ATW and Kinbauri Combining

Kinbauri Gold Corp. (KINBF) and ATW Gold Corp. (ATWGF) announced this morning they are combining the two companies at an exchange ratio of 1.35 ATW shares per Kinbauri share, an exchange equal to C$0.85 per Kinbauri share. This share price equals a premium of 55% over the closing price of Kinbauri shares on July 10, 2009 and a 115% premium over the closing price of Kinbauri shares on May 8, 2009 before the Orvana hostile bid offer of C$0.55 per share.

For investors who haven't been following the Kinbauri drama, Toronto mining company Orvana Minerals Corp. initiated a hostile takeover attempt on Kinbauri Gold Corp. on May 25 and just yesterday extended its offer of C55 cents per share to July 24.

The hostile bid was complicated by a Kinbauri dispute with former partner, Montreal-based Glen Eagle Resources Corporation.

Kinbauri was running into a cash on hand crisis. The Orvana offer was one way to provide Kinbauri with liquidity.

As a marginal Kinbauri shareholder, I like the ATW Ventures offer because it offers a higher premium than the Orvana deal. But importantly, I believe ATW Ventures is a well run company and a good fit for Kinbauri over the long term.

ATW Ventures, an Australian gold miner, went into production in March of this year.

Here are the features of ATW Ventures before the Kinbauri deal that are attractive.

1. ATW reported C$8.5 million cash on hand in June.

2. ATW has positive operating cash flow.

3. ATW has a projected doubling of production from 2009 (25k oz. au) to 2010 (50k oz. au) and eventually ramping up to 130k per year.

4. Recent estimates of cash costs equal to roughly US$450 per ounce.

5. Gold resources of 1.3 million ounces with potential "blue sky" upside at the Burnakura and Gullewa gold mines.

Kinbauri provides ATW with the following:

1. 2.7 million ounces of gold resource and 76 million pounds of copper or 0.5k oz. gold equivalent at 3 mines in Spain with significant "blue sky" resource expansion potential.

2. Near term production in 2010 at an eventual annualized rate of 145k gold equivalence and US$355 per ounce cash cost.

3. Additional gold, platinum, and palladium exploration claims in North America.

The "new" ATW Ventures will have about 150 thousand common shares issued and outstanding. Former Kinbauri shareholders will own 53.5% of the issued and outstanding common shares of the combined company.

Congratulations to both ATW Ventures and Kinbauri shareholders.

Best,

The Gold Stock Strategist
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Errata: The 115% is the premium over the Kinbauri price before the Orvana bid, not over the Orvana bid of $0.55 and has been corrected in the text.

Disclosure: I own shares in Kinbauri Gold.

ATWGF.PK KINBF.PK