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Yamana Gold to Acquire Extorre Gold Mines at Bargain Price
June 18, 2012 by prospectingjournal · Leave a Comment
COMMENTARY – ProspectingJournal.com –
Yamana Gold (TSX: YRI), one of Canada’s largest gold producers, announced this morning that it has entered into a definite agreement to purchase Extorre Gold Mines (TSX: XG) in a cash-and-stock deal for $414 Million. Yamana has agreed to pay Extorre shareholders $3.50 in cash and 0.0467% of a Yamana share for each Extorre share they hold. The deal is worth about $4.26 per share, 68% higher then Extorre’s Friday close of $2.54 and a great return for investors — if they invested in June.
For Yamana, the acquisition is a steal. Extorre’s stock has plunged nearly 70% this year with its 52 week range peaking at $14.84 a share. The stock has fallen drastically due to poor market conditions and investor fear in Argentina where the company is focused. This is an ideal transaction for the producer as it could eventually generate over 10% of their total gold production while only costing 3% of their current market capitalization.
Yamana presently operates 7 producing gold mines in Argentina, Brazil, Chile and Mexico. Acquiring Extorre will allow the company to increase its future gold production by developing the Cerro Moro project which has 1.35 million ounces of indicated gold equivalent resources and 1.05 million ounces of inferred resources. Extorre initially wanted to develop the project through a staged plan but Yamana has the operational expertise – and money – to develop Cerro Moro much quicker.
While Extorre shareholders still have to approve the agreement, management is encouraging they vote in favour. The takeover may leave some investors in the red but given the current markets, the company believes that “this transaction represents a good outcome for all stakeholders.” Extorre isn’t the only opportunity out there for majors searching for great value at a cheap price. With many junior miners languishing at near record lows, look for the summer to bring more bargain deals for anyone with cash. As important as a promising property is for juniors, if they don’t have money in the bank – or the ability to raise it – a cheap takeover offer is often better then the alternative.
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Angela Bouzanis
