The drive towards consolidation in the Australian gold mining industry prompted the merger, according to St Barbara’s managing director, Stephen Miller.
“There will be substantial value adding for both companies through this merger,” he said.
Miller said St Barbara had been on the lookout for a new acquisition and Taipan needed capital to develop its Paulsens deposit in the Ashburton mineral field, 180km east of Paraburdoo, Western Australia.
The Paulsens deposit is expected to produce up to 100,000 ounces of gold per annum at an extremely low cash cost of about $225/oz.
“With St. Barbara’s strong balance sheet and position, we have the capital to springboard the Paulsens project into production by this time next year,” Miller said.
St Barbara’s Meekatharra projects are on track to produce 150,000oz per annum and are expected to rise to in excess of 175,000ozpa in 2002. The company currently holds 2 million oz in resources and 400,000 oz in reserve.
“We plan to spend $5 million on exploration to prove up further resources in Meekatharra,” Miller said.
The company recently hedged 35% of gold production from its Meekatharra operation at about $500/oz.
Currently, St Barbara has $15 million in net liquid assets but anticipates increasing this figure to $27 million following the sale of surplus mining equipment.
Proceeds from preliminary sales of assets were used to invest in a 9.9% stake in Sydney-based miner Goldfields Limited, placing St Barbara third on its register.
Goldfields shares currently trade at $1.36 a share, well above St Barbara’s average entry price of $1.12.
Consolidated Mines’ total annual output is forecast to be more than 275,000ozpa of gold at a cash cost of $330/oz.
“The merger has been extremely meritorious,” Miller said. “It will substantially kick-out the market capitalisation of both companies.”
A shareholders meeting held on September 21 will sign-off on the last of the formalities of the merger.
Under a scheme of arrangement, St Barbara’s shareholders will receive three Taipan shares for each St Barbara share they hold.
The largest shareholder in both companies, Strata Mining Corporation NL, has endorsed the merger. Strata holds 19.51% of St Barbara and 13.67% of Taipan.
