Haywood opposed to Yamana bidMineweb link: https://www.mineweb.net/mineweb/view/mineweb/en/page34?oid=24134&sn=Detail
HIGHER OFFER NEEDED
Haywood opposed to Yamana bid as Meridian reports increased gold and silver output and earnings
After the release of Meridian Gold’s second-quarter results, Haywood Securities asserted once again Thursday that Yamana’s bid for the Reno-based miner will not succeed at the current price.
Author: Dorothy Kosich
Posted: Friday , 27 Jul 2007
RENO, NV -
In the wake of Meridian Gold's recently released second-quarter 2007 financial results, Haywood Securities is sticking to its guns that Meridian shareholders should not accept fellow gold miner Yamana's cash-and-stock bid.
For the second quarter of this year, Meridian (TSX: MNG, NYSE: MDG) reported net earnings of US$24.5 million or 24-cents per share as gold production increased 13% over the first quarter and 39% annually as through at El Peñón was up substantially and gold production at Meridian's 40%-owned Rossi mine began production in Nevada. Record operating cash flow of $36.5 million was also reported during the second quarter of 2007. This compares to net earnings of $18.8 million for the same period of 2006.
Meridian reported net earnings of $43.4 million or 43-cents per share during the first half of this year, compared to $36.4 million for the same period of 2006.
Silver production was also reported up 42% over the first quarter of this year as silver grades at El Peñón and Minera Florida increased. Haywood's Kerry Smith revised Meridian's silver forecast upward from 8.5 million ounces of silver to 8.6 million ounces this year, along with gold production of 230,000 ounces. For 2008, Haywood predicted 250,000 ounces of gold production and 98.9 million ounces of silver production for Meridian.
Meridian has forecast 320,000 ounces of gold and over 9 million ounces of silver this year with a net cash cost of production per gold ounce is expected to be approximately negative ($50), including by-product credits based upon a silver price of $12 per ounce.
Smith gave Meridian a "SECTOR OUTPERFORM" rating with a "MODERATE" risk profile and a target price of $34.50/sh.
"Since the bid was announced, Meridian has traded at or slightly below the implied bid value. However, we continue to believe that Meridian shareholders will require a higher offer before they will trade in their gold/silver exposure for a pro forma copper/gold company. Meridian is currently reviewing the formal offer and plans to file a response by August," according to Smith.
Haywood also asserts that Meridian's shareholder base--with Fidelity, Royce and Associates, and T. Rowe Price as its largest shareholders - does not really tie in with that which favors Yamana, where Capita Research and JP Morgan are the largest shareholders.
"Meridian remains unhedged, is debt free, has US$221 million in cash, and continues to generate excellent free cash flow from El Peñón, Minera Florida, and now Rossi," Smith added.
Yamana (TSX: YRI, NYSE: AUY) and Northern Orion (TSX: NNO, AMEX: NTO) have launched a joint $3.06 billion bid for Meridian. Northern Orion has agreed to fund US$200 million of the $300 million of the cash component of the Meridian offer. The companies are making an offer of 2.235 Yamana shares for plus Cdn$3.15 in cash for each Meridian share. Northern Orion shareholders would receive 0.543 Yamana shares for each Northern Orion share.