Nordgold wants to get his hands on the Ghanaian assets of Cardinal Resources…

Africa’s leading gold producer, Ghana could soon see the arrival on its soil of a major player in the gold industry, Russia’s Nordgold, which wants to buy out the mining portfolio of Australia’s Cardinal Resources.

Interested in particular in the Ghanaian gold project of Namdini, the mining group - controlled by the billionaire Alexei Mordashov, 48th largest fortune in the world according to « Forbes » - announced on Monday March 16 that it had submitted « a non-binding indicative and conditional proposal to acquire the entire issued share capital of Cardinal Resources », the Australian junior company which owns the site. Located in the north of the country, close to the yellow metal mines of Newmont and Kinross, the Mandini site could, according to a feasibility study published last October, produce nearly 5 million ounces of gold (130 tons) over a 15-year life, at an average global cost of $895 per ounce, a threshold well below the current gold price (approximately $1550). Clearly, if yellow metal prices remain at current levels, the profitability of the project would not only be guaranteed, but … very substantial. A very favourable configuration which certainly explains the generous terms of the offer made by Nordgold to secure the support of Cardinal Resources shareholders: at 0.4577 Australian dollars (USD 0.28) per share, the Russian, who already holds a 19.9% stake in the company, is offering a premium of… 83% compared to the closing price of the previous trading session. A transaction that values Cardinal at a total of AUD 227 million (USD 138 million).

Location of the Namdini gold project on the map of Ghana (red square). Credit: Cardinal Resources

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However, the Russian giant (907,000 ounces of gold produced in 2018, worldwide) has stated in its press release that a four-week due diligence1 on the Namdini project must first be carried out. If this is completed to Nordgold’s « satisfaction », Nordgold will then submit a « preliminary binding » offer, which will be binding on Nordgold. If successful, the operation would enable the Russian company - which is also present in Russia and Kazakhstan - to strengthen its position in West Africa, as Nordgold is already active in Burkina Faso and Guinea. As for Cardinal, which has appointed a special committee to examine the Russian proposal, its management has urged its shareholders not to take sides for the time being.

1Due diligence, is the set of verifications that a potential acquirer or investor carries out prior to a transaction.