Kingsgate makes $376m bid for Dominion

Gold miner Kingsgate Consolidated has launched a friendly $376 million takeover bid for West Perth-based Dominion Mining.

The bid has been unanimously recommended by Dominion's board who have agreed to vote the shares they control in favour of the transaction.

The terms of the offer are 0.31 Kingsgate shares for every one Dominion share.

This represents a 33 per cent premium to Dominion's closing share price, a 28 per cent premium to the 5 day and 35 per cent premium to the 30 day volume weighted average price of Dominion shares up to October 19.

It values Dominion at $3.63 per share.

The transaction will consolidate Kingsgate's position as a mid-tier gold producer with potential gold production of up to 300,000 ounces per year and a market capitalisation of around $1.6 billion.

Kingsgate's chairman Ross Smyth-Kirk said it was an important step towards Kingsgate delivering its strategic growth objectives utilising Kingsgate's experience and capital base to unlock value for shareholders.

"Dominion will provide Kingsgate with immediate access to additional production and cashflow and also provide geographic and operational diversification" he said.

Dominion's chairman Peter Joseph said the Dominion Board recognises the strong strategic logic in a combination of the two organisations which will provide enhanced growth opportunities for all shareholders".

See joint company statement below:

Kingsgate Consolidated Limited (ASX:KCN) ("Kingsgate") and Dominion Mining Limited (ASX:DOM) ("Dominion") are pleased to announce that they have signed a Scheme Implementation Agreement ("SIA") under which it is proposed Kingsgate will acquire all of the issued and outstanding shares in Dominion under a Scheme of Arrangement ("Scheme"). The transaction has been unanimously recommended by Dominion's Board of Directors who will vote the shares they control in favour of the transaction.

Consideration for the transaction will be Kingsgate shares, with Dominion shareholders offered 0.31 Kingsgate shares for each Dominion share ("Offer") they own. The transaction values Dominion at $3.63 per share, or approximately A$376 million.

Transaction Highlights:
- Consolidates Kingsgate's position as a preferred exposure amongst mid-tier ASX gold producers, with an implied market capitalisation post-transaction of approximately A$1.6 billion.
- Provides a strong operational and financial platform for Kingsgate to continue to deliver a superior growth profile for shareholders
- Combined operations with the potential to produce up to 300,000 ounces p.a. of gold following commissioning of the Chatree plant expansion from a reserve / resource base of 2.4 million ounces and 5.3 million ounces respectively.
- Combines complementary technical capabilities to create a strong operational team capable of maximising value from the respective companies' operating and exploration assets.
- Provides Dominion shareholders with operational and growth diversification through exposure to Kingsgate's prospective Chatree operations and broader exploration projects in Thailand and offers enhanced access to capital to develop Dominion's exploration portfolio.
- Provides Kingsgate shareholders with geopolitical and operational diversification through exposure to Dominion's Challenger project and exploration assets in Australia.

The exchange ratio of 0.31 Kingsgate shares for each Dominion share represents an attractive premium for Dominion shareholders. The implied offer price of $3.63 per share represents:
- a 33.0% premium to the closing price of $2.73 per Dominion Share on ASX on the last trading day before the Announcement Date;
- a 27.9% premium to the five day volume weighted average price of $2.84 per Dominion Share on ASX on the last trading day before the Announcement Date; and
- a 34.7% premium to the 30 day volume weighted average price of $2.69 per Dominion Share on ASX on the last trading day before the Announcement Date.

Dominion's Board of directors unanimously recommends that Dominion shareholders vote in favour of the Scheme in the absence of a superior proposal and subject to an independent expert opining that the Scheme is in the best interests of shareholders. Each Dominion director intends to vote all of the Dominion shares in which they have a relevant interest and in respect of which they have the power to vote in favour of the Scheme (in the absence of a superior proposal and subject to an independent expert opining that the Scheme is in the best interests of shareholders).

After completion of the transaction, current Kingsgate shareholders will own approximately 76% of Kingsgate following implementation of the Scheme and current Dominion shareholders will own approximately 24%. It is proposed that Peter Alexander, a current Dominion non-executive director, will join the Board of Kingsgate, while Peter Joseph, Dominion's Chairman will be retained as an Adviser to the Kingsgate Board.
Commenting on the transaction, Kingsgate Chairman, Ross Smyth-Kirk, said "This is an important step in Kingsgate's strategy to consolidate its position as the ASX's premier mid-tier gold producer.

Dominion will provide Kingsgate with immediate access to additional production and cashflow and also provide geographic and operational diversification. From this enlarged operational and financial platform, Kingsgate will continue to seek out growth opportunities from which to further create value for its shareholders."

Dominion Chairman, Peter Joseph, said "The Dominion Board recognises the strong strategic logic in a combination of the two organisations which will provide enhanced growth opportunities for all shareholders. Dominion shareholders will receive an attractive premium and, by receiving Kingsgate shares, will be able to participate in the benefits created by the combination of the two companies.

We are pleased to recommend this transaction to our shareholders for their consideration".

Implementation
Kingsgate has entered into a Scheme Implementation Agreement with Dominion under which Dominion has agreed to a proposed Scheme between Dominion and its shareholders for the acquisition of its shares by Kingsgate. A copy of the SIA is attached to this announcement.

The transaction is subject to a number of conditions, including receipt of required regulatory and court approvals, along with the approval of Dominion shareholders. Regulatory approvals include approval from the Australian Foreign Investment Review Board ("FIRB").

The SIA also contains customary deal protection mechanisms, including no shop and no talk provisions, a matching right for Kingsgate in the event of a competing proposal and a mutual break fee of A$3.75 million payable in certain circumstances.

Kingsgate also proposes to acquire all outstanding Dominion employee options via an options Scheme of Arrangement.

Next Steps
In due course, Dominion shareholders will receive a Scheme Booklet that will contain full details of the proposed Scheme, including the basis for the Dominion Board's recommendation that shareholders approve the proposed Scheme.5 Dominion will shortly appoint an independent expert to deliver a report on whether the proposed Scheme is in the best interests of Dominion's shareholders. The independent expert's report will be included in the Scheme Booklet.

It is anticipated that Dominion will send the Scheme Booklet to shareholders in December. A meeting of Dominion's shareholders to approve the Scheme is expected to be held in late January 2011, with the Scheme expected to be implemented by early February.

Advisers for the Transaction
Kingsgate's financial adviser is Macquarie Capital Advisers and its legal adviser is Clayton Utz.

Dominion's financial adviser is Goldman Sachs and its legal adviser is Johnson Winter & Slattery.

Conference Call
Kingsgate and Dominion will hold a conference call Wednesday, 20 October 2010 to discuss the transaction at 4:00 p.m. AEST. Participants may dial in to the call on +61 2 8113 1400 or 1800 554 798 toll free in Australia and entering the Participant Pin Code 6905183#.

The transaction presentation is available on both companies' websites. A copy is also available on the ASX website. The webcasts will be available for replay in due course.

For further information on Kingsgate, please visit www.kingsgate.com.au. For further information on Dominion, please visit www.dml.com.au.