TORONTO (miningweekly.com) – ASX- and TSX-listed Teranga has formally started its friendly takeover for fellow Canadian miner Oromin Explorations, offering 0.582 of its own shares for every Oromin share held.

Teranga and Oromin are developing neighbouring gold projects in Senegal, in West Africa.

Oromin late on Thursday said it was reviewing the unsolicited offer and had appointed RBC Capital Markets as financial adviser and Miller Thomson LLP as legal adviser to assist in responding to the offer.

The company also appointed a special committee of directors to assist the board in fulfilling its legal and fiduciary duties regarding the offer. While it has a shareholders rights plan in place, the company would consider all possible alternatives, including any competing offers it may receive, to maximise shareholder value.

The all-share offer represented a premium of 50% to the 20-day volume-weighted average price of Oromin shares and a premium of 68.7% to the closing price of Oromin shares on May 31.

Teranga currently holds a 13.6% shareholding in Oromin, and has secured a lock-up agreement with fellow shareholder Iamgold, securing a further 11.7% shareholding in the company.

Through the takeover offer, Teranga would acquire Oromin’s 43.5% shareholding in the Oromin Joint Venture Group (OJVG) deposits, and intended to work with the other JV partners to develop the deposits.

The proposed takeover would remove near-term liquidity issues and the long-term need for significant capital expenditure from Oromin’s shareholders to advance the OJVG project, while allowing those same shareholders to own shares in a gold firm that is 100% hedge free and has the financial capacity to develop OJVG deposits from free operating cash flow.

"The new relationship and support that we have established with the government of Senegal has positioned us to pursue the long-awaited acquisition of our neighbour – Oromin.

“This is a transformational transaction for Teranga, one in which all shareholders would participate in value creation by virtue of the development of the Oromin assets as we leverage off of our existing infrastructure," Teranga president and CEO Richard Young said.

The OJVG reserves were estimated to host some 1.44-million ounces of gold, and would provide Teranga with the ability to blend ores from multiple deposits, which would enhance the company’s cost profile.

It would further provide Teranga with the ability to leverage its Sabodala project’s existing mill, infrastructure and mobile equipment fleet through increased production from the company’s interest in the OJVG reserves, and anticipated toll-milling opportunities.

The OJVG licences are adjacent to the Sabodala gold mine.

Meanwhile, 43.5% Oromin shareholder Bendon International had started legal action against Teranga and Oromin in an Ontario court, seeking an unspecified amount of damages and an injunction to prevent the takeover offer from proceeding.

Teranga said it believed that this litigation was without merit and it intended to vigorously defend itself. It was also a condition of the offer that this litigation, and any other litigation that could be started by Bendon, be dismissed or settled.

Oromin said that it had not confirmed to Teranga its interpretation of the OJVG shareholders' agreement, and has not had any discussions with Teranga regarding the lawsuit by Bendon International.