UPDATE 1-Anaconda Mining may take New Island bid hostile

Tue Aug 24, 2010 12:54pm EDT

* Says New Island tells regulators of bid violations

* Says New Island did not respond to sweetened offer

* Says can thwart New Island-Mountain Lake deal

* Says will not extend offer beyond Aug. 31

Aug 24 (Reuters) - Canada's Anaconda Mining (ANX.TO) warned it may go hostile with its bid for New Island Resources' NIS.V interest in a gold mine, after the junior miner filed a bid violation application with regulators and backed its planned merger with Mountain Lake Resources MOA.V.

Anaconda Mining, which holds a 41 percent stake in New Island, said the applications filed by the smaller gold miner on Aug. 23 with the Alberta Securities Commission and the Ontario Securities Commission for technical bid violations have no merit.

Toronto-based Anaconda, which also has operations in Chile, had twice raised its offer in its pursuit of New Island's interest in the Pine Cove mine in Canada, where Anaconda Mining also has operations.

"The time is long overdue for the parties to seek a friendly outcome -- but it takes two to tango," Anaconda Chairman John McBride said in a statement on Tuesday.

With Anaconda Mining's latest offer, set to expire on Aug. 31, each New Island shareholder would get 0.42 Anaconda shares for each New Island share they held and would continue to retain their New Island shares.

The deal would fetch Anaconda Mining New Island's interest in the Pine Cove mine, while New Island would remain a public company with its other assets.

"(It) makes no sense for ownership of the relatively small Pine Cove Gold Mine to continue to be divided between two companies," Anaconda Mining Chief Executive Lew Lawrick said.

Anaconda Mining, which also wants two seats on New Island's board, added that it could potentially defeat any deal New Island struck with Mountain Lake Resources or other parties by virtue of its stake.

Anaconda Mining's stock, which has shed about 7 percent of its value since it first made its offer, was up about 4 percent at 28.5 Canadian cents in midday trade Tuesday on the Toronto Stock Exchange.

Shares of New Island, which have more than doubled in the past three months, were flat at 11.5 Canadian cents on the Toronto Venture Exchange. (Reporting by Gowri Jayakumar in Bangalore; Editing by Unnikrishnan Nair)