Consolidation of Industry Continues
Glamis Gold has just offered to buy Francisco Gold for just under $200 million (Can) in a friendly all stock deal. The core development being bought is the El Sauzal property in Mexico. This property has about 2 million oz. and is open pit minable at a cost of $ 120/oz (Can). Francisco has about 16.3 million outstanding shares from what I can find out and were up $ 4.30 to close at $12.80 (Can) yesterday. I found the story in the National Post (a canadian newspaper) in the Financial Section. I have included the story below. The website for the companies involved are
franciscogold.com
glamisgold.com
No costs for putting this property into production were given. But it gives an idea what the industry is paying for good gold properties. I may have missed something but after checking on the property on the Francisco website I think the GBG property is better. I would sure be interested in some other points of view.
Glamis eyes key mine
Makes $200M all-stock offer to buy Francisco Gold
Drew Hasselback
Financial Post
Chris Bolin, National Post
Kevin McArthur sees El Sauzal as a "showplace mine" for Glamis.
Glamis Gold Ltd. has offered to buy Francisco Gold Corp. for just less than $200-million in a friendly, all-stock deal.
The immediate focus of the transaction is control of Vancouver-based Francisco's core development asset, the El Sauzal gold project in Chihuahua, Mexico. The property is expected to enter production in 2005.
"We expect El Sauzal to become Glamis' next showplace mine, producing 170,000 ounces of gold for 10-plus years at cash costs below US$120 per ounce," said Kevin McArthur, president and chief executive of Glamis.
Randy Reifel, president of Francisco, said the Glamis offer is a "fair valuation" of his company.
"After many years of patience and hard work, our Francisco shareholders will get to participate in the development of El Sauzal into a world-class mine," Mr. Reifel told a conference call.
Also key to the deal is Francisco's Marlin gold project in Guatemala. The property is believed to hold more than one million ounces of gold. Glamis said it is "very excited" about the project's potential to increase the company's holdings in Central America.
The acquisition would be Glamis' fourth in four years.
Under the terms of the friendly offer, Glamis has offered to swap 1.55 Glamis common shares for each Francisco share. Francisco shareholders will also be given one share in a new exploration company, temporarily called ExploreCo.
ExploreCo will be given the rights to a basket of Francisco's smaller exploration projects. Francisco will fund the company with $25-million cash. Glamis will retain a right to acquire a 5% stake in ExploreCo over the next three years.
The offer rocked Francisco's stock. Shares were up $4.30 to close at $12.80, giving the company a market capitalization of $196.5-million.
"Glamis is paying up here for El Sauzal. That's the bottom line," said Brian Christie, an analyst at Canaccord Capital Corp.
The transaction will increase Glamis' proven and probable recoverable gold reserves by more than 50% to five million ounces.
"The transaction is an important step in realizing Glamis' goal of 500,000 ounces of annual gold production in the near term, while maintaining cash costs below US$150 per ounce," Mr. McArthur said.
In 2002, Glamis expects to produce about 255,000 ounces of gold at a total cash cost of US$172 an ounce at its mines in Nevada, California and Honduras.
Completion of the transaction is subject to approval by Francisco shareholders and regulatory authorities. About 14% of Francisco is owned by company insiders. They have locked up their support in favour of the Glamis offer. If the deal fails to close, Francisco will pay Glamis a break fee of $8.6-million. |
