Friday, 27 April 2012

Gold Junior Mergers & Acquisitions - Iamgold to Buy Trelawny for $585m

$500m value EV, net of cash. Approx $75/oz, mostly inferred.

Iamgold discussing the acquisition here
I held Augen Gold which Trelawny acquired and the potential of some of the properties may be a significant part of the acquisition logic. Trelawny also recently consolidated other elements of a large land package.

Is this just the start of a Mergers & Acquisitions Cycle?
Shareholders may have been disappointed as the price was a near 50% discount to the 12 month high. What are management and key stock holders looking to do next where they believe they can add more value?

Interesting to me that now both Richfield and Trelawny have been bought out at relatively early stages after discovery and with large bulk tonnage models and large district scale land packages.
The Rick Rule article linked a couple of days ago, to my reading, implied favouring high grade mines. Perhaps the lesson is simply a view on "mineability" which companies are ready to take their own views on rather than wait for full technical studies.
The extremely remote projects with enormous capital requirements may still have the issues Rule refers to. Trelawny and Richfield are near relatively good infrastructure, and accessible year round.

So where does that $585m go now?

Into bonds, Apple, or looking for the next Gold Juniors?

Trelawny and many other success stories traded at pennies in 2008/9, this is the potential in the juniors if we can find the best quality opportunities in the market.......

Always interesting discussion at Metal Augmentor
Here and earlier discussion here

They express some surprise at the selection of Trelawny due to high internal waste expectations.
There had been accusations of grade smearing against Trelawny in a letter to the Northern Miner - Here.
All of that has not stopped Iamgold.
Interesting how criticism can drive the stock price lower and an acquistion follows.

Trelawny was on the "Venture 50" list in 2011. 
There have been a few acquisitions and successes from this list and a number which have sold off very hard, perhaps worth investigating for opportunities.
See also the "Venture 50" 2012 list.
Note the increases in share price and market capitalisation. Market Cap often increases more as funds are raised diluting current shareholders. Companies can achieve growth objectives without necessarily rewarding stockholders in these sectors.

Metal Augmentor see a positive impact for other Canadian bulk mining situations and mention

  • Prodigy - Magino - have a study
  • Northern Gold -  Recent updated resource estimate with little market reaction
    • Metal Augmentor discuss this one favourably
  • Rainy River - perpetually mentioned but no action so far
I would add interesting large and potentially large low grade bulk mines in Canada where stock prices reacted strongly yesterday

Trelawney 3.27 0.95 41%
North Country Gold 0.38 0.06 19%
Gold Canyon 1.53 0.21 16%
Balmoral 0.7 0.07 11%
Agnico-Eagle 39.36 3.52 10%
Lake Shore Gold 0.98 0.08 9%
Entourage Metals 0.37 0.03 9%
Probe Mines 1.3 0.1 8%
Rainy River 4.52 0.32 8%
Eagle Hill Exploration 0.15 0.01 7%
Atac Resources 2.66 0.17 7%
Queenston Mining 3.97 0.21 6%
Northern Gold Mining 0.21 0.01 5%
Ryan Gold 0.45 0.02 5%
Elgin Mining 0.85 0.03 4%
Premier Gold Mines 4.87 0.17 4%

Surprisingly, perhaps, no sign of Rubicon or San Gold, deep high grade miners unlike the Trelawny bulk low grade model.. Another Canadian Deep miner Lakeshore had been viciously sold off.
Agnico is a much larger miner rebounding from a large sell off.
Eagle Hill had good exploration news.
Atac and Ryan Gold are earlier stage Yukon exploration with little defined resource but Atac in particular has shown enormous potential and big initial discoveries for Carlin Style mineralisation.

Metal Augmentor also mention other Junior acquistion targets
  • Queenston - Canadian deep
  • Romarco - US
  • Torex
  • Guyana Goldfields - sold off very hard
  • Sulliden - Peru
  • Torex Gold - Mexico
There are many more at different development stages, often with studies indicating very strong net present values if gold prices remain near current prices.

Pro-Active Investors quote Peter Campbell at Jennings Capital discussing other potential acquisition targets in the Canadian Juniors space.

  • Newcastle Minerals - relavance in large parcels adjoining Trelawny and stake held by Trelawny, but a tiny company without defined resources.
  • Temex
  • Rubicon
  • Treasury Metals
  • Probe
  • Clifton Star
  • Eastmain

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