Caballo purchase is making me a Timmins shareholderI became a Goldgroup shareholder recently, and mostly because of Caballo Blanco. Once put into production at 100K ounces per year, what would that do to a stock trading at $20Million? At least a ten-bagger, and that’s without counting their other assets! To get the upside of Caballo, I have to become a Timmins shareholder, and because of Timmins’ much larger market cap, the growth potential is not even close to the one I had within Goldgroup. At least Timmins has much more resources to develop the mine than Goldgroup.
The bad part is that I can’t even exit Goldgroup yet. How can a company get $25 Million worth of cash and shares for an asset, and still trade for $20 million? This means that I get the 50% San Jose de Gracia high grade mine and Cerro Prieto (18K per year mine about to be put in commercial production) for free. I could have sworn that this transaction would at least cause a big jump in Goldgroup’s stock to come close to its value, allowing me to take my Goldgroup investment and transfer it to Timmins!
Oh well, such are the mis-pricings in the gold miner world. It’s the same mis-pricing that allows an asset like Caballo to be sold for peanuts. I didn't think that Goldgroup would sell it for less than $50 Million. The attractiveness of that asset was never about the reserves already found, but about its great potential (at least 3 million in total, but likely much more), based on the geology and the fact that they are neighbours with the giant GoldCorp mine next door (apparently they share a similar geology). The only consolation to me is that whatever reduced Caballo's price in the last few months did the same to Timmins shares. If the gold price recovers, Timmins shares will go up too.