Yamana to Acquire Extorre - Analyst Blog
June 21 2012 - 12:48PM
Zacks
Gold miner Yamana Gold, Inc. (AUY) has inked a
definitive agreement with Extorre Gold Mines
Limited (XG) for acquiring all of its issued and
outstanding common shares.
Yamana has agreed to pay the shareholders of Extorre $4.26 for
every share, $3.50 of which will be in cash. The remaining part of
the consideration would be satisfied by issuing 0.0467 of a Yamana
common share for each common share of Extorre.
Yamana is purchasing Extorre at a 54% premium on Extorre’s
20-day volume weighted average price ("VWAP") and at an 18% premium
on the 60-day VWAP for the period that ended on June 15, 2012. The
deal is valued at around $395 million and is expected to be closed
in August this year.
Extorre seems to be a strategically apt acquisition for Yamana.
Extorre has a number of development projects under its
jurisdiction, of which, Cerro Moro is the most advanced. Cerro Moro
has high grade gold and silver deposits in Santa Cruz, Argentina.
It has 1.36 million ounces of gold equivalent indicated mineral
resources and 1.05 million ounces of gold equivalent inferred
mineral resources, which enables Yamana to strengthen its
development pipeline further.
Yamana follows a strategy of bolt-on acquisitions wherein it
scouts for smaller companies that present organic growth prospects
and can be scaled up to yield better production and higher returns.
The acquisition of Extorre is a result of this particular
strategy.
Management is quite optimistic about the results of this deal.
In the company’s opinion, even though the deal value is just 3% of
Yamana’s market capitalization, it is capable of pushing its gold
production higher by 10%. In addition, it is expected that Extorre
will contribute cash flows which are better than the deal value to
market capitalization multiple.
Yamana, which competes with AngloGold Ashanti
Ltd. (AU), Goldcorp Inc. (GG) and
Kinross Gold Corporation (KGC), holds a Zacks #3
Rank, reflecting a short-term (1 to 3 months) Hold
rating.
ANGLOGOLD LTD (AU): Free Stock Analysis Report
YAMANA GOLD INC (AUY): Free Stock Analysis Report
GOLDCORP INC (GG): Free Stock Analysis Report
KINROSS GOLD (KGC): Free Stock Analysis Report
(XG): ETF Research Reports
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