East Africa-focused Shanta Gold (LSE: SHG) said on Wednesday it had agreed to a £141.9 million ($239.7 million) takeover bid by Tanzania-based Saturn Resources.
Under the deal, Shanta shareholders will be entitled to receive 13.5 pence a share, which represSents a 6.7% premium to Tuesday’s closing price of 12.65 pence. They will also be entitled to receive an interim dividend of up to 0.15 pence a share, the company said.
Saturn Resources, which is part of ETC Holdings, said the move came as the valuation of publicly listed gold companies has de-rated, adding that U.K.-listed African gold miners were a good example of such trends, as they are now trading over 40% down on a Price to Net Asset Value (P/NAV) basis compared to five years ago.
The P/NAV ratio reflects how much investors are prepared to pay per one net asset.
Saturn Resources believes the impact on junior gold miners within Shanta’s peer group has been exacerbated by other factors, such as lack of diversification, jurisdictional issues and poor liquidity.
“This is an all-cash offer at a premium to the current price when the gold price is close to an all-time high,” Shanta Gold said in the statement. “As such it provides an exit opportunity in cash for all shareholders taking into account the current gold price as well as the operational and other risks inherent in the business.”
Shanta’s directors have been advised that the terms of the acquisition are fair and reasonable, the miner said. It noted they intended to recommend shareholders vote unanimously in favour of the deal at an upcoming general meeting.
Last year, the company was approached by Shandong Gold, Chaarat Gold (LSE: CGH) and Yintai Gold but negotiations fell through.
Shanta owns and operates two gold mines in Tanzania — New Luika, which is the country’s fourth largest mine, and Singida. It also has the West Kenya project, believed to be one of Africa’s highest-grade gold assets. It holds exploration properties in both countries.
Company shares were up 2.3% to £12.95 on Wednesday, valuing Shanta at £133 million. Its shares traded in a 52-week range of £8.60 and £14.
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