Eldorado Gold Makes Clever Offer for Frontier Gold

Eldorado Gold Corp.'s (EGO) altered offer for Frontier Pacific Mining Corp. (FRPMF.PK) is not only accretive to the company, it's also very smart, according to Blackmont analyst Richard Gray.

On Wednesday, Eldorado fine-tuned its bid for Frontier by adding an exchange receipt to the original offer of 1.122 Eldorado shares and C$0.0001 in cash. Each exchange receipt will entitle the holder to receive 0.008 Eldorado shares. The exchange receipt represents a C$0.6.8 per share bump for a total deal price of C$1.101 per share.

But there's a catch. If the Greek government does not pass a joint ministerial resolution accepting the environmental permitting for Frontier's Perama Hill gold project by July 1, 2009, the exchange receipts will be canceled.

In a note to clients Mr. Gray wrote:

This is a clever move by Eldorado to wrap up the acquisition of Frontier Pacific and incorporate the permitting risk into the ultimate offer price.

Given his estimated net asset value of C$252-million for Frontier, the analyst said the deal, now worth C$181-million, remains accretive to Eldorado.

He maintained his "hold" recommendation and C$8.25 price target, but noted a completed deal would result in a 3% price target bump to C$8.50.