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Alfa Group Refused to Cross Canada’s Board
Alfa Group has refused to buy 32 percent in Canadian High River Gold for $272 million due to the deterioration of precious metal market. It is the first deal crabbed in the industry, but the analysts predict the number of the M&A deals on gold-mining market will be going down until stabilization.
Canadian High River Gold (HRG) announced late Tuesday that Alfa Group had refused to buy out 32 percent in HRG for $272 million. The given reason was decline of the precious metal market and of the market in general. The price of the gold oz slid from $1,000 at the start of the second quarter to $910. It went down by roughly 10 percent in addition to $830 from August 1, when the deal was announced. As to HRG, its stocks shed 52 percent.
HRG is mining gold in Russia and Burkina Faso. In Russia, it develops Irokinda and Zun-Kholba deposits (Buryatia), holding 85 percent in the local producer – Buryatzoloto. Berezitovy mine, the Amur Region, was launched in July of 2007.
In Alfa Group, however, they give different reasons for the deal’s failure. According to Alexei Mikhailovsky, who heads Alfa Group’s United Gold Co., Toronto Exchange blocked the deal because of the acquisition pattern. The plans were that Alfa Group’s Veromart Securities would buy out new stocks of HRG via two tranches, paying 25 above the market price for them. Then, it would hand over the stocks to United Gold Company. “The asset is still attractive,” Mikhailovsky specified. “Despite that the price doesn’t appear acceptable, given the changes in market opportunities.”
Alfa Group’s withdrawal from the deal has threatened the plans of HRG to develop deposits in Buryatia and to acquire new assets in Russia and Africa. As a result, its stocks lost another 14 percent on Toronto Exchange by 7:00 p.m., MSK, Wednesday.
www.kommersant.com
All the Article in Russian as of Aug. 28, 2008
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