RE:AEMAEM a potential suitor?
This is one of my two favourite majors which have been rivals during the last few years for OSK Canadian Malartic, and PRB's Borden Lake deposit. AEM won the first one, but let the second go to G even though, as I recall, they had a 9% achor on PRB corner. May be they did not want to antigonize G too much.
Now ICG, #4 Plug has those small tension veins that would be amenable to bulk tonnage operation, just like in Goldex on the other side of Val d'Or, where AEM has a lot of experience with. They know how to mine that economically (as I recall, de Jong mentioned this in one one his presentations).
Why #4 Plug important? First, AEM knows how to handle this type of deposit. Second, ICG has been under-reporting the RE from this plug (for conservatism, or otherwise). But what included in the global RE estimate for Lamaque (South) Gold Project for #4 Plug is minimal, at most only about 1/3 of the potential total that would be contained in this plug (estimated, my own back-of-envelope, to be over 1.MozAu, down to 800m). If we take this extra 0.7MozAu into account, the global RE for Lamaque Gold Project would hit 3.3 +0.7 = 4MozAu, over 20% increase in RE and would add 2 years worth of (profitable) production @ 300,000 oz/yr for ~13 years.
Presumable, AEM,as a respectable 800 lb gorilla (Mkt Cap ~$15B), would not drip drip with some low-balls, knowing that G (another 800 lb gorilla, Mkt Cap ~$16B) is watching as well. So, AEM would come in with something decent, just to show that it is serious. During the meantime, ELD would be left out on the side (a 300 lb gorilla is no match for this contest among the silverbacks, Mkt Cap only $2.8B). Note that ELD current offer was price @ $1.21/s (for a max of $129M) was based on the average recommended price from analysts (see ICG current Corp Presentation, slide 23). The range was from 0.90 to 1.75 (M Partners). For 1.21/s the total offer at 1.21 would be something like $590M, or rounded up to $600M. ELD could adjust the share exchange ratio to account for the drop in its SP (Greece effect) so that the total would be around $600M in a "revised offer" but it cannot affort to move too much beyond the $600M mark (it has a large cash reserve from the sales of its properties in CHina, but it has some "short term" loan that would need to be settled, some $600M?). Hence, the moment an offer of the order $750M -800M = $1.64/s is coming from AEM or G, ELD would fold up the tent and move on (after pocketting the profit from 62Ms and $18M penalty from ICG).
If the final offer were 1.75/s then the extra money would be more than enough to cover the $18M penalty (very rough math).
IMO, I don't see that ELD can walk away with this low-ball while the Greece trouble is brewing...and Turkey is not really a stable situation either.
Conclusion: A bidding war is imminent.
- ICG is in AEM turf (Goldex and Osisko in the west, and a foothold in AZX in the south/east.
- G has an elaborated tangled web among ICG, ER and SOI and would not want anyone to get in its own sandbox (ICG has 5.1% with Thiboutot instead of Salamis and de Jong, sitting in the BoD, G has 8%); G has 19% of SOI, and SOI Cheechoo is within 100m of Eleonore South 1/3ER, 1/3G, 1/3 EZM).
When the fat lady sings, the offer would be around $800M. It could be a tad higher, say $850M, but not beyond $1B, noway. It would be just too rich, unless the DEEP shows a compelling situation.
GH