Perseus Mining (ASX:PRU) has utilised a portion of its US$600 million (over A$900 million) cash reserve to acquire a significant stake in OreCorp, a competing African mining company.
In this move, Perseus CEO Jeff Quartermaine underscored the company's eagerness to use its cash reserve for expansion, stating, "Perseus continues to assess and, where deemed commercially viable, deploy its reserves of cash, bullion, and undrawn debt facilities totaling approximately US$900 million to pursue opportunities that complement its existing asset portfolio and our organic growth program."
In two separate announcements made on Monday to the ASX, Perseus revealed that it initially purchased a 15.03% stake in OreCorp to block a bid from Canadian firm Silvercorp through a scheme of arrangement. Two and a half hours later, Perseus issued a second statement confirming that it now holds 19.9% of OreCorp and intends to vote against the Silvercorp scheme at a meeting of OreCorp shareholders scheduled for Friday, December 8.
Perseus clarified that it is not presently engaged in active discussions with OreCorp and does not plan to submit a change of control transaction in competition with Silvercorp's current scheme for OreCorp shareholders.
The news of Perseus's acquisition of a blocking stake and its substantial financial resources compared to Silvercorp caused OreCorp shares to decline more than 10% to 48 cents around 12:50 pm on Monday, while Perseus shares rose more than 2% to $1.77.
Silvercorp's initial offer was made on August 7 this year and was revised on November 23. The revised offer increased the cash component to 19 cents per share, with the share component remaining unchanged, raising the bid's value to approximately $A260 million. Silvercorp also offered OreCorp $A28 million in funding through an equity placement to advance the Nyanzaga gold project in Tanzania.
Perseus's first announcement on Monday described its OreCorp stake as "a strategic equity investment." OreCorp is an emerging mineral development company listed on the ASX, with its key project being the Nyanzaga Gold Project in northwest Tanzania, boasting a reported Probable Ore Reserve of 40.08 Mt @ 2.02 g/t gold for 2.60 million ounces of gold.
Perseus CEO Jeff Quartermaine expressed the company's ambitions for OreCorp, stating, "It provides an investment in an attractive African gold project located in a jurisdiction that has a long and successful history of gold mining." He further emphasised Perseus's ability to contribute to the successful development and operation of the Nyanzaga Gold Project.
Perseus currently operates three gold mines in Africa: Edikan in Ghana and Sissingue and Yaoure in Cote d’Ivoire, and owns the Meyas Sand Gold Project in Sudan. Thanks to higher gold prices and effective cost management, Perseus witnessed a 26.7% increase in revenues from $US1.43 billion in the year to June, with net income surging 83% from $A233.60 million to $A427.40 million.
