Mother of all Mergers: Marrick Gold & Durban Deep
May 15, 1998
ANNUAL STOCK HOLDERS' MEETING
Toronto, Ontario - CANADA
Peter Bunk, Presiding
Our company slogan and philosophy may be seen at the top of our Internet website. It reads:
"First Marrick Gold became the leading gold company in North-America. Now we are expanding our frontiers. We have the people, the financial strength and corporate culture to excel worldwide."
It greatly pleases me to announce that the Board of Directors of Marrick Gold has just completed a sure-fire strategy to realize the goals implied in the above statement of purpose. Moreover, we will achieve our global objectives WITHOUT SPENDING A DIME OF THE STOCK HOLDERS MONEY. Specifically, our corporate goals for 1998 are herewith stated.
- To immediately increase annual gold production.
- To increase our total gold reserves.
- To diversify our gold production internationally.
- To do all of the above at the lowest possible purchase price.
Our Strategy and Plan
As you are all well aware exploration and development of new areas for gold production is extremely expensive in monetary and managerial costs - our two most scarce corporate resources. Furthermore, over-zealous government agencies are implementing prohibitive mining regulations in new production areas. The impracticality of these stringent regulations will cause exploration, development and mining expenses to soar. Therefore, Marrick Gold will soon embark upon an aggressive acquisition and merger campaign. The result will significantly expand total gold reserves at NEARLY NO OUT OF POCKET COST TO OUR STOCK HOLDERS. Here's our plan for the first acquisition - which we call the Mother of All Mergers.
Our first target is the second oldest continuing producing gold mine in the world (after Homestake Mining of the USA)). I refer of course to Durban Deep of South Africa. To appreciate the relative importance of this acquisition, we show here the pertinent numerical characteristics of Marrick Gold and Durban Deep.
Now gentlemen, let's take a hard look at these numbers. By acquiring Durban Deep we will increase our total gold reserves by 43% - from 93 to 133 million ounces. Marrick Gold would then be the largest gold company in the world in reserves - dwarfing all others. This has prestige value - and therefore will most likely increase the multiple of our stock market price.
The most salient benefit is the acquisition of proven and probable gold deposits at a cost of a mere $2.34 per ounce. Gentlemen, you cannot get a cup of coffee in a decent Toronto restaurant for $2.34! You say this is a "steal," not quite yet.
Financing the Acquisition
We shall not spent one single dollar in realizing the Mother of All Mergers. Moreover, Marrick Gold stock holders are going to be very happy, but the Durban Deep share holders will be too. Following is the Public Offering we will soon make to Durban Deep people.
Durban Deep's total capitalization today is ONLY $94,000,000. To make a mouth-watering offer to Durban Deep's share holders, our Public Offering (PO) will be TRIPLE THE THEN EXISTING MARKET PRICE PER SHARE. Consequently, if it were today, the total cost would be $282 million. Marrick Gold would offer shares in our company in exchange for those of Durban Deep at the following rate. Marrick Gold will exchange exactly ONE SHARE of our company for THREE SHARES of Durban Deep. Here's the corresponding math.
As mentioned, tripling the current market cap of Durban Deep is equivalent to $282 million. By dividing the $282 million market cap by the price of the Marrick Gold $21.63 stock price, we get 13,037,000 shares of our stock needed for the acquisition. Therefore, we will give 13,037,000 Marrick shares in exchange for 39,000,000 Durban deep shares. That's a One for Three exchange.
Will this make the stock holders of each company happy? Let's think this out together.
Benefits For Marrick Gold Share Holders
- Gold production will increase by 22% from 3.0 to 3.66 million ounces.
- Gold reserves will increase from 0.249 to 0.345 oz. per share - UP 39%
- Total gold reserves increase from 93 to 133 million ounces - UP 43%
- Stock dilution will be only 3.5% - from 373 to 386 million shares
- Cost of acquisition is ZERO
- Expanded global production diversification into and area of lesser regulation, but a region with existing infra-structure and ample local labor force.
Benefits For Durban Deep Share Holders
- Their investment triples in value over-night
- They obtain international diversification of their investment portfolio
- They significantly increase the liquidity of their investment - as Marrick trades much higher daily volume
It is a WIN/WIN situation for all concerned… except the competition.
Incidentally, our next target is Randgold & Exploration.