Exclusive: China Shandong Gold offers $1 billion for Brazil's Jaguar Mining: sources

BEIJING Wed Nov 16, 2011 7:59am EST

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BEIJING (Reuters) - China's Shandong Gold Group, the parent of Shandong Gold Mining (600547.SS) and a big gold producer, has made a $1 billion offer to acquire Brazil's Jaguar Mining JAG.N JAG.TO, two sources close to the deal told Reuters on Wednesday.

Shandong Gold is offering $9.3 per share in cash, a 73 percent premium to Jaguar's Tuesday close in New York.

If successful, the deal would be one of the biggest overseas acquisitions by a Chinese gold miner.

"Shandong Gold made the current offer about two weeks ago, and Shandong Gold has prepared cash to get the deal done," said one of the sources, who declined to be named because he was not authorized to speak to the media.

Taking advantage of a strong yuan, Chinese resources companies have been hunting overseas for the minerals needed to power the country's fast-growing economy.

"This is a positive development for the overall sector," said Yan Chen, metals and mining analyst at Standard Chartered Bank.

"So far, there are not a lot of Chinese companies that have bought gold resources overseas."

Shandong Gold, a state-owned firm, is one of China's top three gold miners. Its listed arm produced 19.41 tonnes of mined gold in 2010. The group has said it owns about 800 tonnes of gold resources.

Jaguar Mining is one of Brazil's fastest-growing gold producers, with operations in a prolific greenstone belt in the state of Minas Gerais. Jaguar's main development project is Gurupi, which holds reserves of 2.3 million ounces.

Li Zhongyi, vice general manager of Shandong Gold in charge of international deals, declined to comment. A spokesman for Jaguar was not immediately available for comment.

GOLD BUYS

Gold, a traditional safe-haven investment, hit an all-time high in September, reaching $1920.30. It has since fallen about 8 percent, though it remains expensive by historical standards.

Acquisitions have been on the rise in the sector because companies, concerned about depletion at existing mines and poor new discovery rates, are desperate to increase their reserves, said Michael Jansen, a precious-metals analyst with JP Morgan.

"Gold companies will tell you they are in the business of expanding mining supply organically but in reality they are in the business of buying new assets, particularly in the case of many large miners who are struggling to replace lost production," Jansen said at a conference in China last week.

There had been $28 billion worth of completed M&As in the gold sector so far this year, he said.

Notable deals this year include Newmont Mining Corp's (NEM.N) $2.3 billion acquisition of Fronteer Gold Inc and AuRico Gold Inc's (AUQ.TO) $1.5 billion deal to buy Northgate Minerals Corp.

Other recent resources M&A deals from China included Minmetals Resources' $1.28 billion (1208.HK) planned takeover of Africa-focused copper miner Anvil Mining AVM.AX and Sinopec Group's C$2.2 billion ($2.1 billion) agreement in October to buy Canadian oil and gas explorer Daylight Energy Ltd DAY.TO.

Sinopec Group is the parent of China Petroleum & Chemical Corp (Sinopec) (0386.HK) (600028.SS).

(Additional reporting by David Stanway in BEIJING, Polly Yam in HONG KONG and Rujun Shen in SINGAPORE; Editing by Don Durfee and Vinu Pilakkott)

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