Mexico Focused GMM tops TMM
GammonGold Inc. is a Nova Scotia based mid-tier gold and silver producer withproperties in Mexico. The Company's flagship Ocampo Project inChihuahua State achieved commercial production in January 2007. GammonGold also operates its El Cubo operation in Guanajuato State.
Mexico-focused Gammon tops Timmins Gold, agrees to purchase Capital Gold for $288m
by Deborah Sterescu
Mexico-focusedgold producer Gammon Gold (NYSE: GRS, TSX: GAM) said Friday it hasagreed to acquire Capital Gold (TSX and NYSE AMEX: CGC) in a cash andshare transaction totaling about US$288 million.
The US$4.57 per share deal follows Timmins Gold's offer of $4.50 pershare, which was announced earlier this week. Unsurprisingly, sinceTimmins' proposal, Capital Gold's shares have moved up sharply, fromaround $3.82 on Monday morning to trade at around $4.68 on Friday.
The Gammon bid represents a 1.5% premium to Timmins' offer and a 20%premium to Capital Gold's closing price on Friday September 24th, thelast business day prior to Timmins Gold's announcement.
Under the terms of the acquisition, each common share of CapitalGold will be exchanged for 0.5209 common shares of Gammon Gold, and acash payment in the amount of US
.79 per share.
The deal no doubt strengthens Gammon's position as a Mexico-focusedgrowing gold producer, as Capital Gold owns and operates the El Chanategold mine in Sonora as well as the Orion development project inNayarit, both in Mexico.
Capital Gold has increased reserves at its El Chanate mine by 1.3million gold ounces since 2002, and it is thought that there is stillpotential to be realized. The company also owns and leases mineralconcessions near the town of Saric, also located in Sonora, that areundergoing exploration for gold and silver mineralization.
"Both Gammon Gold and Capital Gold have operating teams that possessextensive experience in Mexico, which supported by Gammon Gold's strongfinancial foundation, will allow El Chanate and Orion's potential to befully realized," said Capital Gold chairman Stephen Cooper.
Following the transaction, Capital Gold shareholders will own approximately 20% of Gammon Gold on a fully diluted basis.
Bothboard of directors have already approved the transaction, and seniorofficers and directors of Capital Gold have also agreed to vote infavour of the acquisition.
Should the acquisition not be completed, Capital Gold has agreed topay a break fee of US$10.3 million to Gammon, under specificcircumstances.
The deal, which is still subject to customary closing conditions, is expected to close in late 2010.
Toronto-based Gammon Gold's flagship property is Ocampo in ChihuahuaState, which achieved commercial production in January 2007. Thecompany also owns the suspended El Cubo mine in Guanajuato State andthe Guadalupe y Calvo development property in Chihuahua State, withseveral option purchase agreements signed for other properties inMexico.
Since 2008, the company has increased its Mexican land position by over 59%.
Gammon slipped more than 2.6% on Friday, trading at $6.98 at 12:10pm ET.