China's Shandong Gold Group, the parent of Shandong Gold Mining Co Ltd (600547.SS) and a big gold producer, has made a $1-billion offer to acquire Brazil's Jaguar Mining, two sources close to the deal told Reuters on Wednesday.
Shandong Gold is offering $9.30 per share in cash, a 73% premium to Jaguar's Tuesday close in New York. Jaguar shares surged more than 47% to $7.94 in afternoon trading on the New York Stock Exchange.
Jaguar acknowledged in a press release later on Wednesday that it received proposals to buy the company over the past few weeks and has launched a process to explore ways to maximize shareholder value. It said it hired financial and legal advisors to assist it, but warned the process may not end in a sale.
If Shandong is successful, the deal would be one of the biggest overseas acquisitions by a Chinese gold miner.
"Shandong Gold made the current offer about two weeks ago and Shandong Gold has prepared cash to get the deal done," said one of the sources, who declined to be named because he was not authorized to speak to the media.
Taking advantage of a strong yuan, Chinese resources companies have been hunting overseas for the minerals needed to power the country's fast-growing economy.
"This is a positive development for the overall sector," said Yan Chen, metals and mining analyst at Standard Chartered Bank.
"So far, there are not a lot of Chinese companies that have bought gold resources overseas."
Shandong Gold, a state-owned company, is one of China's top three gold miners. Its listed arm produced 19.41 tonnes of mined gold in 2010. The group has said it owns about 800 tonnes of gold resources.
Jaguar Mining is one of Brazil's fastest-growing gold producers, with operations in a prolific greenstone belt in the state of Minas Gerais. Jaguar's main development project is Gurupi, which holds reserves of 2.3-million ounces.
Li Zhongyi, vice general manager of Shandong Gold in charge of international deals, declined to comment. A spokesman for Jaguar was not immediately available for comment.
