B2Gold Corp TSX:BTO announced that it has signed an agreement to acquire Auryx Gold Corp TSX:AYX at a purchase price of approximately $0.88 per share of Auryx for a total equity value of $160 million. The merged companies will hold a 92% interest in Otjikoto gold project in Namibia as well as a 100% interest in two other Namibia projects.
B2Gold President/CEO Clive Johnson tells ResourceClips.com, “This is a friendly-merger deal—a plan of arrangement to combine the two companies. It’s valued at around $160 million in B2 shares. We’ve been aware of the Otjikoto project for a couple of years, and we thought it looked interesting. Our acquisition policy is to look for projects where we can come in and help a good technical group—which Auryx has—and bring our financial strength to bear on the project as well as our own exploration, mine-building and production experience. So we’ll be working with Auryx, and they’ll end up getting B2Gold shares.
We’re definitely ready to build another mine, and we have the team to do it. We’ve shown we can do it anywhere in the world, and we see this project in Namibia as being a very robust project in a good country—Clive Johnson
“We liked Otjikoto because it came out with a PEA that looked attractive,” Johnson continues. “It is a robust project economically. We think there’s a lot of upside, and we think there’s a lot of optimization that can be done in a number of areas to make an already good project even better. It’s got a minimum 10-year mine life with, by 2015, [production of] 100,000 ounces per year. We think there’s upside on that, but that’s a long mine life—at least 10 years. And Namibia is a very good jurisdiction. The project is in a good location. The logistics are fantastic in terms of it not being close to a population but with power and highways. The tax regime is fair, and the mining law works. We think it’s a good acquisition for us, and it can have a significant impact on our production. By 2015, we’re looking at getting up over 300,000 ounces of production. Beyond that, if we build the Gramalote project [in Colombia] with AngloGold Ashanti that could take us up to over 450,000 ounces a year. So there’s a lot of growth built into what we’re doing. Otjikoto will become an important part of our growth profile, and we look forward to finding out more about it.
“We tend to look at opportunities. We didn’t go to Namibia saying we have to have something in Namibia—we’ve been looking at lots of projects. The project itself was the first thing that attracted us. The fact that it’s in a good jurisdiction helps. Some people ask if we can handle all these projects in all these different locations, but I think you have to look at our history. The team, all of us together in B2Gold, built Bema Gold—so we’ve done it before in Russia, in South Africa, in Chile and now in Nicaragua. We’ve have an unusually strong team from exploration all the way through construction and production. We’re definitely ready to build another mine, and we have the team to do it. We’ve shown we can do it anywhere in the world, and we see this project in Namibia as being a very robust project in a good country.
“A number of us are going to visit the project next week, and we’ll come out with a more detailed plan going forward. But [Auryx] was talking about having a definitive feasibility study completed by 2Q 2013, with a budget—between now and next July—of around $20 million. So a lot of drilling and a lot of feasibility work. We have not reviewed that in detail yet, but we don’t see any reason to disagree with it, so we’re just going to go down to firm up the budget.”
Johnson adds, “Another important point here is the financial strength we bring. With [Auryx's] cash and our cash we’ll have about $100 million in cash and no debt or hedging. And we’re generating from the Nicaragua mines right now about $118 million of cash from operations. So we can do all of our capital spends at the mine and all of our exploration—our budget this year totalled $53 million—and we can take on this project as well and still maintain a really strong cash balance going well into the future.”
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by Ted Niles