Winspear fights to fend off De Beers
(UPDATE: Adds byline, adds quotes, background throughout. All figures in U.S. dollars unless noted)
By Lesley Wroughton
TORONTO, July 5 (Reuters) - Canada's Winspear Diamonds Ltd. (Toronto:WSP.TO - news) said on Wednesday it was trying to enlist a white knight in its efforts to fight off a C$259 million ($175 million) hostile takeover bid by the world's biggest diamond firm, South Africa's De Beers .
Winspear said it had opened its files to third parties as it tries to rebuff De Beers, which is seeking a larger stake in Canada, which is emerging as a major diamond producer.
``The company...is in the process of negotiating confidentiality agreements with a number of interested third parties and has a data room available to qualified companies,'' Winspear president and chief executive Randy Turner said in a statement.
The small-cap Canadian miner also said it is funding a comprehensive value programme for the promising Snap Lake diamond project on Camsell Lake, 220 kilometres (135 miles) northeast of Yellowknife, in Canada's mineral-rich Northwest Territories.
Winspear is the majority partner and operator in the project with Aber Resources (Toronto:ABZ.TO - news) as the minority partner.
With the programme, Winspear wants to show its shareholders the potential of the Snap Lake project, forecast to produce around 1.9 million carats a year, hoping they won't cash in their stocks to De Beers' offer of C$4.25 cash per common share.
Turner said the programme would also show the De Beers' offer significantly undervalues Winspear.
Despite protests by Winspear, De Beers has made it clear it will pursue its unsolicited offer, financed by its own funds, swelled by record rough gems sales of $5.24 billion in 1999.
Its bid carries a premium of 77 percent above Winspear's closing price on the Toronto Stock Exchange of C$2.40 a share on June 23.
The programme combines an updated scoping study and an aggressive new drilling programme on the Snap Lake area.
The Snap Lake project has gone through a pre-feasibility study, unlike De Beers' existing Canadian assets at Kennedy Lake in the Northwest Territories, in northern Ontario and in Saskatchewan,
The Snap Lake pre-feasibility study, released in April, showed a mineable resource of 12.6 million tonnes, with a diluted mine grade of 1.75 carats per tonne at an average value of $118 per carat. This represents only a portion of the estimated June 1999 global resource of 21.3 million tonnes.
Snap Lake would give De Beers its first major producing asset outside Africa and its first significant project in Canada, where it has so far been unsuccessful in making rich diamond discovery.
With Canada forecast to produce about 10 percent of the world's diamonds in 2010, De Beers wants to ensure it is not left out.
Winspear said the purpose of the new drilling programme is to further show the extent of the kimberlite dikes, geological formations that contain diamonds, to the east and northeast, beyond the current limits of the main deposit.
Turner said De Beers' offer was an attempt to put maximum financial pressure on the company and specifically includes a condition that Winspear not issue additional equity.
``The company will secure adequate funding, as necessary, to protect and develop its interest in the Snap Lake diamond project in the best interest of shareholders,'' Turner said.
Turner said Winspear would aggressively seek new ways to maximize shareholder value.
"In the days and weeks ahead, the Winspear board of directors and its advisors will be working diligently to ensure that any transaction which may be entered into reflects the true value of the Snap Lake diamond project.
``The board of directors strongly urges shareholders not to make any decision with respect to the De Beers announced offer at this time,'' Turner said.
Winspear shares were trading at C$4.49, up 19 Canadian cents, on the TSE on Wednesday. De Beers was at 168 rand on the Johannesburg Stock Exchange. |
