Orvana Ups The Ante In Battle For Kinbauri

VANCOUVER — Orvana Minerals (ORV-T, ORVMF-O) sweetened its all-cash offer for Kinbauri Gold (KNB-V, KINBF-O) a week after Kinbauri and ATW Gold (ATW-V, ATWGF-O) announced intentions to merge. Orvana had offered 55¢ for each Kinbauri share on May 11 — a bid that Kinbauri’s board of directors rejected — but now Orvana says it is willing to pay 75¢ per share.

News of the second bid boosted Kinbauri’s share price by 7.25% to 74¢.

At this point, Kinbauri, which has convened a special committee to consider the new offer, has advised its shareholders not to act.

Orvana, however, has urged Kinbauri shareholders to accept its offer of cash instead of voting in favour of a deal with ATW.

Orvana says the ATW merger would create a “cash-starved junior gold company” in need of major financing to advance its projects.

Though Kinbauri has not yet responded to the current Orvana offer, it argued when it entered into a letter of agreement with ATW that the deal would better suit Kinbauri shareholders; on July 10, the merger implied a Kinbauri share price of 85¢ versus the 55¢ of Orvana’s original offer.

Kinbauri also said the merger better fit the company’s goal of becoming a mid-tier gold producer. The deal with ATW would see Kinbauri shareholders receive 1.35 ATW shares for each Kinbauri share. The combined company would have 149.7 million shares outstanding, of which former Kinbauri shareholders would own 53.5%.

The duel for Kinbauri is not the only battle that is heating up, however. In a more or less separate matter, Kinbauri and Glen Eagle Resources (GER-V, GERFF-O) have entered into arbitration over a failed agreement between the two that would have seen Glen Eagle purchase a 45% stake in Kinbauri’s Spanish assets for US$32 million.

The deal, which predated Orvana’s original offer, subsequently fell through as Glen Eagle signalled its original source of financing, a consortium of European banks arranged through Paradise Peak Holdings, had evaporated. Kinbauri then announced

it was withdrawing from the agreement.

After Kinbauri withdrew, Glen Eagle accused Kinbauri of breaching their earlier agreement, as it was still confident it could source funds. Glen Eagle is seeking $25 million in damages. Kinbauri has announced that it too will seek damages.

Further complicating the matter is a recent accusation made by Jaguar Financial (JFC-T, JGFCF-O), a significant Kinbauri shareholder. (See “Jaguar” story on Page 1.) It says Glen Eagle relied on false documentation to support sources of funding Glen Eagle subsequently says it arranged after the US$32 million fell through. Glen Eagle denies the allegation.