From John Kaiser -- one of the most knowledgeable guys in the public company diamond sector...
Bidding War for MPV $6 - $8
John Kaiser has a list of companies that may be interested in MPV...
""""We had recommended
Harry Winstonat $3.08 on March 20, 2009 as a Good Absolute Spec Value Buy on the premise that the arrival of
Kinross as a major shareholder would give management a mandate to pursue growth through acquisition once the financial situation had stabilized and retail diamond was back on a growth track.
Our Spec Value Buy recommendation is up 215% but we recommend holding those positions while we wait to see if rumours pan out that Harry Winston management is serious about acquiring other near-production diamond assets. The burst of market activity in
Mountain Province Diamonds Inc was apparently due to a trial balloon Harry Winston excutives floated past institutional shareholders with regard to a buyout of Mountain Province and its 49% stake in Gahcho Kue.
We think the whole created by summing the Harry Winston and Mountain Province parts is worth a lot more than the sum of the parts""""".
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""""Mountain Province Diamonds Inc had its heaviest
trading day in more than a year on
September 18 as the stock traded
1.6 million shares on both the TSX and AMEX with AMEX generating about
58% of the volume. This contrasts sharply with the day before when Mountain Province traded only
3,400 shares on the TSX to close at
$1.79. During the first
half hour of trading on
Friday the stock spiked as high as
$3.21 before settling back to close up
$0.76 at
$2.55. This activity comes on the heels of big moves during the week by
Harry Winston Diamonds Corp, which announced that the plan to close Diavik for a winter break had been canceled in light of stronger diamond demand, and
Shore Gold Inc which published its first resource estimate for the Orion South portion of the FALC JV with Newmont. By Friday other juniors were also showing evidence of diamond fever as
Shear Minerals Inc attracted an early morning trading halt after its stock jumped from the pennies to over a dime, and
Peregrine Diamonds Ltd finished the week on a strong note after releasing excellent news on Monday that initially attracted a big yawn from the market until its chain was yanked by a KBFO comment on Thursday.
The Mountain Province move, however, appears to have been triggered by speculations independent of a general increase in market interest for the diamond sector. The word on the street is that representatives of Harry Winston floated the concept of a takeover bid for Mountain Province past key institutional shareholders who recognized this as such an obviously good idea that they could not resist jumping into the Mountain Province market.
In talking to Mountain Province CEO Patrick Evans I get the impression that a $4-$6 price range is still the target for the core shareholders, and whether or not a bid from Harry Winston pleases them depends on Harry Winston's price and the proposed ratio. The current Harry Winston price of $9.70 certainly seemed to appeal to Evans, so I suspect another 10-20% increase for Harry Winston would not put its price out of consideration range. We issued a Good Absolute Spec Value Buy at
$1.52 on June 2, 2009 in
2009-04 in anticipation of a takeover in the
$4-$6 range, and confirm that recommendation as still valid.
Mountain Province management has been on the road during the past couple weeks promoting the story to European and American institutions without much to show for it in the market, but today's market action will most likely prod new buyers from the sidelines. I like the prospect of a merger between Harry Winston and Mountain Province based on respective price ranges of
$10-$12 and
$4-$6 because in this situation
the whole is going to be worth more than the sum of the parts.
Bottom-fishers should continue to hold their positions, and Spec Value Hunters should buy the stock (MPV) at the current level for a short term double.