Esperanza Resources acquired by Alamos Gold for $69.4 million

alamos esperanzaCanadian junior Esperanza Resources (TSX.V:EPZ) has been acquired by Alamos Gold (TSX:AGI) in a friendly acquisition.

Esperanza shareholders will receive C$0.85 in cash for each common share of Esperanza held, representing a premium of approximately 38% to Esperanza’s 30-day volume-weighted average price. The transaction values Esperanza’s equity at approximately Can$69.4 million on a fully diluted in-the-money basis. In addition, Esperanza shareholders will be issued approximately 5 million Alamos warrants in aggregate and existing Esperanza warrant holders will be issued approximately two million Alamos warrants in aggregate.

Both companies work in Mexico. Alamos runs the Mulatos Mine, as well a some exploration and development properties in Turkey. Esperanza is advancing an open pit gold project in Morels State, Mexico.

Esperanza terminated its agreement with Pan American Silver today. In February Esperanza agreed to acquire three advanced gold projects from Pan American all in Latin American in return for a $35 million investment and a $15 million credit facility.

CEOs from Esperanza and Alamos Gold released statements on the deal.

“Alamos is very pleased to announce this transaction with Esperanza” commented Mr. John A. McCluskey, President and Chief Executive Officer of Alamos. “Esperanza is an excellent strategic fit within our existing portfolio and in our view, is one of the best undeveloped opportunities and significant open pit targets in Mexico. We have followed Esperanza’s progress for some time and see this as a truly compelling opportunity for our shareholders. While the transaction represents less than 5% of our market capitalization, it has the potential to grow our production in Mexico by more than 50%, or nearly 30% on a consolidated basis.”

“This transaction provides an attractive and immediate premium to our shareholders,” said Mr. Greg Smith, President and Chief Executive Officer of Esperanza. “Further, the cash consideration provides liquidity and value certainty while the warrants ensure Esperanza shareholders will retain exposure to the success of the Esperanza gold project going forward. Alamos Gold is an industry leader with substantial experience operating in Mexico and the financial and technical capacity to continue advancing the Esperanza gold project. Finally, I would like to thank our employees for their dedication and hard work over the last number of years and all stakeholders of Esperanza for their support.”

Source: http://www.mining.com/esperanza-resources-acquired-by-alamos-gold-for-69-4-million-42678/

Wits Gold bids for Burnstone, decision expected next week

JOHANNESBURG – Witwatersrand Consolidated Gold Resources (Wits Gold) on Friday said that it had offered to buy embattled Great Basin Gold’s (GBG’s) suspended Burnstone gold operation, in Mpumalanga.

The TSX- and JSE-listed group aimed to deliver dividends to its shareholders and generate cash flow in the near term, as Wits Gold brought Burnstone into production.

“Moving to producer status will serve as a solid platform with which to start generating free cash flow for shareholders,” Wits Gold CEO Philip Kotze said, adding that the bid was in line with the company’s strategy of owning and developing shallow mines in South Africa.

Wits Gold would pay $7.25-million in cash towards GBG South African subsidiary Southgold Exploration’s debt, which was restructured and cut by 55% to $177.35-million.

Southgold would, from generated actual cash flow, repay the remaining $170.1-million liability.

Wits Gold would also advance a $100-million shareholder loan with an interest rate of 4%, which was also to be paid back on a preferential basis from Southgold’s operating cash flow.

The offer to buy the mine would be put to vote on July 11, but Wits Gold had signed irrevocable undertakings from the major creditors that its bid would be voted for to eliminate deal uncertainty.

Burnstone was put on care and maintenance in September, after several production setbacks and an inability to afford the mine’s required working capital to reach cash-flow breakeven forced the mine into business rescue.

Kotze noted that a new underground mining plan, which would allow for flexibility in the production approach, had been developed, after due diligence found the previous mine plan “far too ambitious”.

GBG’s mine plan had created market expectations, which had resulted in the team rapidly trying to deliver into high production, at 250 000 oz/y, without the required structures in place, he explained.

Burnstone, which started producing in 2010, encountered a geological fault that GBG did not find during exploration drilling, leading to the company having to revise its 2011 production guidance to 30 000 oz – which it missed by 6 000 oz – from the previous levels between 85 000 oz and 110 000 oz.

The mine’s production target – before suspension – for 2012 was 90 000 oz to 100 000 oz.

Wits Gold lowered production by 50%, with plans in place to potentially ramp up production in a gradual phased approach to a maximum 130 000 oz/y for a $100-million investment. First production is expected 12 months after the initial takeover.

“We have a number of options that require less capital for lower production or more for higher production [than the middle ground of 50 000 oz/y],” he said, noting the current Wits Gold plan for the mine required $50-million in capital expenditure and would enable production ramp-up to about 70 000 oz/y.

Wits Gold expected to take control of the operation – which has more than six-million ounces of gold in proven and probable reserves and a forecast life-of-mine upwards of 25 years – during the second half of 2014, after which the final mine plan would be decided on according to the market at the time.

Wits Gold aimed to initially focus on establishing the appropriate infrastructure for the relevant plan, and develop until enough ore reserve had been opened up for sustainable production.

The company would complete the footwall development in advance, and create a drilling platform to predetermine the geological structure and paychannels.

Wits Gold also planned a three-dimensional seismic survey, which would constrain the highly faulted underground structure and enable mine design optimisation.

Source: http://www.miningweekly.com/article/wits-gold-bids-for-burnstone-decision-expected-next-week-2013-07-05

Gold returns, bonds die, plus other investing themes to watch for

Everything is changing, so what sort of themes should you look for in the balance of the year? Read on to find out.

The year is half over and investors don’t have much to show for it: A TSX loss of nearly 4%, the Canadian market is underperforming the U.S. and just about everything else, and there’s a market backdrop where all the rules for Canadian investors seemed to have changed overnight.

What’s new? Plenty and it’s not good.

Golds, which every Canadian has loved for 12 years, are dying. Every day, it seems, the sector is taken down another notch, even as they seem ‘cheap.’ The problem: massive fund redemptions and no buyers in sight.

REITs, which provided stable income and gains to investors for a decade, are now treated like lepers.

And telcos, one of the best places historically for both income and growth, are now dropping like a junior miner’s shares thanks to seemingly random CRTC rules on competition.

Everything is changing, so what sort of themes should you look for in the balance of the year? We’ve outlined five to consider, but keep in mind we are in a rapidly changing landscape. Flexibility might be an investor’s key to surviving what lies ahead.

Interest rates will keep rising, but not as much as you think

The devastation in the REIT and utility sector this past month was brought about by higher interest rates, and, more importantly, the fear of more rate increases to come. Suddenly, fixed-income payouts don’t seem so attractive.

But, seriously, is the economy really fixed? Are we surging so much that interest rates need to move way higher to slow things down? Hardly.

Yes, there is economic improvement, but we are not out of the woods yet. Rates are unlikely to head to 6% from their 2% levels now. Yields of 7% on REITs such as Artis (AX.UN/TSX) will start to look attractive again at some point.

Bonds are… dead

Despite the first theme, it might indeed be over now for the bond market. After years of bubble talk, the bond market may not have popped, but it surely has sprung a leak.

A bond coupon of 2% that is taxed at the highest rate, and then subtract 2% for inflation, means you lose money on your so-called safe investment. Compare that with the 14% market return in the U.S. and you can see why investors are reconsidering — and selling — their bonds.

Dividend growth is back

If the economy is going to grow again, investors will want to participate in that growth. Being the nervous nellies that investors are, however, they are still going to want dividends. Any company paying dividends that also has the ability to grow its dividend is going to attract interest.

For example, Alaris Royalty Corp. (AD/TSX) has increased its dividend not once, but twice this year alone. Its stock is up 30% on the year and investors ponied up $92-million for new Alaris shares this week.

Gold shares will bounce

Seriously. We don’t know when it will happen, but many gold companies are trading near their cash values or far below the replacement value of their still-profitable mines.

We’ve talked to many investors this month who are physically sick over the sector’s plunge. Generally, this means the bottom might be close. (Warning: It could still get very ugly before it gets better.)

We think the best buying opportunity will be in the late fall, when year-end tax-loss selling and portfolio position causes even more sector selling.

Source: http://business.financialpost.com/2013/06/28/gold-returns-bonds-die-plus-other-investing-themes-to-watch-for/