Russian Billionaire Goes For A Golden Knock Out Punch

The Russia v China battle for control of an Australian goldmining company with its best asset in Africa has intensified with Russian billionaire, Alexey Mordashov, going for a knock-out punch.

Mordashov, who made a fortune which Forbes values at $19.4billion through control of Severstal, a steel and energy business, has increased his offer for Cardinal Resources to 65 cents a share, a 35% increase on his previous offer of 48c.

More importantly, Mordashov’s latest bid through his goldmining company, Nordgold, is 14.5c higher than the 50.5c bid offered by China’s Shandong Gold.

The takeover tussle between Nordgold and Shandong started in March around the time when gold was trading at $1450 an ounce.

Since then, as gold has risen towards $2000/oz (the latest price is $1958/oz) the Russian and Chinese rivals have traded bids to the point where Nordgold is now offering roughly double its opening price of 33.5c.

Shandong Has The Right To Match Nordgold

For management of Cardinal the latest move by Mordashov should force a re-think of its advice to shareholders that they accept Shandong’s bid which has been locked into place through an implementation agreement which gives the Chinese company the right to match Nordgold.

Whoever wins control of Cardinal will get a promising, but yet to be developed gold deposit in Ghana, one of Africa’s biggest gold producing countries.

The Namdini deposit is close to a number of Nordgold’s existing African operations and rated as one of the world’s best undeveloped gold projects, containing a reserve of 5.1 million ounces.

The financial side of the project is even more impressive with the estimated development cost of $390 million expected to be repaid in less than a year thanks to the high gold price and low production cost of $895/oz.

Mordashov is not the only billionaire with a growing appetite for gold.

Last month it was reported that Warren Buffett, an investor not known for his interest in the metal, had acquired a stake in Barrick Gold, one of the world’s biggest gold miners.

Hedge fund manager John Paulson has also been building his gold position by increasing his stake in U.S. focused Midas Gold.