Agnico expands Mexican footprint via $205M Cayden bid

VANCOUVER — Agnico Eagle Mines (TSX: AEM; NYSE: AEM) had been eyeing Cayden Resources’ (TSXV: CYD; US-OTC: CDKNF) exploration efforts since early 2012, but on Sept. 8 finally made its move with a $205-million offer for the junior gold explorer.

Agnico president and CEO Sean Boyd described the acquisition as “consistent with our long-term strategy of acquiring promising, early stage gold projects where it can add value through focused exploration and mine building.”

Agnico is offering Cayden shareholders 0.09 of an Agnico share and 1¢ for each share held, which values Cayden at $3.79 per share, or a 51.9% premium, based on the junior’s volume-weighted average trading price over the past two months.

The maximum number of shares issuable by Agnico under the offer would be 4.9 million.

All of the directors and officers of Cayden — who hold a 19.8% equity stake in the company — have agreed to vote for the offer.

Cayden’s flagship asset is its 100% interest in the El Barqueno gold property, which covers 410 sq. km in the Guachinango gold district in Jalisco state, Mexico.

El Barqueno hosts an epithermal bonanza-type gold vein and disseminated stockwork system. Several gold-bearing zones have been identified by drilling and trenching over a 13.5 by 4.7 km area.

Cayden has made three key discoveries at El Barqueno — Azteca, Pena de Oro and Angostura — that Agnico believes could be part of a 9 km long gold–copper system.

Soil and rock sampling at the property have shown anomalous gold mineralization over 7 km of combined strike length in a southwest direction.

Azteca is Cayden’s most advanced discovery, and the junior anticipated a maiden resource calculation by 2015.

The junior has finished the first of two drill phases scheduled for this year, with assay highlights including: 23 metres grading 2.43 grams gold per tonne, 3.5 grams silver per tonne and 0.03% copper from 59 metres depth in hole 28; and 44 metres at 2.34 grams gold, 11.1 grams silver and 0.15% copper from 44 metres depth in hole 37.

Cayden’s recent drill program at Pena de Oro delivered the highest gram–metre intercepts to date. The target lies 8 km along strike from Azteca to the northeast, with recent drill highlights including: 45 metres of 4.06 grams gold, 8.3 grams silver and 0.39% copper from 59 metres depth in hole 76; 19 metres of 4.98 grams gold, 3.5 grams silver and 0.26% copper from 45 metres depth in hole 80; and 20 metres of 2.58 grams gold, 3.6 grams silver and 0.36% copper from 130 metres depth in hole 73.

Angostura is the third of nine  targets at the project and is Cayden’s newest discovery. It is described as a parallel structure located 1 km northwest of Azteca.

Cayden announced the discovery in early July, when drill hole 85 cut 12 metres of 4.6 grams gold, 10.1 grams silver and 0.1% copper from 7 metres deep.

“From a technical perspective, El Barqueno bears a lot of similarities to our [Pinos Altos mine] in the early days,” Agnico senior vice-president of U.S. and Latin American operations Timothy Haldane said. “The property has tremendous exploration upside and several prospective zones that we believe can ultimately support heap leach and/or milling operations, which would allow us to build another meaningful business in Mexico.”

Along with El Barqueno, Agnico will secure a foothold in the emerging Guerrero gold belt in the form of Cayden’s Morelos Sur asset, 230 km south of Mexico City. The project is next to Goldcorp’s (TSX: G; NYSE: GG) Los Filos gold mine and Torex Gold Resources’ (TSX: TXG; US-OTC: TORXF) development-stage Morelos gold property.

Morelos Sur occupies 130 sq. km over three properties — including La Magnetita, Tenantla and Las Calles — where exploration has outlined a 25 sq. km gold-in-soil anomaly.  Las Calles has yielded drill intersections of up to 3.21 grams gold and 84 grams silver over 28.5 metres from a 254-metre depth in hole 101.

“This strategy has served us well in Mexico, and we believe that the Cayden properties are a good fit with our existing southern operations and skill sets,” Boyd added. Agnico anticipates spending between US$10 million and US$15 million on exploration at El Barqueno in 2015.

BMO Capital Markets analyst David Haughton — who has a $45-per-share price target on Agnico, along with a “market perform” stock rating — said the deal was “potentially positive,” and noted that the cash component, which is estimated at $500,000 based on the number of Cayden shares outstanding, represents less than 1% of Agnico’s cash balance.

“This acquisition is in line with Agnico’s strategy of acquiring early stage gold exploration projects in lower-risk geopolitical regions and complements the company’s existing portfolio of assets in Mexico, which includes the Pinos Altos, Creston Mascota and La India mines,” Haughton wrote on Sept. 8.

Cayden shares jumped 14%, or 40¢, on 4.4 million shares traded after the news before closing at $3.35 per share at press time. Shares are up 190%, or $2.01 per share since the beginning of 2014. The company has 50 million shares outstanding for a $168-million market capitalization.

Agnico traded relatively flat after the announcement before closing at $37.12 per share at press time. Shares have traded between $24.66 and $45.92 over the past year. There are 210 million shares outstanding for a $7.8-billion market capitalization.