B2Gold Corp.

I might have caught a lucky break selling when I did. Let's see how this plays out. SMF

-

B2Gold, Papillon to merge in $570-million (U.S.) deal

2014-06-03 07:52 ET - News Release

Mr. Clive Johnson reports

B2GOLD CORP. SIGNS MERGER IMPLEMENTATION AGREEMENT WITH PAPILLON RESOURCES LIMITED

B2Gold Corp. has entered into a definitive merger implementation agreement with Papillon Resources Ltd., pursuant to which B2Gold and Papillon have agreed to combine the two companies at the agreed exchange ratio of 0.661 B2Gold common share for each Papillon ordinary share held.

The merger consideration represents a purchase price of approximately $1.72 (Australian) per Papillon share and values the transaction at approximately $570-million (U.S.). Papillon has been in a trading halt (which has extended into a suspension of trading on the Australian Securities Exchange) since May 26, 2014, following receipt of an indicative non-binding proposal from B2Gold on May 24, 2014, which included a proposed merger ratio. While the Papillon shares have not been trading since May 23, 2014, the B2Gold share price has fallen since that date due to a combination of the gold price volatility and media speculation surrounding this transaction.

The premium implied by the B2Gold offer as at May 23, 2014 (when the B2Gold indicative non-binding proposal was received by Papillon), and the last closing price of each company on June 2, 2014, are shown in the associated table.

                            SHARE PREMIUMS AND PRICES

                                                   May 23, 2014  June 2, 2014  

Premium to the 20-day volume weighted average        
price of each of B2Gold (TSX) and Papillon (ASX)          52.7%         42.4%
Premium to last closing price of B2Gold (TSX)             
(being June 2, 2014) and Papillon (ASX) (being                             
May 23, 2014)                                             36.5%         20.6%

The merger will be implemented by way of a scheme of arrangement under the Australian Corporations Act 2001. Upon completion of the scheme, existing B2Gold shareholders and former Papillon shareholders will own approximately 74 per cent and 26 per cent, respectively, of the issued common shares of the combined company.

The combination of B2Gold and Papillon will result in a company with a significant growth profile beyond its three operating mines, which collectively produced 366,000 ounces of gold in 2013 at a cash cost of $681 (U.S.) per ounce and an all in sustaining cost of $1,064 (U.S.) per ounce. B2Gold's production is projected to increase to approximately 550,000 ounces by 2015 as the low cost Otjikoto mine in Namibia is scheduled to commence gold production in late 2014.

The combined company will be focused on furthering the development of the Fekola project in Mali, and continuing to operate B2Gold's existing Masbate gold mine in the Philippines, and Limon and La Libertad gold mines in Nicaragua. Further, B2Gold will possess a strong growth profile through its Otjikoto project, the Kiaka project in Burkina Faso and its Gramalote project (a joint venture at 51 per cent AngloGold Ashanti/49 per cent B2Gold) in Colombia. B2Gold will have the management, development, construction, operational and in-country experience combined with the financing capacity to optimize the development of Fekola for the benefit of all shareholders. B2Gold is one of the few mining companies with a proven in-house construction team with a record of building high-quality plants and infrastructure while reducing capital costs. In addition, B2Gold has a highly regarded and experienced exploration team that sees significant exploration potential at the Fekola project, in addition to B2Gold's existing assets.

"At B2Gold, we are excited about the merger with Papillon as it will add the high-grade Fekola project to our rapid growth as a profitable gold producer. We believe this merger will bring great value to all shareholders and we congratulate Papillon's strong technical team on advancing the impressive Fekola project to a robust prefeasibility study and look forward to working together to advance the project to production," said Clive Johnson, president and chief executive officer of B2Gold.

"The combination of Papillon and B2Gold provides Papillon shareholders with the opportunity to gain immediate exposure to a significant, growth-orientated and profitable producer with diversified operations whilst still retaining material exposure to the upside potential of Fekola. B2Gold's track record of successful mine development and operation, coupled with its balance sheet, cash flows and funding capacity, will derisk the development of Fekola and should maximize the value of the project for both Papillon and B2Gold shareholders," commented Mark Connelly, managing director and chief executive officer of Papillon.

Posttransaction highlights of B2Gold:

• Aggressive exploration agenda: significant exploration programs at existing mines and development stage projects, including Fekola, as well as at highly prospective earlier stage projects in Nicaragua, the Philippines, Colombia and Burkina Faso;
• Operational and geographic diversification: production and development assets spanning three continents and located in high-growth emerging economies, serving to mitigate collective operational and geopolitical risk;
• Builds on strong African presence and expertise: Fekola is targeted, subject to a definitive feasibility study, to be the next construction project for B2Gold's Otjikoto development team and a seamless transition after the scheduled commissioning of Otjikoto in the fourth quarter of 2014;
• Strong financial position: cash and cash equivalent assets of approximately $190-million which, in addition to continued strong cash flow from operations and unused debt capacity of $150-million, coupled with good access to capital, will allow B2Gold substantial flexibility for future development activities including Fekola;
• Experienced management team: proven combined management and technical employees with extensive exploration, mine development, operating, in-country and financial expertise.

Board of directors' recommendations

The board of directors of B2Gold unanimously recommends that B2Gold shareholders vote in favour of the issuance of B2Gold common shares pursuant to the scheme and as consideration for the cancellation of the Papillon options. On the same basis, each director and officer of B2Gold intends to vote all B2Gold common shares over which her or she has control in favour of the issuance of B2Gold shares pursuant to the scheme and any other scheme related matters at a special meeting of B2Gold shareholders to be convened later in 2014 -- see the indicative timetable.

The board of directors of Papillon has unanimously recommended that Papillon shareholders vote in favour of the proposed scheme, in the absence of a superior proposal for Papillon and subject to an independent expert opining that the scheme is in the best interests of Papillon shareholders. On the same basis, each director of Papillon intends to vote all Papillon shares which they control, at the time of the Papillon shareholder meeting to approve the scheme, in favour of the scheme and any other scheme related matters. The meeting of Papillon shareholders to approve the scheme will be convened later in 2014 -- see the indicative timetable.

The boards of directors of Papillon and B2Gold have determined that the proposed transaction is in the best interests of their respective shareholders based on a number of factors, including financial advice received from their respective financial advisers (in the absence of a superior proposal for Papillon and subject to an independent expert opining that the scheme is in the best interests of Papillon shareholders).

Transaction structure and terms

Pursuant to the merger agreement, it is proposed that B2Gold will acquire all the issued and ordinary shares of Papillon by way of a scheme of arrangement under the Australian Corporations Act 2001 (Cth). Under the terms of the scheme, Papillon shareholders will receive 0.661 B2Gold common share for each existing Papillon ordinary share they hold. B2Gold shareholders will continue to hold their existing B2Gold common shares.

Pursuant to the merger agreement, it is proposed that all outstanding Papillon options will be cancelled and optionholders issued B2Gold shares as consideration for the cancellation of their options based on the in the money amount of such Papillon options determined by using the value implied by the merger consideration as at June 2, 2014. Papillon also has a number of performance rights that will automatically vest into ordinary shares upon court approval of the scheme in accordance with the terms of the performance rights, and form part of the scheme.

The scheme is subject to regulatory, Australian court, shareholder and third party approvals, together with other customary conditions. Regulatory approvals include approval by the Australian Foreign Investment Review Board, the Australian Securities and Investments Commission and the Australian Stock Exchange, and approval by the Toronto Stock Exchange and NYSE MKT in respect of the issue of new B2Gold common shares under the scheme and as consideration for the cancellation of the Papillon options.

A scheme booklet setting out the terms of the scheme, independent expert's report and the reasons for the Papillon directors' recommendation is expected to be circulated to all Papillon shareholders. A meeting of Papillon shareholders to consider the scheme is expected to be held later in the year and the scheme is expected to be implemented shortly thereafter. The scheme is conditional upon approval by 75 per cent of the number of votes cast, and 50 per cent of the number of Papillon shareholders present and voting, at the meeting of Papillon shareholders.

In addition to the approval by Papillon shareholders, the scheme is conditional upon B2Gold shareholders approving the issuance of B2Gold common shares that will be issued in connection with the scheme and as consideration for the cancellation of the Papillon options by a simple majority of the B2Gold common shares that are voted at a shareholder meeting, which meeting will be held in reasonable proximity to the Papillon shareholder meeting.

The merger agreement also contains customary deal protection mechanisms, including no shop and no talk provisions, matching and notification rights in the event of a competing proposal, and a mutual reimbursement fee payable by B2Gold or Papillon in specified circumstances.

The merger agreement will be available under the profile of B2Gold on SEDAR and on EDGAR.

The merger agreement will also be released to the ASX by Papillon in a contemporaneous announcement.

                                TIMING
Event                                                        Target date
    
First court hearing to convene scheme meeting                  Late July      
B2Gold circular sent to B2Gold shareholders                 Early August   
Scheme booklet sent to Papillon shareholders                Early August   
B2Gold shareholder meeting                               Early September
Papillon scheme meeting                                  Early September
Second court hearing to approve Papillon scheme            Mid-September  
Scheme becomes effective                                   Mid-September  
Papillon shareholders receive B2Gold shares               Late September 
B2Gold shares become tradeable on the TSX and NYSE-MKT    Late September 

(i) Note: Target dates are subject to change

Advisers and counsel

B2Gold's financial advisers are Canaccord Genuity Corp. and Raymond James Ltd., its Canadian legal counsel is Lawson Lundell LLP, and its Australian legal counsel is K&L Gates LLP. Each of Canaccord Genuity and Raymond James has provided an oral opinion to the board of directors of B2Gold that the consideration to be offered is fair, from a financial point of view, to the shareholders of B2Gold.

Papillon's financial adviser is Macquarie Capital, its Australian legal counsel is Hardy Bowen and its Canadian legal counsel is Stikeman Elliott LLP.

Qualified/competent person

Tom Garagan, PGeo, is a qualified person as defined under National Instrument 43-101, Standards of Disclosure for Mineral Projects. All of the scientific and technical disclosure contained in this press release was reviewed and approved by Mr. Garagan.

Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Conference call

A conference call will be held on June 3, 2014, at 11:30 a.m. (Toronto)/8:30 a.m. (Vancouver)/11:30 p.m. (Perth), to discuss the transaction. To access the call, please dial 416-340-2218 or toll-free at 866-225-0198. In addition, a webcast of the call can be accessed on-line.

There will be a question-and-answer session following management presentations during the call.

A playback version of the call will be available for one week after the call by dialling 905-964-9451 or within North America call toll-free 800-408-3053 (pass code: 3251005).