News blog

Bullabulling Gold

• BY: Andrew Hore |
• POSTED: 17/04/2014 |

ASX-listed Norton Gold Fields Ltd has launched a A$0.07 a share offer for Bullabulling Gold.

The cash offer is a 30% premium to the previous closing price on ASX. The UK share price was 3p, although it has risen to 3.38p a share.

Bullabulling is considering the offer which should be sent to shareholders by 2 May.  Shareholders owning 6.6% of Bullabulling say they will accept the bid.

What Norton can offer is the ability to finance the development of the Bullabulling project. A lack of cash has been a problem for Bullabulling but it can be argued that the bid does not fully value the progress that has been made. Of course, as Norton points out, to finance the project the existing shareholders are likely to be diluted.

Bullabulling requires investment and sustaining capital of more than £200m to get it back into production. The company estimates that there should be more than 2.2m ounces of gold produced over the life of the mine – an average of 175,000 ounces a year.

In 2013, Norton produced 172,739 ounces of gold at Paddington near Kalgoorlie in Western Australia. The reported post-tax profit for 2013 was A$22.5m on revenues of A$259.7m. Norton lost money the previous year. Zijin Mining Group, which is the largest Chinese gold producer and second largest copper producer, owns 82.4% of Norton. Zijin’s funding has enabled Norton to develop its mining assets. Last year, Norton had A$21.8m returned by the Mining Rehabilitation Fund and there was A$38.3m in the bank at the end of 2013. There are also borrowings of more than A$130m – mainly from the Industrial and Commercial Bank of China.

RFC Ambrian is the financial adviser to Norton. The offer is not subject to a minimum acceptance condition which suggests that Norton would be comfortable as a minority shareholder. It also means that if Norton does acquire a majority stake that it will have control and the minority shareholders will not be in a strong position.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFApril2014_55.pdf