VANCOUVER — Shares of West African junior Volta Resources (TSX: VTR) skyrocketed around 100% on Oct. 28 following news of a friendly, all share bid from geographically diversified producer B2Gold (TSX: BTO; NYSE-MKT: BTG) that values the gold explorer at roughly US$63 million.
The companies signed a binding letter of agreement wherein shareholders of Volta will receive 0.15 B2Gold shares for each share held, which represents a purchase price of roughly 42¢ per Volta share. B2Gold is offering a 106% premium based on respective share prices as of Oct. 25, and an 81% premium based on volume weighted average share prices over the past 20 trading days.
Volta's portfolio includes nine projects across Burkina Faso and Ghana, with a focus on prospective West African greenstone belts. The company's flagship asset is its 81% stake in the Kiaka gold project located 120 km southeast of Ouagadougou, Burkina Faso, which is nearing the feasibility stage.
Kiaka's measured and indicated resources total around 153 million tonnes grading 0.99 g/t Au for 4.9 million contained oz. Back in mid-2012 Volta released a prefeasibility study (PFS) at Kiaka that modelled a US$610 million open pit mine, which focused on in-pit reserves of 126 million proven and probable tonnes grading 0.96 g/t Au for 3.9 million contained oz.
Kiaka would crank out around 340,000 oz Au annually over a 10 year mine life via a carbon-in-pulp leach circuit, and generate a US$548 million pre-tax net present value at an 8% discount rate, along with a 23.3% internal rate of return and 4.3 year payback period. Volta's PFS assumed a gold price of US$1,372 per oz.
Despite reporting "multiple expressions of interest from a range of banks and project finance advisory groups" following its PFS, Volta indicated that significant financial challenges for development stage gold companies were one of the main catalysts behind the deal. Volta's stock was down nearly 60% year-on-year to around 20¢ per share at the time of B2Gold's offer.
Volta's second resource stage asset in Burkina Faso is its Gaoua copper-gold porphyry project, which covers around 558 km2 near the southern limit of the Boromo greenstone belt. The project's Gongondy and Dienemera deposits host roughly 282 million inferred tonnes grading 0.32% Cu and 0.35 g/t Au, which equates to around 3.3 billion lb of contained copper equivalent.
B2Gold was searching for an asset to strengthen its development pipeline, as the company closes in on a 2014 production target at its Otjikoto gold project in Namibia. Upon completion of the transaction, B2Gold will have roughly 675 million shares outstanding, with former Volta shareholders holding approximately 3.4% of the combined company.
Volta shot up 20¢ following the news, as 24 million shares of the company traded hands en route to a 40.5¢ per share close at the time of writing. Volta maintains 155 million shares outstanding for a 63 million press time market capitalization, and reported US$10 million in working capital at the end of June. Volta has traded within a 52-week window of 11¢ and 65¢.
Meanwhile, B2Gold jumped around 3¢ on 9.2 million share trade volumes following news of the deal. The company maintains 651 million shares outstanding at the time of writing for a $1.85 billion market capitalization. B2Gold has moved within a 52-week trading range of $1.87 and $4.24.
B2Gold's acquisition requires roughly 67% acceptance by shareholders of Volta, who have until Jan. 15, 2014, to tender their shares.
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