Australian takeover too rich for Eldorado Gold

VANCOUVER -- MINING REPORTER

Eldorado Gold Corp. has pulled its bid for Australia's Andean Resources Ltd., saying it doesn't want to get into a "value destroying auction."

Eldorado's $3.4-billion bid for Andean was trumped late last week by a $3.6-billion offer from its Vancouver rival, Goldcorp Inc., the world's second-largest gold producer by market capitalization.

Both firms had been eyeing Andean's Argentina-based Cerro Negro gold project for the past couple of years, and made separate offers last week.

Paul Wright, Eldorado's chief executive officer, said in a statement that his shareholders "expressed a note of caution in terms of Eldorado entering a value destroying auction whose main result will be the enrichment of short-term market participants."

"The gold industry, as a whole, has an appalling track record of value destruction and Eldorado has no intention of following in these unfortunate footsteps," he added.

He also said while Cerro Negro was a "good-to-have" asset, it was not a "need-to-have asset." Eldorado also suggested the Goldcorp-Andean deal was driven by one main shareholder. "Our proposal has been met with broad support from the minority shareholders of Andean and our own shareholders," the company stated. "Extensive dissatisfaction exists among Andean shareholders as result of the Board of Andean choosing to focus on the agenda of a single large shareholder rather than the interests and desires of its broader shareholder registry."

Andean's largest shareholder is Sentient, a private equity investment firm specializing in the global resources industry, which has a 20-per-cent stake. Sentient has agreed to vote in favour of the Goldcorp-Andean deal.

Goldcorp declined to comment on the news Tuesday. Eldorado's decision came after it signalled on Friday that it may not be ready to give up the fight for Andean. Its unsolicited offer made late Thursday was followed within hours by Goldcorp's announcement it had struck a deal with Andean. Analysts haven't ruled out the possibility of other bidders entering the fray. "We view this as a very good disciplined move," Scotia Capital analyst David Christie said in a note to clients.

Gold producers began to pay closer attention to Andean in June after the release of promising drill results.

Andean chief executive officer Wayne Hubert said last week that a number of proposals came in from "players in the Americas" over the summer, but none were appealing until Goldcorp and Eldorado presented each of their offers. Mr. Hubert said Goldcorp's offer was the most compelling.

Goldcorp's bid, which has been approved by the Andean board, values the company at $6.50 per share compared with the Eldorado offer valued at $6.36.

ELDORADO (ELD)

Close: $20.18, up 29¢

GOLDCORP (G)

Close: $44.32, down 17¢

ANDEAN (AND)

Close: $6.39, down 59¢