UPDATE 3-B2Gold enters Philippines with C$1.1 bln CGA Mining buy

Wed Sep 19, 2012 2:37pm EDT

* Offer of C$3.18/share represents 20 pct premium

* B2Gold expects total production of 350,000 ounces this year

* Deal expected to close by year end - B2Gold CEO

* CGA shares rise 11 pct on TSX; B2Gold shares fall 9 pct

Sept 19 (Reuters) - Canadian miner B2Gold Corp will buy CGA Mining Ltd for C$1.1 billion ($1.13 billion) to gain access to one of the largest gold mines in the Philippines.

The South East Asian country sits over $850 billion reserves of gold, silver and other metals, based on government estimates.

CGA expects its flagship mine on the island of Masbate to produce 200,000 ounces of gold in the year ending June 30, 2013.

B2Gold, which operates two mines in Nicaragua, expects the deal to ramp up total production to 350,000 ounces this year. It had earlier forecast production of 185,000 ounces in 2013 and 200,000 ounces in 2014.

The deal will add to reserves, production, cash flow and earnings, B2Gold CEO Clive Johnson told Reuters.

"It becomes accretive to us as we get into the first quarter of next year on earnings basis," Johnson said.

The combined company will have proven and probable reserves of 3.9 million ounces, B2Gold said. The Masbate project has reserves of 3 million ounces, according to CGA website.

Johnson said there may be some tax increases in the Philippines.

The International Monetary Fund has recommended Manila scrap all mining incentives, including a five-year tax holiday.

"From the homework we have done and talking to CGA ... any increase in tax will be reasonable and we have built in all that," Johnson said.

GOLD PRICE SPURS GROWTH

The price of gold has risen more than five-fold in the last decade, from about $300 an ounce in 2002 to about $1,720 an ounce, a stratospheric rise that has pushed gold miners to seek growth at any cost.

B2Gold, with cash and cash equivalents of $77.3 million at the end of the second quarter, has made an offer of C$3.18 per share, representing a premium of 20 percent to CGA's Tuesday closing price on the Toronto Stock Exchange.

CGA shareholders will receive 0.74 shares of B2Gold for each share they hold, the companies said.

Genuity Canaccord Corp advised B2Gold while BMO Capital Markets and Haywood Securities Inc advised CGA.

The CGA board recommended a vote in favor of the proposed deal, in the absence of a superior proposal. The deal agreement also includes no-shop and no-talk provisions.

The deal is expected to close by the end of this year, B2Gold CEO said.

Shares of CGA, which had a market value of about C$879 million before the deal, rose more than 11 percent to C$2.95 on Wednesday on the Toronto Stock Exchange. Shares of Vancouver-based B2Gold fell more than 9 percent to C$3.96.

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