RE:RE:Premier Gold in NewsletterApril 12, 2020
Premier Gold — Centerra rejects bid for its take in Hardrock
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Last week, Centerra Gold (CG.T) rejected Premier Gold’s offer to purchase its 50% stake in the Hardrock open pit gold project that they jointly operate as Greenstone Gold Mines in northern Ontario, for US$205 million.
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The funding for the purchase was to be sourced from PG’s undisclosed partner.
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The rejection of the offer is not surprising given the short window of time that Centerra had to evaluate it.
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Regardless, the most important aspect of the proposal is that it puts a mark-to-market on the project’s potential value, for which the analysts covering Centerra Gold did not give much.
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Centerra would prefer to downplay the value of the project to potentially purchase PG’s stake cheaper, but it’s likely that the negotiations will continue in the background.
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Given that PG has a partner with deeper pockets supporting the bid, the junior miner should not be at a significant disadvantage in any discussion.
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Centerra hasn’t the money to build the Hardrock project right now, so would prefer to delay it.
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Also, it wouldn’t be a good idea to begin construction during the COVID-19 crisis since the productivity would be low and the costs higher.
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Some resolution on a plan to develop and finance the Hardrock project would help both Premier and Centerra, given the project continues to increase in value due to a higher local gold price.
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Acknowledgment: Exploration Insights Newsletter - Joe Mazumdar & Brent Cook - 04/12/20
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RJ