MergerMarket
Eldorado Gold (TSX:ELD) (NYSE:EGO), the Vancouver, British Columbia-based gold mining company, has seen a number of Chinese mining companies show an interest in its assets in the country, CEO Paul Wright said late last week.
During his prepared remarks on the 4Q15 earnings call, the CEO noted that in 2014, the company announced it was evaluating the merits of possibly listing its Chinese assets on the Hong Kong Stock Exchange.
“Since then we’ve had numerous approaches by Chinese mining companies looking to acquire these high quality assets,” Wright said. “I am of the opinion that we will have a resolution to this value-up maximization exercised within the near term and you should expect updates during the second quarter.”
In the Q&A session, Raymond James analyst Phil Russo asked Wright about the prices it was being offered for the Chinese business units. The CEO said any potential sale of these assets would reflect Eldorado’s desire for improvement and the alternatives for the Chinese assets. He noted that it was aware of the market valuation of the units.
“We’re not considering our divestment option to disappoint ourselves in the marketplace, I guess that’s the best way I’d describe it,” Wright said.
Eldorado announced in late October 2014 it had retained BofAML as its sponsor for a proposed Hong Kong Stock Exchange listing of its Chinese business units. Eldorado is the largest foreign producer of gold in China, the company said in its 30 October earnings release, with three operating gold mines (Jinfeng, Tanjianshan and White Mountain) and the Eastern Dragon project. The company's Chinese operations produced more than 325,000 ounces of gold in 2015, its website states.
A published report in January said Eldorado may pursue an accretive spinout or divestiture of its Chinese holdings in the first half of this year. The article noted that the potential sale of its entire Chinese portfolio, which has a net asset value of USD 710m, would give Eldorado the financial wherewithal to pursue accretive M&A.
Earlier on the call, JPMorgan analyst John Bridges asked if Eldorado was being approached with potential targets while it awaited permits for its Skouries mine in Greece.
"People do appear on our doorstep and occasionally have interesting ideas, not a lot. We are clearly in the mode of being open for interesting ideas going forward in the event that we did," the CEO replied. "I'd like to divest ourselves [of] the Chinese assets, we would be looking at some point on how we replace that production both internally and externally."
He added that while Eldorado was a little more open to external opportunities than it had been in previous years, there were very few "gems just waiting on the kerb to be picked up."
A report by this news service in September 2015, citing Wright, said the company’s IPO process for the Chinese units had "advanced to a degree.” The company was running a dual-track process and had seen enough serious expressions of interest that Eldorado wanted to see “where they may lead” in order to properly weigh the value of a potential IPO, the article said.
The CEO declined to identify bidders at that time. Zhaojin Mining [HKG:1818], Zijin Mining [HKG:2899], China National Gold and Jiangxi Copper [HKG:0358] were identified as potential bidders, according to a previous newswire report.
Eldorado’s M&A efforts have been largely focused on acquisitions in the past decade. However, it disposed of a Brazil-based gold company in 2008 and a Peru-based uranium mining company in 2009.
The company has used Canadian advisors for the majority of its buys in recent times, including GMP Securities on the financial side, along with Borden Ladner Gervais and Fasken Martineau Dumoulin for legal. The latter was used for the Peru-based sale.
In-country advisors have also been used, including Macquarie Group and Freehills for Australia-based acquisitions. Dorsey & Whitney has additionally been used on both the buy and sell side, according to the Mergermarket M&A database.
On the call, Eldorado reported total liquidity of just less than USD 670m, including USD 290m in cash and cash equivalents and USD 375m in undrawn lines of credit. The company has a market capitalization of CAD 2.9bn (USD 2.2bn).