Capital Gold shareholders love a good fight (March 28, 2011)

Sometimes a fight can be a beautiful thing. 

And that is just the position that Capital Gold (CGC-T, CGC-X) shareholders are taking as they sit back and watch two rivals up their bids for the prized shares they hold. 

The latest round of sweetened offers came courtesy of Timmins Gold (TMM-V), which boosted its offer for the company by 25¢ per share on March 15. 

Word of the increase put Gammon Gold (GAM-T, GRS-N) in a more generous mood as it decided to up its bid to $1.09 per share in cash plus 0.529 of a Gammon share. 

Timmins’ offer also includes a share component, 2.27 Timmins shares for every Capital share. And while its offer is currently richer than Gammon’s, the larger cash component of Gammon’s offer is holding sway with Capital Gold’s management, which reiterated its support for a Gammon takeover. 

But management’s approval far from locks up the asset for Gammon, as one of Capital’s key shareholders, Sprott Asset Management, is firmly in favour of the Timmins bid. Sprott holds 12.5% of Capital’s shares and has considerable sway with mining investors. 

Both Timmins and Gammon are looking to solidify their position in Mexico by securing New York-based Capital’s El Chanate gold mine in Sonora, Mexico. The mine is slated to produce roughly 70,000 oz. gold in 2011. 

Capital Gold has 61.37 million shares outstanding meaning the Timmins offer values it at roughly $365.8 million, while Gammon’s offer puts a $329.6-million price tag on the company. 

On March 18, Capital announced that shareholders would be getting more time to mull over the two offers as the special meeting was pushed back to April 1. 

When Gammon first announced its friendly offer for Capital Gold, on Oct. 1, 2010, its share price was sitting at $6.99. In Toronto on March 21, Gammon’s shares were trading for $8.87. 

When Timmins Gold announced its proposed merger with Capital on Sept. 27, 2010, its shares were trading for $1.88. In Toronto on March 21, the company’s shares were at $2.56. 

Those gains, however, have been dwarfed by those made by Capital Gold. Before the acquisition talk heated up, the company’s shares were in the $3.60 range. In New York on March 21, the company’s shares were trading for US$5.67.