Small-Cap Gold Stocks Rise as Goldcorp, Eldorado Battle
September 3rd, 2010 - 9:22 am | by GoldAlert
GOLD STOCKS NEWS - Gold stocks -posting their best month in August since last April - may see additional gains in September as merger and acquisition activity in the gold stocks sector continues at a record pace. That pace accelerated overnight as two major gold producers, Goldcorp (GG) and Eldorado Gold (EGO), clashed over the same takeover target.
Goldcorp pulled ahead in the race to buy Australian-based gold miner Andean Resources (AND.TSX) as the board of directors of both companies unanimously approved a cash-and-stock offer valued at C$3.6 billion or C$6.50 a share. The bid betters a competing one from Eldorado Gold for a stock-only offer valued at C$6.36 per share. The Goldcorp agreement represents a 35% premium over Andean’s TSX closing price on Thursday of C$4.81.
The battle for Andean helped propel the shares of other gold companies higher Friday morning. Shares of Extorre Gold (XG.TSXV) rose 16.5% to $4.59 per share, rallying on the back of the news that Andean was being pursued by a number of the world’s largest gold producers. Investors are bidding up the shares of Extorre and other gold companies with high-grade gold discoveries, betting on the next takeover target in the sector. Extorre is in the process of defining a new high-grade gold deposit in the mining-friendly province of Santa Cruz in Argentina. The company’s share price has risen 170% since it was spun out from Exeter Resources (XRA.TSX) in Mid-March.
Goldcorp and Eldorado are both vying for Andean’s primary asset, the advanced-stage Cerro Negro gold exploration project in Santa Cruz, Argentina. The deposit is reported to contain a gold resource of 3.1 million ounces and 25 million ounces of silver, according to a March 2010 study.In a report to clients, Scotia Capital noted that in addition to the higher offer and Andean board of directors’ support, the deal is backed by Andean’s largest shareholder. While Eldorado may raise its bid, the report said, it does not expect other suitors to step forward.
With gold prices on the verge of breaking out to new all-time highs and merger and acquisition activity heating up in the sector, investors will be on the lookout for the next takeout candidate. According to Bloomberg, there have been 290 gold deals done thus far in 2010, valued at $38.4 billion. Wellington West, in a note to clients, compiled a list of companies that could “get some attention” as result of the takeover battle for Andean. These include Anatolia (ANO.TSX), Romarco (R.TSXV), Detour Gold (DGC.TSX), Novagold (NG), Victoria Gold (VIT.TSXV), and Rainy River Resources (RR.TSXV).
Other investment banks have also rushed to find gold stocks that could be the next to be acquired. TD Securities analysts highlighted Extorre Gold Mines (XG.TSX), Rubicon Minerals (RMX.TSX), and Ventana Gold (VEN.TSX) as companies that could see their share prices gain as result of the Eldorado-Goldcorp takeover battle. Dundee Securities mentioned Magellan Minerals (MNM.TSXV) and European Goldfields (EGU.TSX) also other potential benefactors.
goldalert.com
note: Thanks to Bylo Selhi on Gold and Silver Juniors thread.. |
