalize on Bema’s management’s extensive collective knowledge and relationships in Russia,” Bema said in its Dec. 22 proxy filing.
Kinross would hold an indirect 9.9% stake in B2Gold with an option to increase that to 19.9%. The company would also have a right of first offer on B2Gold’s joint-venture project in Russia.