accept - kingsgate · shareholder to accept kingsgate’s offer. in addition, kingsgate’s offer...

KINGSGATE’S UNCONDITIONAL OFFER FOR YOUR ANDEAN SHARES

Please call the Offer Information Line on 1300 760 949 (toll free within Australia) or +613 9415 4247 (from outside Australia) if you require assistance. For legal reasons calls to these numbers will be recorded.

SUPPLEMENTARY BIDDER’S STATEmENT

PROVIDED YOUR ACCEPTANCE FORM IS RECEIVED BY KINGSGATE BEFORE 7:00Pm (SYDNEY TImE) ON 21 APRIL 2006 YOU WILL BE ISSUED WITH YOUR NEW KINGSGATE SHARES WITHIN 5 BUSINESS DAYS AND YOU WILL ALSO BE ENTITLED TO RECEIVE THE KINGSGATE INTERIM DIVIDEND OF 5 CENTS PER KINGSGATE SHARE

ACCEPT

This document is a Supplementary Bidder’s Statement dated 4 April 2006 under section 643 of the Corporations Act. It is the second Supplementary Bidder’s Statement issued by Kingsgate South America Pty Ltd (ACN 118 498 561) (Bidder) in relation to its takeover offer for Andean Resources Limited (ABN 66 064 494 319) (Andean) dated 14 March 2006. Bidder is a wholly-owned subsidiary of Kingsgate Consolidated Limited (ABN 42 000 837 472) (Kingsgate).

This second Supplementary Bidder’s Statement supplements and is to be read together with the replacement Bidder’s Statement dated 9 March 2006 (Bidder’s Statement) given by Kingsgate to Andean and the first Supplementary Bidder’s Statement dated 9 March 2006.

ACCEPTTHE OFFER NOW

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TO ENSURE YOU RECEIVE THE KINGSGATE INTERIM DIVIDEND OF 5 CENTS PER KINGSGATE SHARE

KINGSGATE’S OFFER IS NOw

UNCONDITIONAL

KINGSGATE CONSOLIDATED LImITEDSUPPLEmENTARY BIDDER’S STATEmENT

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ImPORTANT FACTS YOU NEED TO KNOw ABOUT KINGSGATE’S OFFER AND ANDEAN’S RESPONSE

1. KINGSGATE’S OFFER IS NOW UNCONDITIONAL

2. THE IMPLIED VALUE OF KINGSGATE’S OFFER1 HAS INCREASED SINCE THE OFFER wAS ANNOUNCED

3. KINGSGATE’S OFFER PROVIDES YOU wITH A SIGNIFICANT PREmIUm TO THE PRICE OF ANDEAN SHARES PRIOR TO THE ANNOUNCEMENT OF KINGSGATE’S OFFER

4. THE ANDEAN DIRECTORS2 HAVE NOT PROvIDED YOU wITH ANY ASSESSmENT OF wHAT THEY THINK YOUR ANDEAN SHARES ARE wORTH

5. KINGSGATE IS BETTER PLACED TO ADD vALUE AND POTENTIALLY DEVELOP THE CERRO NEGRO PROjECT

6. KINGSGATE’S OFFER ALLOwS YOU TO RETAIN ExPOSURE TO THE CERRO NEGRO PROjECT AND SHARE IN THE GOLD PRODUCTION AND GROWTH OF A COMBINED KINGSGATE AND ANDEAN

7. BY BECOMING A SHAREHOLDER IN A MERGED KINGSGATE AND ANDEAN, YOU wILL ImPROvE THE RISK PROFILE OF YOUR INVESTMENT


1 Based on the closing price of Kingsgate Shares on 3 April 2006.2 Excluding Gavin Thomas who, due to his position as CEO of Kingsgate, was not involved in any deliberations of the Andean Directors in relation to the Offer.

4

4 April 2006

Dear Andean Shareholder,

Important Developments in Kingsgate’s Unconditional Offer for Your Andean Shares

As you would be aware, Kingsgate Consolidated Limited (“Kingsgate”), through its wholly-owned subsidiary, Kingsgate South America Pty Ltd, has made a takeover offer for your shares in Andean Resources Limited (“Andean”). Kingsgate is offering you 1 Kingsgate Share for every 15 Andean Shares you hold.

By now you will have received both the Bidder’s Statement from Kingsgate setting out details of our Offer and the Target’s Statement containing the response from Andean Directors.

Kingsgate is of the view that the Target’s Statement fails to justify the recommendation by the Andean Directors that Andean shareholders should reject the Offer by Kingsgate. The implied value of Kingsgate’s Offer since announcement has increased from $0.391 to $0.4293 and Kingsgate believes that it is in your best interest as an Andean Shareholder to accept Kingsgate’s Offer.

In addition, Kingsgate’s Offer is now unconditional.

As a result, you now have the opportunity to accept Kingsgate’s Offer and, within 5 business days, be issued with your Kingsgate Shares. Furthermore, if you accept the Offer before 7.00pm (Sydney time) on 21 April 2006 you will become entitled to receive Kingsgate’s interim dividend of 5 cents per Kingsgate Share. This dividend will be paid to eligible Kingsgate shareholders on 28 April 2006.

We believe that a combination of Kingsgate and Andean has compelling logic for the shareholders of both companies. Kingsgate possesses a high level of technical expertise, financial capability and commercial experience as well as a proven track record in developing offshore epithermal gold deposits like the Cerro Negro Project. As a result, Kingsgate believes it is best placed to accelerate the exploration and fast track the potential development of Cerro Negro in Argentina to ensure maximum value is delivered to all shareholders in the shortest possible timeframe. In contrast, we believe that Andean’s ability to effectively explore and potentially develop the Cerro Negro Project is constrained by its limited access to financial, technical and human resources.

I very much look forward to your acceptance of the Offer and to welcoming you as a shareholder in an expanded Kingsgate.

Should you have any questions, please contact the Kingsgate Offer Information Line on 1300 760 949 (toll free within Australia) or +613 9415 4247 (from outside Australia).

Yours sincerely,

Ross Smyth-Kirk Chairman3 Based on the closing price of Kingsgate Shares on 3 April 2006 of $6.44.


KINGSGATE CONSOLIDATED LImITEDSUPPLEmENTARY BIDDER’S STATEmENT5

KINGSGATE’S OFFER IS NOw UNCONDITIONALKingsgate has now waived the remaining conditions of its Offer. This means that if you accept the Kingsgate Offer you will be issued with Kingsgate Shares within 5 business days.4

In addition, if you accept the Offer before 7.00pm (Sydney time) on 21 April 2006 you will also be entitled to receive the Kingsgate interim dividend of 5 cents cash per Kingsgate Share. The dividend will be paid on 28 April 2006.

KINGSGATE’S OFFER PROVIDES YOU wITH A SIGNIFICANT PREmIUm TO THE PRICE OF ANDEAN SHARES PRIOR TO THE ANNOUNCEMENT OF KINGSGATE’S OFFERAs at 3 April 2006 (the last trading day prior to the date of this Supplementary Bidder’s Statement):

n the Kingsgate share price of $6.44 was higher than it was when Kingsgate announced its Offer on 22 February 2006; and

n the Kingsgate Offer valued your Andean shares at $0.429, a premium of 34% to $0.32, the last closing price of Andean Shares prior to the announcement of Kingsgate’s Offer.

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2

ImPORTANT FACTS YOU NEED TO KNOW ABOUT KINGSGATE’S OFFER AND ANDEAN’S RESPONSE

4 If you are a Foreign Andean Shareholder you should refer to section 9.16 of Kingsgate’s Bidder’s Statement which provides details on how you will receive your Offer consideration.



Kingsgate believes that the current market value of your Andean Shares is primarily driven by the presence of Kingsgate’s Offer. As a result, in the event that you do not accept Kingsgate’s Offer and the Offer lapses, there is significant risk that the price of your Andean Shares will fall from its current level.

Implied Offer price: $0.4295

37% premium

70% premium

34% premium

$0.32 $0.31

$0.25

Andean 6 month VWAPto 21 February 20066

Andean 3 month VWAPto 21 February 20066

Andean closing priceon 21 February 20066

$0.45

$0.40

$0.35

$0.30

$0.25

$0.20

$0.15

$0.10

$0.05

–

The implied value of Kingsgate’s Offer remains higher than the highest price at which Andean Shares have traded since Andean acquired an interest in the Cerro Negro Project in january 2004 until the announcement of Kingsgate’s Offer.

Figure 1: Implied Offer price premium to historic Andean Share price

5 Based on the closing price of Kingsgate Shares on 3 April 2006 of $6.44.6 Last trading day prior to the announcement of Kingsgate’s Offer on 22 February 2006. “VwAP” means Volume weighted Average Price.


THE ANDEAN DIRECTORS HAVE NOT PROvIDED YOU WITH ANY ASSESSmENT OF wHAT THEY THINK YOUR ANDEAN SHARES ARE wORTHThe Andean Directors have claimed that the Kingsgate Offer does not recognise the value of Andean and its Cerro Negro Project in Argentina.

n No assessment of the value of Andean Shares has been provided by the Andean Directors

n No independent assessment of the value of Andean Shares has been provided to support their recommendation

n No sound basis has been provided for the claim that the Kingsgate Offer undervalues Andean

KINGSGATE IS BETTER PLACED TO ADD vALUE AND POTENTIALLY DEVELOP THE CERRO NEGRO PROjECTKingsgate is a successful Australian gold mining and exploration company, with a market capitalisation of over $550 million and no debt.7 Its experience and proven track record in the exploration and development of a similarly-styled epithermal gold deposit into the Chatree gold mine gives Kingsgate a significant advantage over Andean to potentially bring the Cerro Negro Project into production in the shortest possible timeframe.

In particular, you should note that despite more than two years of exploration of the Cerro Negro Project by Andean, the company is still yet to issue a jORC8-compliant Resource Statement despite stating it would do so as early as in the September quarter of 2005.9

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7 As at 3 April 2006.8 “jORC” means joint Ore Reserves Committee. For a mineral resource to be officially recognised by the Australian minerals industry, it is a requirement for ASX-listed companies to prepare a mineral resource statement in accordance with the jORC Code, which is a set of standard guidelines incorporated in the ASX Listing Rules.

9 Refer to Andean’s 30 june 2005 Quarterly Report, lodged with the ASX on 29 july 2005.

5ImPORTANT FACTS YOU NEED TO KNOW

ABOUT KINGSGATE’S OFFER AND ANDEAN’S RESPONSE


KINGSGATE’S OFFER ALLOwS YOU TO RETAIN ExPOSURE TO THE CERRO NEGRO PROjECT AND SHARE IN THE GOLD PRODUCTION AND GROWTH OF A COMBINED KINGSGATE AND ANDEANThe Andean Directors claim that if you accept the Kingsgate Offer this “will result in your participation in the Cerro Negro Project being diluted due to it being part of a larger group with a larger shareholder base”.

However, as an Andean shareholder you should be aware that:

n If you accept Kingsgate’s Offer you will not only retain exposure to the Cerro Negro Project but you will gain exposure to Kingsgate’s high quality, low cost Chatree gold mine in Thailand (which is expected to produce 145,000-150,000 ounces of gold in the year to 30 june 2006) as well as Kingsgate’s exploration interests in South East Asia, South America and Australia; and

n If you remain a shareholder in Andean, Kingsgate believes it is likely that your interest in Andean (and hence your exposure to the Cerro Negro Project) will continue to be diluted as Andean seeks to procure financing for the continued exploration and potential development of the Cerro Negro Project.

For example, since january 2004, the issued share capital of Andean has increased from 92 million shares to over 270 million shares. In addition, there are 36 million options on issue. As a result, if you held 10% of Andean’s shares in january 2004 and you did not invest further money in the company, your interest in Andean would now have fallen to 3.4% of the company, representing a dilution of approximately 66% to date.

BY BECOMING A SHAREHOLDER IN A MERGED KINGSGATE AND ANDEAN, YOU wILL ImPROvE THE RISK PROFILE OF YOUR INvESTmENTThe Andean Directors claim that if you accept Kingsgate’s Offer for your Andean Shares, you will become a shareholder in Kingsgate “which exposes you to additional risks”.

Kingsgate believes that by combining the assets of Kingsgate and Andean, you will improve the quality and risk profile of your investment:

n A combined market capitalisation of more than $660 million10;

n Enhanced market presence through participation in the S&P/ASX200 Index;

n Strong cashflow underpinned by the low cost operations at the Chatree gold mine;

n A growth profile including an expected expansion of the Chatree gold mine in the near-term and the potential accelerated development of the Cerro Negro Project;

n A strong balance sheet with no debt; and

n A diversification and improvement in overall sovereign risk. In contrast to the claim by Andean Directors, Thailand is rated as having a lower level of country risk than Argentina by respected global agencies such as Euromoney and Global Insight. Standard & Poor’s (S&P) also rates Thailand as having a lower credit risk than Argentina.11

6ImPORTANT FACTS YOU NEED TO KNOW

ABOUT KINGSGATE’S OFFER AND ANDEAN’S RESPONSE

10 Based on the closing price of Kingsgate Shares on 3 April 2006 of $6.44 and assuming Kingsgate acquires 100% of Andean Shares.11 As at March 2006, Euromoney ranked Thailand 57th out of 185 countries in terms of its country risk compared to Argentina, which was

ranked 119th. Similarly, as at 30 March 2006, Global Insight rated Thailand risk as “Medium” versus Argentina risk as “Significant”. Also, refer to S&P research reports on Argentina (23 March 2006) and Thailand (24 February 2006 and 14 December 2005).

9 KINGSGATE CONSOLIDATED LImITEDSUPPLEmENTARY BIDDER’S STATEmENT

HOW DO IACCEPT THEKINGSGATEOFFER?You should follow the instructions in the Bidder’s Statement in order to accept the Kingsgate Offer:

For Issuer Sponsored Holdings of Andean Shares

To accept the Offer, complete the enclosed Acceptance Form in accordance with the instructions on it and return it in the enclosed envelope or to an address on the Acceptance Form.

For CHESS Holdings of Andean Shares

To accept the Offer, either contact your Controlling Participant (usually your broker) and instruct them to accept the Offer on your behalf, or complete the enclosed Acceptance Form in accordance with the instructions on it and return it in the enclosed envelope or to an address on the Acceptance Form.

For full details of how to accept the Offer, see section 9.6 of the Bidder’s Statement

Should you have any questions in relation to the Kingsgate Offer or how to accept it, please call the Kingsgate Offer Information Line on 1300 760 949 (toll-free within Australia) or +613 9415 4247 (from outside Australia). Alternatively, please contact your broker or professional investment adviser.

Please note that, as required by the Corporations Act, all calls to these numbers will be recorded.


11 KINGSGATE CONSOLIDATED LImITEDSUPPLEmENTARY BIDDER’S STATEmENT

OTHER INFORmATION1. ASIC mODIFICATIONS AND ExEmPTIONS

ASIC has published various ‘Class Order’ instruments providing for modifications and exemptions that apply generally to all persons, including Bidder, in relation to the operation of Chapter 6 of the Corporations Act.

Amongst others, Bidder has relied on the modification to section 636(3) of the Corporations Act set out in paragraph 11 of ASIC Class Order 01/1543 ‘Takeover Bids’ to include references to certain statements by Andean in this second Supplementary Bidder’s Statement without obtaining the consent of Andean.

As required by Class Order 01/1543, Bidder will make available a copy of the relevant documents (or relevant extracts of the relevant documents), free of charge, to Andean Shareholders who request them during the Bid Period. To obtain a copy of these documents (or the relevant extracts), Andean Shareholders may telephone the Offer Information Line on 1300 760 949 (toll-free within Australia) or +613 9415 4247 (from outside Australia).

As permitted by ASIC Class Order 03/635, this second Supplementary Bidder’s Statement may include or be accompanied by certain statements:

n fairly representing a Statement by an official person; or

n from a public official document or a published book, journal or comparable publication,

where the statement was not made, or the document was not published, in connection with the Offer or Kingsgate or Andean or any business, property or person the subject of the Bidder’s Statement or Target Statement.

Pursuant to the Class Order the consent of persons such Statements are attributable to is not required for the inclusion of such Statements in the second Supplementary Bidder’s Statement.

2. CONSENTS

Kingsgate and its Directors have each consented to the inclusion of the statements in this second Supplementary Bidder’s Statement which are based on the statements made by Kingsgate or its Directors (as the case may be) and have not withdrawn those consents before the date of this second Supplementary Bidder’s Statement.

3. LODGEmENT WITH ASIC

A copy of this second Supplementary Bidder’s Statement was lodged with ASIC on 4 April 2006. This second Supplementary Bidder’s Statement will prevail to the extent of any inconsistency with the Bidder’s Statement. Neither ASIC nor its officers takes any responsibility for the contents of this second Supplementary Bidder’s Statement.

4. DEFINED TERmS

Words defined in the Bidder’s Statement have the same meaning in this second Supplementary Bidder’s Statement, unless the contrary intention appears.

5. AUTHORISATION

This second Supplementary Bidder’s Statement has been approved by a resolution passed by the directors of Kingsgate.

Kingsgate Consolidated Limited

ABN 42 000 837 472

Level 8, 14 Martin Place, Sydney, New South wales, 2000

Tel: +61 2 8256 4800 Fax: +61 2 8256 4810 Email: [email protected]

website: www.kingsgate.com.au

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accept - kingsgate · shareholder to accept kingsgate’s offer. in addition, kingsgate’s offer...

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