UPDATE 2-Red Back to buy Moto Goldmines for C$513 million
* Red Back agrees to buy Moto Goldmines
* Deal to speed development of Moto project
* Red Back to pay shares worth C$513 million (Adds comments, details. Changes dateline, previous CALGARY)
TORONTO, June 1 (Reuters) - Red Back Mining (RBI.TO) said on Monday it has launched a C$513 million ($471 million) friendly takeover bid for Moto Goldmines Ltd MGL.TO to acquire the high-grade Moto gold mining project in the Democratic Republic of Congo.
The all-stock bid, which triggered a 7.2 percent drop in Red Back's shares, will boost the company's production to more than a million ounces when the mine enters production, the company said.
"I think it's a good deal for Red Back. Based on my numbers it would certainly be accretive," said Haywood Securities analyst Kerry Smith, who covers both Red Back and Moto. He said the mine could start producing around 2012.
Vancouver, British Columbia-based Red Back will pay 0.45 of each of its shares for one share of Moto, an offer that represents a 40-percent premium on Moto based on the 20-day volume-weighted average of both companies' stock.
However, following a 42 percent surge in Moto's shares on Thursday and Friday last week, the offer was only a 4.4 percent premium on Moto's shares based on Friday's close.
Around mid-afternoon on Monday, Red Back stock was down 75 Canadian cents at C$9.70, which Smith attributed to concerns about the dilutive impact of the transaction as well as unease about Moto's sharp rise last week.
He also noted that entering the Democratic Republic of Congo raises the risk profile of the company, which could deter some shareholders.
Moto, which is based in Australia, was up 5 Canadian cents at C$4.55.
RISK AND REWARD
Moto owns 70 percent of the gold project, which should produce around 500,000 ounces in its early years of production, has 5.5 million ounces of reserves, and will cost about US$438 million to build, according to a feasibility study released in March.
Red Back, which produced 260,000 ounces last year from its two mines in Ghana and Mauritania, said the acquisition will allow it to speed up development of the project.
Speaking on a conference call, Red Back Chief Executive Richard Clark said the company would probably be able to pay for the development out of cash flows from other mines, but said it would also look at gaining access to credit. Continued...
