Ventana Gold Corp. has bluntly rejected the $1.2-billion hostile takeover bid from Brazilian billionaire Eike Batista, refusing to sell its assets in the booming Colombia mining market for what its directors say is a steal of a price.
Now the company is trying to employ a two-part strategy. Vancouver-based Ventana is telling investors it is more than capable of raising the $300-million required to develop its La Bodega project, but it has also hired Goldman Sachs and TD Securities to help engage other suitors to increase the takeover price.
"We just think that this bid is opportunistic at this point in time and there's a significant amount of value to be gained," said Ventana's president and chief executive officer, Stephen Orr, on a conference call. "The premium is simply inadequate."
As proof, he cited two recent Canadian gold deals. Kinross Gold Corp. paid 1.7 times the net asset value of Red Back Mining Inc.'s African assets and Goldcorp Inc. paid 2.2 times the value of Andean Resources Ltd.'s Argentine assets, he said. AUX Canada Acquisition Inc., which is owned by Mr. Batista through EBX Group, has offered only 1.1 times Ventana's net asset value, the target company said.
The rejection of the offer by Ventana's board was expected. "This is not a surprising event," noted analyst Michael Fowler at Loewen, Ondaatje, McCutcheon Ltd. "We believe there will be other bidders for Ventana or Mr. Batista will have to sweeten his offer."
Mr. Fowler suggested that a successful bidder will have to pay about $15 per share. EBX's current all-cash offer is for $12.63 per share.
But on the conference call, Ventana disclosed that the current bid isn't EBX's first - a move that was aimed at turning up the heat on Mr. Batista. Starting in November 2009, Mr. Batista's company approached Ventana three times behind the scenes, Ventana executives said. The most recent friendly offer was worth $13.06 per share, more than EBX put up in its public offer, they said.
EBX has said little publicly about the deal, but Ventana is trying to lure other bidders in by highlighting just how much potential is packed into the assets. In the next two years the company hopes to double its inferred resource base from 3.5 million to 7 million ounces - the current estimates are conservative by nature because more drilling is required.
Ventana also said it found a sizable silver deposit when drilling and is in the process of determining how much of the mineral might be there.
To buy time, Ventana's board has implemented a shareholders' rights plan. EBX's bid expires Jan. 24.