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re: and 50 cents is better Kingsgate bids for Andean

Ben Sharples
Wednesday, February 22, 2006

KINGSGATE Consolidated has its eyes fixed on the Cerro Negro gold project in Argentina, with the gold miner making an off-market scrip takeover bid for junior explorer Andean Resources. However, it may have a fight on its hands.



Epithermal quartz veins within the Vein zone at Andean Resources Cerro Negro project, Argentina.

"Kingsgate sees clear benefits from merging the two companies into a larger, more diverse gold mining company," the company said. "The acquisition will represent a material growth step for Kingsgate and add a second major asset with medium-term development potential to its portfolio."

Under the offer, Kingsgate is offering one of its shares for every 15 Andean shares. Kingsgate has dangled a carrot to Andean shareholders in the form of the Kingsgate dividend of 5c, provided the offer is successful and they are shareholders by April 21.

The Kingsgate offer values Andean shares at 39c, a 22% premium to yesterday's closing price.

But Andean director Warren Gilmour isn't sold on the offer.

"Gavin Thomas is a joint director between the two companies, so there has been some degree of understanding between the two companies, but I think the offer is somewhat undervaluing, in my view, the assets of Andean," he told MiningNews.net.

"Whilst I'm not against Kingsgate as a company and I believe there are some synergies between the two companies, I think we've got to get to a situation where the starting off point is more appropriate for Andean shareholder base.

"In my view, we have had a recent high trading point of 37c, the project has great potential, and it's a full scrip offer, so I would say the premium should be closer to value Andean at 50c, rather than 39c.

"With my questioning of some shareholders in Andean, the conclusion is that would be a figure that would be more applicable than what they have offered."

The Cerro Negro gold project has a non-JORC compliant resource of 500,000 ounces at the Vein Zone.

"Together with its access to financial resources, Kingsgate believes it is best placed to accelerate the potential development of Cerro Negro project to maximise value for all shareholders," the company said.

Kingsgate operates the Chatree gold mine in central Thailand, which is expected to produce up to 150,000oz at cash costs of $US200-220/oz in fiscal 2005-06.

Shares in Kingsgate, which has a market capitalisation of $A503.6 million, closed unchanged at the end of Wednesday trade at $5.87, while shares in Andean closed at 32c – capitalising it at $A85.8 million.

Courtesy mining news

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