From Friday's Globe and Mail

December 11, 2008 at 8:36 PM EST

The bargain hunting in the junior gold sector has officially begun.

Iamgold Corp. came to the rescue of cash-strapped Orezone Resources Inc. Thursday, with a $139-million (U.S.) takeover offer in the first of what's expected to be a wave of buyouts of juniors unable to finance their projects.

The deal gives Iamgold a major boost in gold reserves and annual production. Slated for completion in mid-2010, the Essakane gold project in Burkina Faso is expected to produce 300,000 ounces of gold per year, increasing Iamgold's annual production by nearly a third.

For Orezone, however, the friendly all-stock deal is a financial lifeline. It was facing the unpalatable prospect of trying to raise more than $100-million in equity to finance the construction of Essakane. From a year high of $1.85 (Canadian), the Ottawa company's shares were trading below 20 cents on the Toronto Stock Exchange before the deal was announced.

“Clearly it's a good transaction for Iamgold but it's also a good transaction for Orezone shareholders. They were very much in a crunch and their share price had dropped significantly. Now they have the opportunity to be in a liquid stock, they are starting to get back some of their money with our price and there is a revaluation scenario that we think could happen with Iamgold,” Joseph Conway, Iamgold's president and chief executive officer said in an interview.

With four million ounces of reserves, the Essakane project could become a second flagship asset for Iamgold, complementing its Rosebel mine in Suriname, which also produces about 300,000 ounces a year.

“It is a very significant transaction for us, notwithstanding the price that we've paid for it,” Mr. Conway said.

Iamgold is offering .08 of a share for each Orezone share, as well as a share in a new company that will hold three Orezone development projects other than Essakane.

It will also provide Orezone with an immediate $20-million equity financing at 28 cents a share.

The bid sent Orezone shares soaring 197 per cent.

“Iamgold brings the capital required to bring Essakane into production during these difficult markets,” Orezone CEO Ron Little said in a statement.

While the price of gold has fared better than other commodities hammered by the global financial crisis, junior gold miners have been pummelled as access to capital to fund projects has dried up.

Cash-rich senior producers such as Barrick Gold Corp., Newmont Mining Corp., Goldcorp Inc. and Kinross Gold Corp. are expected to snap up the beaten down juniors who are desperate for cash.

Iamgold Corp. (IMG)

Close: $5.88, down 22¢

Orezone Resources (OZN)

Close: 52¢, up 341/2¢