Homestake to Buy Argentina Gold of Canada

Giant U.S. miner Homestake Mining Co. joined its major gold- producing rivals in the acquisition arena Monday with a $200-million friendly takeover offer for upstart Canadian exploration firm Argentina Gold Corp.

The all-stock transaction would give San Francisco-based Homestake, one of North America’s largest gold companies, 60% control over the prized Veladero gold-mining project in Argentina’s northwestern San Juan province.

Veladero is estimated to contain 4.5 million ounces of gold and 100 million ounces of silver, though Argentina Gold officials have said the mine could ultimately yield as much as 20 million ounces of gold.

“Based on recent independent surveys and our own due diligence, we believe that the Veladero property is a superb gold asset with exceptional upside potential,� Homestake Chief Executive Jack Thompson said.

Homestake shares fell 56 cents to close at $8.88 on the New York Stock Exchange.

Homestake, a conservative gold producer with operations in the U.S., Canada, Australia and Latin America, said it would begin an aggressive drilling program to increase Veladero’s reserves later this year.

The deal would be a slap in the face for Canada’s Barrick Gold Corp., which late last year launched a bitterly contested and ultimately unsuccessful $100-million takeover bid for Argentina Gold.

Although Homestake appeared the winner in the race for the prized project, analysts expressed concerns that the U.S. company had paid too high a premium.

Under the terms of the agreement, investors would receive 0.545 Homestake share for each Argentina Gold share tendered, a 63% premium to Argentina Gold’s close of $3.18 a share Friday on the Vancouver Stock Exchange.

If Argentina Gold shareholders approve the deal, which is expected to occur within the next two months, Homestake will become the third major gold player to acquire an up-and-coming producer in the last four months.

A wave of consolidation swept through the hard-pressed gold sector last year as the price of gold tumbled to 18-year lows, profits evaporated and smaller firms teetered on the edge of bankruptcy.

Gold traded at $291.70 an ounce Monday, down from a 1997 high near $370 an ounce.