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Qatar buys Greek giants at a steal

Qatar buys Greek giants at a steal

Between its foray into Greek banking, construction and mining, Qatar is on the verge of getting Greece in its pockets. Una Galani breaks it down for you.

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October 5, 2011 1:03 by



Qatar is getting Greek gold for a steal. The financing offer to European Goldfields will buy the world’s richest country at least 27 percent of the Canadian miner for a fraction of its mooted July valuation. But the company’s shareholders will have to think hard before turning down Qatar’s audacious near-$1 billion foray into gold.

A seven-year $600 million secured loan facility will finance European Goldfields’ entire project portfolio, focused on mines located in recession-hit Greece, at 7 percent over LIBOR. For daring to lend where no Western bank would dare, Qatar will receive warrants worth almost 17 percent of European Goldfields on a pro-forma basis.

A NEW GREEK CONSTRUCTION PURCHASE

Qatar also bought a further 9.9 percent of shares from a subsidiary of indebted Greek construction firm Ellaktor and another shareholder for around $173 million. At 10 Canadian dollars a share, that values European Goldfields at less than $75 per ounce of its 24 million ounces of gold equivalent resources. A developed miner like rival Randgold Resources trades at several times that amount.

Qatar is paying close to the miner’s average weighted share price over the last week. The Ellaktor deal also gives Qatar a call option over a further 5 percent of shares that would lift its stake to 32 percent. Qatar isn’t interested in a full takeover, according to a person familiar with the situation.

Existing shareholders get some protection. They have the option to subscribe to loans notes with warrants for $150 million, on the same economic terms. Asset manager Blackrock owns over 10 percent of shares and is understood to be co-underwriting the notes, suggesting that other shareholders may be equally grateful to get any financing.

Qatar’s opportunistic deal may yet entice an all-paper offer from A larger rival for the miner, which some analysts were recently valuing at twice its Friday closing price.

But for now, turning away Qatar might force European Goldfields to wait a year to start developing the projects that will turn it into the continent’s largest gold producer. Qatar, hungry for exposure to gold equities as well as physical gold, is clearly betting shareholders agree that a miner without project financing isn’t worth much at all.

QATAR’S RECENT MOVES:

– Qatar Holding said on October 1 that it will invest almost $1 billion in European Goldfields including $600 million to finance mining operations in Greece, where the Canadian listed firm recently won a key permit.

– The sovereign fund agreed to provide a $600 million seven-year secured loan facility at a margin of 7 percent above 6 month Libor per annum. As part of the facility, Qatar will receive warrants to purchase 40.4 million shares in European Goldfields at a strike price of 9.08 Canadian dollars per share.

– Qatar also acquired a total 9.9 percent stake in European Goldfields, or 18.2 million shares at a cost of 10 Canadian dollars each, from a subsidiary of Greek’s largest construction group Ellaktor and shareholder Dimitrios Koutras. As part of the deal, Qatar will have a call option to buy a further 5 percent or 9.4 million shares at a price of 13 Canadian dollars per share.

– In August, Qatar agreed to invest 500 million Euros to support a merger of Alpha Bank and Eurobank, two of the recession-hit country’s largest banks. The deal would give the Qataris about 17 percent of enlarged group.

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