Frontier rejects Eldorado Gold's $148 million bid

TORONTO (Reuters) - Canada's Frontier Pacific Mining Corp rejected as inadequate on Monday a C$148.2-million takeover offer made by Eldorado Gold Corp , and said it would seek a better offer.

The all-share bid, made late Friday, offers 0.122 of an Eldorado common share for each Frontier share. That values each Frontier Pacific share at C$0.90, which is a 28.6 percent premium on the stock's closing price on Friday.

Eldorado, a mid-cap gold miner, warned it would go directly to shareholders if smaller rival Frontier rejected its offer.

A successful takeover would give Eldorado Frontier's Perama Hill gold mining project in northeastern Greece.

"The overall economics of the Perama Hill project are extremely compelling and are not reflected in the proposed price," Frontier said in a statement on Monday afternoon, adding it has started looking for competing offers.

Frontier's stock jumped 23 Canadian cents, or 32.9 percent, to 93 Canadian cents on the Toronto Stock Exchange's Venture Shares of Eldorado were off 24 Canadian cents, or 3.25 percent, at C$7.14 on the TSX.

Earlier this month, Frontier said an environmental impact study on developing Perama Hill still awaited approval from the Greek government. The company also said it was in financing discussions with banks for Perama Hill, which contains an indicated 1.36 million ounces of gold.

Eldorado said on Monday it had the financial heft to bring Perama Hill into production with no additional share dilution, and that the acquisition would drive its growth strategy in that region of Europe.

The Vancouver, British Columbia-based miner said it made the offer after "various discussions" with Frontier over "several years," and that it has the backing of Frontier's biggest shareholder, 25-percent owner Dundee Precious Metals.

"In the event that a consensual transaction cannot be reached, which is clearly Eldorado's desire, Eldorado will take its proposal directly to Frontier Pacific's shareholders," it said in a statement released before Frontier's rejection letter.

(Reporting by Jonathan Spicer; Editing by Peter Galloway)