Barrick Gold makes winning bid for Equinox

What is considered unorthodox, however, is when a world leading gold producer like Toronto-listed Barrick Gold Corp stretches itself making a big ticket bid to acquire a major copper producer like dual Canadian- and Australian-listed Equinox Minerals via an all-cash offer, even with the current sky-high prices for both metals.

Nevertheless, that is what’s happened. On April 26, just three weeks after Hong Kong-listed Minmetals Resources (MMR) made a verbal bid of C$6.3 billion for Equinox – the largest ever by a Chinese company in the space – Barrick trumped it by sweetening the bid by 16% to C$7.3 billion. And unlike the MMR bid, which was hostile, the Barrick bid is seen as friendly.
According to a Barrick statement, the Equinox board has unanimously approved entering into the support agreement, and is recommending that Equinox shareholders tender to the offer.
“We are very pleased to support this offer,” Craig Williams, Equinox president & CEO says, citing Barrick’s status as a top flight international mining company.

Aaron Regent, Barrick president & CEO, adds that in acquiring Equinox her company stands to gain a high quality, long-life asset, which is consistent with their strategy to increase their gold and copper reserves through exploration and acquisitions. Certainly the recent rise in the price of the yellow metal has given heft to those ambitions.
“(This) transaction is expected to be immediately accretive to cash flow and earnings on a per share basis. It does not dilute our shareholders gold exposure per share, and it enhances copper exposure and leverage per share in a strong copper price environment.”

With Barrick shares off nearly 7% in the day’s trading, however, it would seem investors are yet to be fully convinced. As noted above, it’s an unorthodox move for a gold producer in Barrick’s league; and there are specific concerns, such as mining taxes in Zambia – where Equinox’s key asset, the Lumwana copper mine is located – are not a settled issue.
Equinox shares, meanwhile, gained 2.7% on the same day, suggesting to some that the present state of play doesn’t amount to game over for MMR.

AVCJ has previously reported that Minmetals enjoys the considerable advantage of being a listed unit of giant SOE China Minmetals, plus access to the huge capital pools in PRC banks and other institutions.
So another MMR bid is possible, with potential David & Goliath dimensions. The present agreement between Barrick and Equinox – which includes a $250 million cancellation fee – allows Barrick to match any superior proposal. 

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• Barry Miller