Catalpa, Conquest plan gold merger

Catalpa Resources will buy Conquest Mining to form a $1.1 billion growth-focused gold miner, in which gold giant Newcrest Mining will hold a one-third stake.

Catalpa also announced today it had terminated discussions in relation to a proposed takeover offer announced by gold miner St Barbara on May 13.

The company said that its board was unanimous that the best interests of shareholders would be served by going forward with the Conquest/Newcrest transaction.

Catalpa will issue 0.3 of a share for each Conquest share held and at the same time issue shares to Newcrest to buy stakes in two of that company's gold mines.

The transaction values Conquest at about $298 million, based on Tuesday's closing price for Catalpa shares of $1.705.

The new company will then sell $150 million in new shares to raise money to fund development of its assets and growth opportunities.

Following that capital raising, Newcrest will have a 33 per cent stake in the new company.

By 1405 AEST, shares in Catalpa fell 20.5 cents, or 12 per cent, to $1.50, the lowest since May 12, Conquest added 1.5 cents to 46.5 cents and Newcrest slipped 49 cents, or 1.3 per cent, to $37.00.

Catalpa will buy all of Newcrest's Mt Rawdon mine and 70 per cent of the Cracow mine, both in Queensland, in exchange for shares worth 38 per cent of the expanded company.

Newcrest's stake in the expanded Catalpa will decline to 33 per cent after Catalpa and Conquest asked Newcrest not to participate in the equity capital raising.

"Combining these assets will create a leading Australian gold company with a strong suite of production and development assets with significant exploration upside, a dynamic management team and a supportive major shareholder," Catalpa chairman Peter Maloney said in a statement.

The directors of Catalpa and Conquest have unanimously recommended that shareholders vote in favour of the deal.

The forecast production of the combined company for 2010/11 is 294,000 ounces of gold, which will increase to between 400,000 and 450,000 oz of gold equivalent by 2013.

The company would have resources of 7.1 million oz of gold equivalent and have significant exploration potential.

It would have more than $200 million of cash and $61 million of debt.

Jake Klein, the current Conquest executive chairman, will become executive chairman of the combined company and Bruce McFadzean, current Catalpa chief executive, will become managing director of the merged miner.

The $1.1 billion total capitalisation estimate is based on both companies' capitalisation as of Tuesday's close and the $150 million capital raising.

Perth-based Catalpa was advised by Macquarie Capital Advisers and Freehills, Conquest was advised by Goldman Sachs and Gilbert + Tobin, and Newcrest was advised by Credit Suisse and Allens Arthur Robinson.