Exploration Insights
by Brent Cook
www.explorationinsights.com
March 7, 2016
Comment: Silver Standard to acquire Claude Resources
Another week and another M&A transaction
Apparently, things are heating up on the M&A front in the precious metals sector during PDAC week as investment bankers sharpen their pencils in a buoyant gold price environment.
Today, Silver Standard (SSO.T) announced that it has entered into a definitive agreement to acquire Claude Resources (CRJ.T) in a predominantly share transaction at ratio of 0.185 SSO share plus C$0.0001 in cash per share for one CRJ share. According to the press release, this translates to an acquisition price of C$1.65, a 30% premium to the company’s previous close, and an implied value of C$337 million.
CRJ was purchased at a price of C$0.77 (see EI December 6, 2015), generating a 114% return for the EI portfolio in a few months. The merged company would have an ownership split of 68% SSO shareholders and 32% CRJ shareholders. Given the activity in the gold sector, we plan on holding our position for now.
With Tahoe Resources’ (THO.T) acquisition of Lake Shore Gold (LSG.T), see EI Alert dated February 8, 2016, one would be forgiven for thinking that silver companies’ acquisition of gold producers has become a trend. However, since Silver Standard acquired the Marigold open pit heap leach gold project in Nevada in April 2014 from Goldcorp (G.T) and Barrick Gold (ABX.T), the majority of their valuation is tied up in gold. Year to date in 2016, SSO has underperformed CRJ with the former providing a return of 24% versus 62%. This is the first major acquisition for Paul Benson, CEO of Silver Standard, who joined in July 2015.
At the end of last week (March 4th) Endeavour Mining (EDV.T) entered into an agreement to acquire True Gold Mining (TGM.V) in an all share transaction that valued the company developing the Karma open pit heap leach gold project in Burkina Faso.
That’s the way we see it.
Brent Cook
Joe Mazumdar
Brent owns shares in Claude Resources.
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