AngloGold to take out Cripple Creek partner

AngloGold Ashanti (AU-N) is looking to cement its hold on the Cripple Creek and Victor mine in Colorado by acquiring its minority partner at the project — Golden Cycle Gold (GCGC-N).

AngloGold is offering US$150 million worth of its depository shares for Golden Cycle’s 33% stake in the mine. If approved by shareholders, the deal will give AngloGold a 100% interest in the mine, but operations would continue under the Cripple Creek & Victor Gold Mining Co. joint-venture name so as not to disrupt permitting.

The deal allows for one Golden Cycle common share to be converted into 0.29 of an AngloGold Ashanti depositary share.

Using AngloGold’s Jan. 11 share price of US$49.59, the offer works out to an offer price of US$14.38 per share — a 29% premium over Golden Cycle’s volume-weighted average price for the 30-day period up to Jan. 11.

Shareholders owning roughly 44% of Golden Cycle’s shares have agreed to support the deal. The group includes officers and directors from Golden Cycle as well as New York-based Midas Funds, which holds a 20.2% stake in Golden Cycle.

The president of the fund, Thomas Winmill, told the Colorado Springs Gazette that the fund agreed to vote for the acquisition because it was “the best way to bring liquidity for all shareholders.”

Colorado-based Golden Cycle and AngloGold have been joint ventured at the property since Golden Cycle brought its holdings to Anglo in 1991.

The last audited resource estimate was done at the end of 2006, putting the mine’s reserves at 3.8 million oz. with additional resources coming in at 7.3 million oz. The mine produced 282,000 oz. gold last year.

Don Ewigleben, president and chief executive of AngloGold Ashanti North America says Anglo has no internal numbers on what the deal would work out to on a per-oz. basis.

“When you manage the property, you don’t look at ounces in that vein,” he says. “We’re just looking all the time at how to move the project forward.”

A feasibility study examining whether the mine’s current operating plan needs to be revised is under way and due by the end of the year.

Currently, the mill is set to process ore until 2012. Ewigleben says production for 2008 is slated to come in at 300,000 oz.

Despite being in operation since 1994, Golden Cycle has yet to see any proceeds from operations due to a loan the joint-venture company took from AngloGold.

The arrangement calls for the loan to be repaid from proceeds from the mine before Golden Cycle would begin to earn its 33% share of the proceeds.

At the end of 2007, there was still US$311 million to be paid; Golden Cycle’s portion of the loan is also 33%.

Golden Cycle was incorporated in 1895 and produced 13.5 million oz. gold between 1908 and 1949 in the Cripple Creek and Victor district.