News

May 11, 2009

Kinbauri Gold Rejects Orvana’s Hostile Cash Offer As Too Low, But The Company May Now Be In Play

By Alastair Ford

According to Darrell Munro at Kinbauri Gold, it’s not altogether a surprise that a hostile bid has come in for the company he represents. That’s not because Kinbauri’s been aware that the latest stalker, Orvana, has been breathing down its neck specifically, but more because the value that Kinbauri has been adding at breakneck speed to its lead El Valle/Carles project in Spain has yet to be reflected in its share price. Orvana’s bid has come in at a fairly punchy C$0.55 per share cash, which represents a premium of nearly 40 per cent over Kinbauri’s closing price before the offer was announced. But, on the other hand, as Rob Davies said so clearly in the market commentary we ran on Monday under the title “Everyone Is An Irrational Investor, Except You”, if it wasn’t for the immensely deep troughs that the markets traded down into at the end of last year, no one would be regarding recent price levels as representative of anything other than a market that’s oversold. So Kinbauri’s share price jump on the day the Orvana bid came in is understandable, as the bid at the very least puts a temporary floor on the value of shares that have long looked oversold. But it also prompted a fresh bout of number crunching from a few others in the market who note that Kinbauri is a mere 12 months away from serious production of two commodities that are doing rather well at the moment – copper and gold. And those commentators reckon C$0.55 is cheap at the price.

Canadian investment bank M Partners, for one, was quick to put out a morning note which expressed a certain disdain for the offer. “While we welcome an all cash offer”, said M Partners, before slipping into market mnemonics, “we believe the current one proposed by ORV significantly undervalues KNB”. M Partners, to be fair to Orvana, is of course retained by Kinbauri, and has been since December of last year, when it was brought on board to advise on financing for El Valle/ Carles. Nonetheless...