PMI Gold's merger with Canada's Keegan Resources is facing stiff opposition from some of its major shareholders, with the deal at risk of being voted down at a shareholder meeting on February 20.
Sources say PMI shareholders including Macquarie, Taurus Capital Management and Acorn Capital will vote against the deal, billed as a merger of equals when announced in early December. The $670 million merger needs the support of 67 per cent of shares voted at the meeting, and it is understood as much as 30 per cent of the company's total issue have either already cast proxy votes against it, or indicated they will do so. Sources say the major shareholders are unhappy with the terms of the deal.
Each company has a late stage project. When the merger was announced, PMI was seeking funding for its Obotan mine, and Keegan is in stage feasibilities for its Esaase mine. Each was also sitting on substantial cash reserves, with PMI holding $130 million and Keegan $210 million.
Keegan holders will get one share in the merged entity for each one they hold, with PMI holders receiving 0.21 share for each they hold. Billed as a 50/50 merger, the fact the Canadian gold hopeful's mine is at an earlier stage means PMI's major backers believe they are effectively being asked to accept a 50 per cent dilution in exchange for $250 million in cash.
Talk by Keegan that the PMI asset would be prioritised over PMI's mine have failed to allay shareholder concern, sources say.
It is understood the shareholders feel they were blind-sided by the December announcement of the deal, and blame PMI chairman Peter Buck, who will undoubtedly come under pressure to resign if moves to block the merger succeed.
The merger was regarded by some as a sign of looming consolidation in the West Africa gold space, but that was a relatively low-key theme of the conference. Against a backdrop of labour unrest and emerging sovereign risk in the host nation of South Africa, most speakers emphasised their community development credentials.
Beneath Robert Friedland's Wednesday boasting about the size and quality of the ore bodies his new company, Ivanplats, has discovered, was a thinly veiled pitch to the governments of South Africa and the Democratic Republic of Congo that Ivanplats was not like the mining companies they were used to dealing with.
In effect: "We have learned from the mistakes of our peers, and we have your people's interests at heart - alongside of those of our shareholders."
It was a similar message to that delivered by all of the major mining companies presenting, including Rio Tinto's Alan Davies, who emphasised the economic benefits to Guinea of Rio's Simandou iron ore mine. Outgoing Anglo American boss Cynthia Carroll made the point that mining-generated jobs sustained a quarter of South Africa's population, and incoming Anglo boss Mark Cutifani devoted his keynote speech yesterday morning to the topic of mining's contribution to sustainable development.
The reporter is attending Indaba as a guest of Gryphon Minerals.