A hostile takeover bid turned friendlier on Feb. 13 when Ventana Gold (VEN-T) verbally agreed to a new takeover price of $13.06 in cash per share from EBX Group, up 43¢ from the latter’s initial offer of $12.63 per share last November.
The higher offer price represents a 30.2% premium to Ventana’s closing share price on Nov. 16, the day before privately held EBX Group said it was bidding for the company. EBX is controlled by Brazilian billionaire Eike Batista.
The new price also represents a 33.8% premium to Ventana’s 20-day volume-weighted average trading price prior to Nov. 16.
News of the agreement sent Ventana’s shares up 64¢ to close at $12.92 apiece with 16.2 million shares trading hands.
“Management may now have considered that (EBX’s) new $13.06 per share 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 to clients. “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¢ increase on Batista’s last bid.”
Last year Ventana’s board rejected EBX’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 gold per tonne. Since that time Ventana has completed 341 holes totaling 126,000 metres up to September 2010 to complete its first resource estimate for the project.
La Bodega has an inferred resource of 27 million tonnes of 3.9 grams gold, 21.5 grams silver per tonne and 0.14% copper for a total of 3.5 million oz. gold, 19.2 million oz. silver and 84.6 million lbs. copper. Altogether Ventana holds 45.9 sq. km of mineral rights in northeastern Colombia.
On Nov. 8, Ventana released a scoping study on La Bodega that contemplated an underground mine 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 oz. per year, with byproduct cash costs of US$322 per oz. over the same six-year period. At a 5% discount rate, the pretax net present value was calculated at US$807 million with a pretax 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 (Nov. 17). The Vancouver-based company has 109.14 million shares outstanding.
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