China’s Zijin Mining is a step closer to securing a solid footing in the Australian gold market through its proposed takeover of Norton Gold Fields.
The two companies have now signed a “bid implementation deed” on the potential 229 million Australian dollar (US$222.7 million) deal, which follows an unsolicited bid approach by Zijin in April and has won the unanimous support ofiron ore beneficiation equipment Norton’s board.
Zijin Mining Company Secretary Fan Cheung-Man last September said the company was eager to expand its presence overseas and secure more gold reserves. Australia is the world’s second largest producer of gold, behind China.
Exactly what direction Zijin plans to take with Norton is unclear.
“We haven’t had specific discussion around that,” Norton’s managing director Andre Labuschagne said in a telephone press conference. “I just go at this stage what their chairman has been saying to the market, which is that they are looking for a growth vehicle.”
Talks on business strategy will also occur in the coming weeks as the formal bid is tabled. Mr. Labuschagne says Norton is expecting significant benefits from the tie-up, namely through its access to Zijin’s technological laboratories.
The deal is pitched at 25 cents a share with a special dividend of no more than 2 Australian cents. At 0224 GMT, Norton’s shares were up 9.5% at 23 Australian cents a share.
Zijin, China’s largest gold producer, already holds 16.98% of Norton, whose directors have recommended the offer in the absence of a higher bid.
“Zijin has been involved with us [since] September last year and we see there is significant upside and synergies the company can draw from this transaction,” Mr. Labuschagne said.
He said the bid is “in early stages,” with the companies yet to discuss detailed terms, including whether he will remain with the company as managing director.
The takeover is conditional on approval by Australia’s Foreign Investment Review Board. Chinese regulatory approval is also required. Under the terms of the deed, it is also a requirement that the spot price of gold doesn’t drop below US$1,400 a troy ounce for a 72-hour period of trading in the coming six months.
Mr. Labuschagne said Zijin now has six weeks to lodge its bidder’s statement, after which the bid will have to remain open for at least a month before the deal proceeds.
Norton produced 152,000 ounces of gold from its open cut and underground operations at Paddington, near Kalgoorlie in Western Australia, and recently added two new mining operations, the Homestead underground mine and the Navajo Chief open cut, to supply ore to its processing facility.
Mr. Labuschagne told reporters Friday Norton hadn’t “had any negative feedback at all” regarding the Chinese firm’s offer.
Zijin, which is listed in Shanghai and Hong Kong, has a market capitalization of over US$12 billion and holds extensive interests across a broad range of commodities, including gold, copper, zinc, lead, tungsten and iron ore. It has interesting in Asia, Africa and South America.
