CORRECTION: T/O RUMOURS6 Dec 2011 15:26
One of Canada’s biggest mining groups is mounting a high-stakes move to gatecrash a deal involving a Qatari sovereign wealth fund and a London-listed gold miner, I can reveal.
Eldorado Gold Corp, which is listed on the Toronto Stock Exchange, is understood to have approached European Goldfields about an outright takeover of the company in recent weeks.
The move threatens to scupper a transaction announced in October that would see Qatar Holding, owner of the Harrods department store, become European Goldfields’ largest shareholder. A vote to approve the deal, which would include an initial $750m outlay by the Qataris, is scheduled to be held in Toronto on December 22.
The reason that this is so intriguing is that the Qatari deal had the backing of the Greek government and was positioned as an act of friendship from cash-rich Qatar coming to the aid of the crisis-hit Eurozone’s most troubled economy. Last year, the two countries signed a $7bn memorandum of understanding to co-operate on a variety of economic projects, followed by another $5bn deal in September.
European Goldfields, which is also listed on the Toronto market, had sought the funding from Qatar in order to construct two new gold mines in northern Greece which it hopes will eventually produce 350,000 ounces of gold annually, making it Europe’s largest gold producer.
I’m told that Eldorado’s offer values European Goldfields at a premium to the value attached to the company by the Qatari deal (which is understandable, since the Qatari transaction is structured in a way that wouldn’t give it control).
That may make it difficult for the board of European Goldfields to reject an offer, despite the fact that
Eldorado’s intervention has raised the political stakes for all of those involved. Qatar’s prime minister attended the signing of the European Goldfields deal alongside senior members of the Greek government.
It’s unclear whether Eldorado’s offer for European Goldfields, which I’m told is in the form of shares, has similar political backing from the Greek government but it would be logical not to overlook such factors at a time when the country is in such a state of crisis.
With a market value of around £6bn, Eldorado is substantially larger than European Goldfields, which has a market value of just over £1bn. And there's certainly logic to a deal: Eldorado operates mines in Brazil, China, Greece and Turkey.
The exact status of the contact between Eldorado and European Goldfields is unclear, although I’m told that the offer was made some days ago. However, I'm led to believe that the two companies are not in active talks which implies that any premium offered by Eldorado is insufficient to convince the European Goldfields board.
Another complicating factor will be the attitude of the largest shareholders in European Goldfields to the rival proposals and whether Qatar Holding would respond
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