AMARA MINING PLC MELBOURNE (Reuters) - Australia's Perseus Mining (>> Perseus Mining Limited) has made an all-scrip bid worth $85 million to take over London-listed Amara Mining (>> AMARA MINING PLC), looking to pool their West African gold resources as bullion prices defy the commodities gloom.
The gold sector has been seen as ripe for consolidation as smaller companies that have been sapped of capital look to team up with those that have cashflow from producing mines and ride a pick-up in gold prices.
The bid has the unanimous support of Amara's board, with both companies viewing a merger as the best way to boost their value after lagging a surge in gold stocks over the past year.
Both are eager to develop Amara's promising Yaoure project in Cote d'Ivoire, which could produce 203,000 ounces of gold a year over 15 years and be profitable even if gold fell back to $1,000 an ounce.
"Strategically, it's a good move," said Reg Spencer, an analyst at Canaccord Genuity.
Amara executive chairman John McGloin said teaming up with Perseus, which has cash flow from its Edikan mine in Ghana and no debt, made sense in a market where it is impossible for explorers to line up funds to build a mine.
Amara also wanted to tap Perseus' experience in overcoming problems at its low-grade Edikan mine.
"They've got the scars of an operation that has been difficult," McGloin told analysts on a conference call.
Perseus is offering 0.68 of a new Perseus share and 0.34 of a Perseus warrant for every Amara share, which it said valued Amara at 14.6 pence a share, or 61 million pounds ($85 million), a 42 percent premium to its close last Friday.
Subject to Amara shareholders' approval, the deal is expected to be completed by mid-April.
Perseus Chief Executive Jeff Quartermaine said he was eager to expand beyond Ghana and wanted Yaoure as it would have higher annual output and a longer life than Perseus' proposed Sissingue project in Cote d'Ivoire.
"Given that opportunity to buy an asset that we believe is very valuable for a good price is something clearly we want to do," he told Reuters in a phone interview.
Perseus shares fell as much as 10 percent, which Canaccord's Spencer said reflected a drop in gold prices on Monday, the potenial dilution of Perseus' share base and uncertainty over funding for Yaoure.
Amara has estimated building the mine would cost $334 million. Perseus aims to start producing there in 2019.
(Reporting by Sonali Paul; Editing by Richard Pullin)
By Sonali Paul
