Crocodile applauds Luxor’s higher offer

Luxor Capital Group has increased its partial offer for Crocodile Gold (crk-t), which operates gold mines in Australia. The New York-based investment company has raised its bid from US56¢ a share to US62¢ to buy 215.4 million Crocodile shares.

The improved offer represents an 82% premium to Crocodile’s Dec. 13 close, the last trading day before Luxor made its intentions public.

Crocodile’s board unanimously applauded the revised offer, saying after careful review it believes the bid is fair.

But analyst Gary Baschuk of Raymond James reckons the revised offer is still opportunistic, given the continued advancement at the Cosmo underground gold mine, which he expects will kick into production by the last quarter of 2012. “We believe Cosmo’s value alone substantiates a higher price,” he writes in a Jan.23 note.

The miner expects to mail out the amended offer and its revised director’s circular recommending shareholders to accept the bid shortly. Two weeks ago, it asked shareholders not to act on Luxor’s original offer as it was negotiating better terms. 

The new offer expires on Feb. 7. To go through, it requires regulatory approvals and customary conditions to be met. These conditions include Crocodile not reporting any adverse material change, and that enough shares are tendered to the offer so Luxor would own at least 50% of Crocodile’s issued and outstanding shares.

Currently, Luxor holds less than 20% of the miner, and aims to acquire 69.5% of Crocodile via the transaction.

As Crocodile announced the revised offer, it reported in a separate release its 2011 operating results and fourth quarter highlights.

While the company has several gold deposits in the Northern Territory of Australia, production for the fourth quarter came from the Mottrams and Princess Louise pits with a small contribution of 5,700 tonnes of lower-grade development ore from the Cosmo mine. For the period, it milled 510, 268 tonnes of 1.01 grams gold for 15, 649 oz., and reported US$27 million in revenue.

For the year, the company produced 68,019 oz. gold, within its guidance of 66,000 to 69,000 oz. Those ounces came from 1.88 million tonnes grading 1.21 grams gold per tonne. Overall mill recovery was 92.9%.

Yearly revenue came at US$108 million on the sale of 68,600 oz. gold at an average price of US$1,567 per oz.

Crocodile raked in US$600,000 in silver revenue for the year, by selling 19,394 oz. silver at an average price of US$31 per oz.

Baschuk notes the company exceeded his estimates for tonnage for both the quarter and year, but reported lower grades, production, and revenue than he estimated for both periods. 

Crocodile is currently ramping up production at its flagship Cosmo gold operation. It says targeted production levels should be reached within the next six months.

The company will soon provide its 2012 production guidance and exploration plans.

On Jan. 23, Crocodile was up 7% to 59¢ on 6.4 million shares traded. 

Baschuk has a target price of $1.30 per share, and an “outperform 2” rating on the stock.