Miner Rio Alto's shares drop on deal to buy Sulliden
(Reuters) - Canada's Rio Alto Mining Ltd RIO.TO RIOM.N said on Wednesday it would buy Sulliden Gold Corp Ltd SUE.TO for about C$300 million ($275 million) in an all-stock deal to create a Peru-focused gold miner.
After the announcement Rio Alto's stock fell on concerns the price it was paying was steep.
The friendly takeover will combine Rio Alto's producing La Arena gold mine with Sulliden's nearby Shahuindo project to create a combined company with near-term production potential of about 300,000 ounces of gold per year.
The proximity of the operations to each other, Shahuindo's decent gold grades and Rio Alto's experience at developing open pit heap leach projects made the acquisition a good fit, said Christos Doulis, an analyst at PI Financial in Toronto.
"But the price raises some question marks. Did they pay too much? It values an unbuilt asset at a similar level to a built 200,000 ounce-a-year project today," Doulis said.
Shares in Rio Alto fell 7.5 percent to C$1.97 on the Toronto Stock Exchange. Sulliden's stock rose 33 percent to C$1.04.
Rio Alto said it will pay 0.525 of one Rio Alto share for each outstanding Sulliden share. The offer values Sulliden at C$1.12 per share, representing a 43 percent premium to the stock's Tuesday close on the Toronto Stock Exchange.
Rio Alto's La Arena gold mine is expected to produce between 200,000 and 220,000 ounces in 2014, while Sulliden's Shahuindo gold project is slated to start production by late 2015 or early 2016.
The deal value excludes the stake Sulliden shareholders will get in a new company that will hold Sulliden's stake in a East Sullivan prospect in Val-d'Or, Quebec. Continuación...