RE:RE:Life..Lifexprt wrote: Hey Argo, thanks for chiming in but I will hold at least until the deal closes. Firstly because my investment is now tied to Alamos shares and will track their price at a 54 to 1 ratio. Secondly I am not discounting a competitive bid from another major resulting in a sweetened offer from Alamos. Thirdly in my opinion without considering mexican assets, Florida Canyon is worth far more than $60 million, which is the valuation of spinco. Personally would have preferred to see this through under Argonaut but in reality Alamos paid $516 million US for Magino alone when you include debt and buying out hedges. $60 million for a producing mine (70k oz) in Nevada is not the going rate with gold above $2,200.
You might want to look at this years guidance. Florida Canyon is expected to produce aprox. 65k ounces with an AISC cost average of around $2400. per ounce. If you take out the capex of aprox. $30 million or aprox $450 per ounce out it still leaves. AISC of aprox. $1950. That is a slim profit margin.
Magino on the other hand will have an AISC of aprox. $1725 on aprox 120k of production. Take out the aprox. $60 million in Capex for the year and AISC drops by aprox. $500 per ounce to aprox. bringing AISC down to aprox. $1225. When they get Magino up to 250k production for relatively little money AISC should be near $1000 per ounce. When that happens Alamos will be making aprox, $300 million US on their Magino purchase with huge resources good for 20 plus years with a lot more to be found and Florida Canyone will be limping along with aprox. $17.5 miion US per year in profits with a much smaller resource base and much lower grade.
So if Magino is worth according to you $US 516 and we add this years Capex plus expansion costs of lets say aprox. $180 million US we are up to aprox. $700 million US cost of Magino for aprox. $300 million US in profits per year. In comparison Floriday Canyon with aprox. 6% of Maginos profits would be valued on an equal basis at aprox. $42 million US or aprox. $55 million Cdn.
In conclusion Alamos didnt want the garbage of Mexico or Florida Canyon. They new the prize was Magino. And being right next to them they will also save a bundle uon synergies making their $700 million US investment in Magino return them at least $350 Million US per year in profits for a nice 50% return while Long suffering AR shareholders get the shaft.
Alamos are vultures for sure. With a $7.5 billion market cap. they could have offered 50 cents for each AR share costing them like another 2% dillution to their shares. They saw how desperate AR was and took full advantage. Hopefully a bit of karma comes to them one day.
On the other hand other major gold miners can do the numbers i have a lot better than me and i am sure that a 250k low cost producer in a safe jurisdiction with a brand new mine and huge relatively rich resources may be of interest to them.
What would be a fair price for a mine that when expanded should produce aprox. $300 million US or aprox. $390 million Cdn. per year in profits? Lets assume a $1 billion purchase price by a major or around $1 per AR share. This years Capex should be taken care of by this years Magino profits. So lets add another $100 million for expansion. That would bring the total cost to a purchaser or aprox. $1.1 billion Cdn. For a mine that will produce aprox. $390 million Cdn. for the next 20 plus years likely a lot more. That still equals an aprox. 35% return if they buy each AR share for $1
No guarantees but i would not be surprised if other mid tier or major gold miners are burning the midnight oil working on another offer because projects like this with a brand new large mill and huge resources in a safe country for pennies on the dollar dont come along everyday.
Heres to hoping for a bidding war.
Good luck to all.