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B2Gold’s La Libertad mine in Nicaragua, March 2010.Handout

B2Gold Corp.'s chief executive sought to reassure shareholders that its acquisition strategy was sound after the small Canadian miner announced a $570-million (U.S.) deal to buy Australia's Papillon Resources Ltd.

"For shareholders who are nervous about any acquisitions… stick with us and watch what we do," said B2Gold's chief executive Clive Johnson, who has worked in the mining industry for more than three decades.

The all-stock offer of 0.661 B2Gold shares for every Papillon share would give investors in the Australian miner a 26 per cent stake in the combined company, as well as access to an entity already in production. The news sent shares of the Vancouver-based company down 6 per cent to $2.46 per shares.

B2Gold churned out 366,000 ounces of gold from its three mines in Nicaragua and the Philippines. The company is forecasting about a 40 per cent increase in output over the next few years once its Namibia mine is in full production.

The acquisition would give B2Gold control of Papillon's Fekola gold project in Mali, a mine that is expected to start producing in 2017 and would further pump up the Canadian company's production.

Mr. Johnson, the former CEO of Bema Gold Corp. who helped build the junior explorer into a mid tier miner until he sold it to Kinross Gold Corp. for $3.5-billion, highlighted his track record as a miner.

Bema's Russian mine, Kupol, has since become one of Toronto-based Kinross' top performing mines, even though Kinross has been caught in a political dispute between Western countries and Russia.

"We pride ourselves in doing accretive acquisitions," Mr. Johnson told analysts during a call to discuss the deal. He said his company was very comfortable that it could finance Papillon's project with "minimum dilution" to shareholders.

B2Gold has taken over two other companies in the past three years, including the owner of the largest operating gold project in the Philippines for $1.1-billion in stock.

Mr. Johnson criticized other companies' acquisition strategy, and said they did not do their due diligence.

Mr. Johnson did not mention any specific companies by name. But Kinross bought Red Back Mining Inc. for $7.1-billion in 2010 and has since had to completely write down its West African mine that it acquired in the Red Back purchase. Other big mining companies like Rio Tinto Plc and Barrick Gold Corp. have also had to record large writedowns for acquisitions gone awry.

The B2Gold-Papillon deal comes after a heated takeover battle for Osisko Mining Corp, as well as after merger talks between Barrick and Newmont Mining Corp fell apart.

Osisko will be taken over by two Canadian miners, Yamana Gold Inc. and Agnico Eagle Mines Ltd. Osisko was put in play by Goldcorp Inc.

Mr. Johnson said his team combed through hundreds of projects before it found Papillon. He said he believed that this was a good time to make an acquisition. The deal requires approval from Papillon shareholders.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 2:44pm EDT.

SymbolName% changeLast
ABX-T
Barrick Gold Corp
-0.89%21.17
AEM-N
Agnico-Eagle Mines Ltd
-1.14%55.3
AEM-T
Agnico Eagle Mines Ltd
-1.24%74.84
BTG-A
B2Gold Corp
-1.91%2.57
BTO-T
B2Gold Corp
-2.26%3.46
G-N
Genpact Ltd
+0.42%33.26
G-T
Augusta Gold Corp
-1.12%0.88
K-N
Kellanova
+2.26%54.77
K-T
Kinross Gold Corp
-0.65%7.65
KGC-N
Kinross Gold Corp
-0.18%5.66
NEM-N
Newmont Mining Corp
+1.59%34.42
OSK-T
Osisko Mining Inc
-1.75%2.81
RIO-N
Rio Tinto Plc ADR
+0.14%62.27

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