Despite China being the largest producer of gold one of the country’s biggest state-owned gold mining companies is looking westward to lock-up future production.
Shandong Gold Group has tabled a US$1-billion offer for Jaguar Mining (JAG-T, JAG-N) and its Brazilian gold assets.
Word of the deal was leaked to Reuters by two anonymous sources said to be close to the deal.
The move will continue a trend that began with base-metals miners over into the gold market, as Chinese firms have been scooping up base metal assets held by western based company’s for the last five years.
The latest deal, if consummated, would secure a hefty premium for Jaguar shareholders as it is said to be for $9.30 per share in cash – that amount works out to a remarkable 73% premium on the company’s Nov. 15 closing price.
In Toronto on Nov. 16 the company’s shares were up 47% or $2.57 to $8.03 on 5.3 million shares traded.
In a press release Jaguar confirmed the offer and said that its board is now looking at other alternatives, but cautioned that as of yet, nothing has gone beyond the exploratory stage.
If Shandong is successful, the deal would be one of the biggest overseas acquisitions by a Chinese gold miner and would signal that the country is taking a strategic interest in the yellow metal.
Shandong Gold is one of China’s largest gold miners with 685,000 oz. of gold production in 2010. The company says it has 28.2 million oz. of non-compliant gold resources.
Jaguar Mining calls itself one of Brazil’s fastest-growing gold producers and is largely focused on the greenstone belt in the Brazilian state of Minas Gerais
The company has three operating gold mines there, Trumalina, Paciencia and Caete, and expects to produce just over 160,000 oz. of gold this year.
Its pipeline is dominated by the Gurupi project in the state of Maranhão where a feasibility study on the project was released in January of this year. That study outlined a mine that would go into production in 2013 and produce roughly 150,000 oz. of gold per year over its 13 year mine life.
The project has resources of 69.89 million tonnes grading 1.12 grams gold for 2.5 million ounces.
For a short period of time Jaguar is situated as one of the most important gold producer in Brazil due to its aggressive behavior and capacity of relatively fast decisions. The technical group is the main responsible for that position. Actually the difficult task of evaluation of gold deposit was performed objectivelly by Jaguar, and certainly Shandong Gold made a good deal.