A hostile takeover bid turned friendlier on Sunday when Ventana Gold Corp. (VEN-T) verbally agreed to a new takeover price of $13.06 per share from AUX Canada Acquisition, up 43¢ from the latter’s initial offer of $12.63 per share in November.
The higher offer price represents a 30.2% premium to Ventana’s closing share price on Nov. 16 2010, the day before an AUX affiliate, EBX Group, said it was bidding for the company. AUX is one of the subsidiaries of Brazilian billionaire Eike Batista.
The new price also represents a 33.8% premium to Ventana’s 20-day volume weighted average trading price through that date.
News of the agreement sent Ventana’s shares up 64¢ or 5.21% to $12.92 apiece with 16.2 million shares trading hands.
“Management may now have considered that AUX’s new $13.06 offer was in the best interest of shareholders, given the increasing pressure the share price was under with no competing bid forthcoming,” Nicholas Campbell, an analyst with Canaccord Genuity, wrote in a research note to clients. “We consider that a competing bid is unlikely to materialize.”
Others like Michael Fowler of Loewen, Ondaatje, McCutcheon, have not ruled out a competing bid. “This still may not be the end game,” he wrote in a note. “Presumably there will be a break fee attached to this agreement however there is still an outside chance of an alternative bidder (say 20%) as the improved offer is only a 43 cent increase on Batista’s last bid.”
Last last year Ventana’s board rejected AUX’s initial offer, saying it “undervalues Ventana and its world class La Bodega project, and fails to reflect the significant resource expansion potential at La Bodega.”
The La Bodega project, about 400 km northeast of Bogota, has multiple high-grade zones of gold, silver and copper. The initial drill hole encountered 107 metres grading 7.8 grams per tonne gold. Since that time Ventana has completed 341 holes totalling 126,000 metres up to September 2010 to complete its first resource estimate for the project.
The project has an inferred resource of 27 million tonnes grading 3.9 grams gold per tonne, 21.5 grams silver per tonne and 0.14% copper for a total of 3.5 million ounces of gold, 19.2 million ounces of silver and 84.6 million pounds of copper. Altogether Ventana holds 4,591 hectares of mineral rights in northeastern Colombia.
On Nov. 8 Ventana released a scoping study on La Bodega that contemplated an underground operation operating at up to 7,500 tonnes per day. Gold production in the first full six years of the mine’s estimated 14-year lifespan was estimated to be 301,000 ounces, with byproduct cash costs of $322 per oz. over the same six-year period. At a 5% discount rate the pre-tax net present value was calculated at $807 million with a pre-tax internal rate of return of 34% and payback in 2.9 years.
Over the last year Ventana has traded between a low of $6.41 per share (July 20 2010) and a high of $14.13 per share (Nov. 17 2010). The Vancouver-based company has 109.14 million shares outstanding.