Moto waits for Red Back to make a competing bid

While most analysts already agreed that Randgold Resource‘s (GOLD-Q, RRS-L) $546-million cash and share offer for Moto Goldmines (MGL-T, MTOGF-O) surpassed an earlier bid by Red Back Mining (MGL0T, MTOGF-O), it’s now official.

Moto today announced that it views Randgold’s deal as superior and that it’s willing to pay a $15.25-million break fee to get out of the Red Back agreement.

Red Back has until Aug. 5 to top Randgold’s July 16 offer. At the time of the offer, analysts were predicting a potential bidding war but Red Back hasn’t said whether it would make competing offer. No one from Red Back’s office, based in Vancouver, could be reached for comment today.

If Red Back does make a better offer, Moto will have to enter an amended Red Back agreement and the deal with Randgold will be terminated. In certain circumstances, Randgold would receive a US$14.6-million break fee.

The companies interest is in the Moto gold project in the Democratic Republic of the Congo. An ‘optimized’ feasibility study looked at building an open-pit and underground mining operation that would produce 484,000 oz. gold per year over the first five years, with cash costs around US$303 per oz. The project’s reserves are about 42.3 million tonnes grading 4 grams gold per tonne for 5.5 million oz. gold.

In early June, Red Back offered Moto a $513 million all-share deal but now the company will have to add a cash sweetener similar to Randgold’s if it wants to entice Moto. That would likely mean Red Back would have to do a financing or taking on extra debt when it came time to put the Moto gold project into production.

Randgold had the help of AngloGold Ashanti for the cash portion through a separate side agreement that would see Anglo pick up a 50% interest in the Moto gold project in the Democratic Republic of the Congo.

Under the deal Moto shareholders would be able to choose receiving $5 (US$4.47) per share for some or all of their shares to a maximum of US$244 million, subject to proration. Otherwise, Randgold will exchange 0.07061 of a Randgold share for each Moto share.

Randgold already has gotten 36.1% of Moto shareholders to sign support agreements if the Red Back transaction isn’t withdrawn. Randgold also has formal written support for the transaction from the government in the DRC.