Sulliden rejects Century offer

Sulliden Exploration (SUE-T, EXSDF-O) has advised its shareholders to reject a hostile takeover offer from Century Mining, (CMM-V, EXSDF-O) citing doubts of Century’s financial well-being and the reliability of technical assessments for its properties.

Century offered 0.72 of a Century share for each Sulliden share in late November, valuing Sulliden at 41 per share a premium of 51% based on both company’s volume-weighted average over 20 days prior to Oct. 4, when Century first made its intentions public.

Sulliden made its recommendation to reject the offer based on an evaluation done by its legal advisors and independent forensic accounting experts, Rosen & Associates.

The company says Century has limited cash resources and significant liabilities, including share dilution due to financings adding 16.3 million shares, US$71 million in payment liabilities for recent transactions in Peru and future capital requirements for its existing projects.

The company has brought the Ontario Securities Commission and the Authorite des Maraches Financiers of Quebec (AMF) into the equation as well.

Sulliden alleges that Century has not provided full, proper or accurate disclosure relating to the offer. As well, the company has accused Century of being in breach of the Securities Act by improperly and negatively affecting Sulliden’s share price by selling Sulliden shares after it had already planned to make a takeover bid.

In a Jan. 16 announcement, Century noted that it had responded to all allegations that Sulliden made to the OSC and the AMF, and that Sulliden’s complaints were without merit. The company says Sulliden is employing tactics to delay the normal process of the offer.

A successful takeover would end a long battle over the Shahuindo gold property in northern Peru, which has an indicated resource of 38 million tonnes grading 0.95 gram gold per tonne and 22.99 grams silver, or 1.2 million oz. gold and 28 million oz. silver. The inferred resource is 17.2 million tonnes grading 0.62 gram gold per tonne and 12.83 grams silver, or 342,000 oz. gold and 7 million oz. silver.

Sulliden bought the property for $4.13 million from Companhia Minera Algamarca in 2002.

But then Century bought Algamarca shortly afterwards, which was then under new management, and launched a lawsuit declaring the property transfer invalid.

Century also owns the Lamaque mine in Quebec, where it is ramping up gold production to 140,000 to 160,000 oz. per year. A technical report on Lamaque gave the project an internal rate of return of 2322% and an estimated net present value of $297 million based on a gold price of US$800 per oz.

Sulliden shares were down 1.5 to 27 on a trading volume of nearly 40,000 shares while Century shares lost a penny to close at 39 on a trading volume of 95,000 shares.