RE: Takeoverfeaver...mexican properties!With Primero Mining left standing at the altar after AuRico swooped in to buy Northgate Minerals, the company is again actively hounding deals, and CEO Joseph Conway said in an interview on Monday that he was already fielding calls from companies interested in doing tie ups.
“There are still people out there who need management, who need capital, and are not necessarily being loved by the street at this moment,” he told Mining Weekly Online.
TSX-listed AuRico announced earlier in the day that it had agreed to buy Northgate in an all-paper deal worth nearly C$1.5-billion, which saw the target paying a C$25-million break fee to Primero.
Northgate and Primero had in July agreed to merge.
“We’ve known for several weeks that these guys had been interested, but it took them an amount of time to put a deal before the Northgate board that was sufficiently superior to what was on the table,” Conway said.
While Primero had the right to match the offer, this would have led to its shareholders owning 20% of the merged company, instead of 36% under the original agreement.
“We would be effectively diluting our shareholders in half, and that wasn’t a card we could play,” commented Conway.
So it’s back to square one on the corporate activity front for Primero, but a new deal may arrive sooner rather than later.
“We did have other opportunities we were looking at prior to when we opened up the dialogue with Northgate in late March. Some of those have come back to us in the last several weeks, saying ‘are we still interested potentially’?” Conway said.
“We’ve got a number of inbound calls already today.”
Primero, in which Goldcorp has a near 40% stake, owns the San Dimas gold-silver mine in Mexico, and the company is keen to add Canadian precious metal production to its profile.
Asked where the company would be looking, Conway answered: “I think we’re really an America’s focused vehicle. If we can find something in Canada, so much the better.”
His company would likely pay for any acquisition using shares.
Mackie Research analyst Barry Allan said that there “certainly is an imperative” for Primero to strike a new deal, naming TSX-listed Lake Shore Gold and Aurizon as potential targets for the company.
Lake Shore’s share price got punished in July when the company reported disappointing production at its Timmins mine for the second quarter, and the stock has languished since, shedding neearly 40% over the past 12 months, despite soaring gold prices.
Aurizon, which owns the Casa Berardi mine in Quebec, is also trading lower than where it was at the start of the year.
Allan said that Mexico-focused Argonaut Gold also “looks cheap”, and may attract interest from Primero.
The problem for Primero is that it’s had tax issues in Mexico, where it is taxed at spot silver prices for the production it sells to streaming company Silver Wheaton for $4/oz, which has depressed its share price.
This makes paper transactions more costly.
Conway said a formal process to try alter the taxation at San Dimas would soon be underway.
He told Mining Weekly Online earlier this month that the company would benefit to the tune of $35-million to 40-million a year at current silver prices, if successful.
Primero is hoping to get a tax ruling on the matter in 12 months to 18 months.