Well it's nice to see companies like Agnico Eagle Mines Ltd. AEM-T buying junior explorers when they see value. AEM just purchased Grayd Resources Corp for $275 - Million, see article below.
So here is the breakdown on the most current junior gold company acquisition....
26.8M tonnes@ .88 g/t = 23 584 000 grams resources / 31.1 (gs/oz)= 758 327 troy oz in the indicated resource.
Purchase price $275 000 000 / 758 327 troy oz = $ 362.64 paid per troy oz of Indicated resource in ground.
Going forward, this could be a comparable figure used for buying similar indicated resources in Sonora Mexico.
Not a bad price to be paid for gold in ground....it's almost 20% of the current gold price. So now we know what indicated resources should fetch in the open market with friendly acquisitions.
Kinross bought Redback for more than double this price, but Redback is a producer with upside potential in Ghana Africa.
This give us some valuations to work from in calculating potential take out target prices on junior to mid size producers.
What I found very interesting after today's announcement by AEM was the reaction in AEM's share price, it didn't budge. This is actually very bullish for the market in general. Up until now, news like this would have a negative effect on AEM share price, the market would have thought they over paid and then punish AEM stock for an extended period of time, much like what happened to Kinross after the Redback acquisition. Today, the share price of AEM didn't move much and it's still trading with the price of gold, to me this is a bullish indicator and I would continue to add AEM if the stock price weakens and gets a little cheaper, you will be glad you did 6 months from now.
Agnico-Eagle to buy Grayd Resource for $275-million
Monday, September 19, 2011
Toronto — Agnico-Eagle Mines Ltd. is increasing its position in Mexico with the purchase of gold explorer Grayd Resource Corp. for $275-million.
The Toronto-based gold producer said Monday that Grayd shareholders will be offered a combination of cash and shares valued at $2.80 per Grayd share.
In return, Agnico-Eagle will get ownership of the La India project in the Mulatos gold belt in Sonora, Mexico. The project has an indicated resource of 26.8 million tonnes at a grade of 0.88 of a gram per tonne, the company said.
Grayd has also recently discovered the Tarachi gold prospect covering about 54,000 hectares that's about 10 kilometres north of La India.
“This acquisition is consistent with our long-term strategy of building value by bringing our mine development and exploration skills to promising early stage gold deposits and projects,” said Agnico-Eagle vice chairman and CEO Sean Boyd in a release.
“It is expected that La India and, further out potentially Tarachi, will contribute to the ongoing growth in Agnico-Eagle's gold production and cash flows reflecting the high quality of work performed by Grayd.”
The offer for Grayd, which is based in Vancouver, will give shareholders the option to receive either $2.80 in cash or 0.04039 of an Agnico-Eagle share and five cents in cash, to a maximum cash payout of about $92-million.
The offer is a 65.7-per-cent premium over the company's 20-day average weighted price ending Sept. 16, the companies said.
“Thanks to the hard work and dedication of our team, our Mexican properties have advanced to the stage that it is time for us to join with a fully funded and well established mine builder like Agnico-Eagle for their final stage of development into gold mines” said Grayd president and CEO Marc Prefontaine.
Agnico-Eagle is a gold producer with mining operations in Canada, Finland and Mexico as well as exploration and development projects.