Back to top

Analyst Blog

Gold miner Yamana Gold, Inc. (AUY - Snapshot Report) has inked a definitive agreement with Extorre Gold Mines Limited for acquiring all of its issued and outstanding common shares.

Yamana has agreed to pay the shareholders of Extorre $4.26 for every share, $3.50 of which will be in cash. The remaining part of the consideration would be satisfied by issuing 0.0467 of a Yamana common share for each common share of Extorre.

Yamana is purchasing Extorre at a 54% premium on Extorre’s 20-day volume weighted average price ("VWAP") and at an 18% premium on the 60-day VWAP for the period that ended on June 15, 2012. The deal is valued at around $395 million and is expected to be closed in August this year.

Extorre seems to be a strategically apt acquisition for Yamana. Extorre has a number of development projects under its jurisdiction, of which, Cerro Moro is the most advanced. Cerro Moro has high grade gold and silver deposits in Santa Cruz, Argentina. It has 1.36 million ounces of gold equivalent indicated mineral resources and 1.05 million ounces of gold equivalent inferred mineral resources, which enables Yamana to strengthen its development pipeline further.

Yamana follows a strategy of bolt-on acquisitions wherein it scouts for smaller companies that present organic growth prospects and can be scaled up to yield better production and higher returns. The acquisition of Extorre is a result of this particular strategy.

Management is quite optimistic about the results of this deal. In the company’s opinion, even though the deal value is just 3% of Yamana’s market capitalization, it is capable of pushing its gold production higher by 10%. In addition, it is expected that Extorre will contribute cash flows which are better than the deal value to market capitalization multiple.

Yamana, which competes with AngloGold Ashanti Ltd. (AU - Snapshot Report), Goldcorp Inc. (GG - Analyst Report) and Kinross Gold Corporation (KGC - Analyst Report), holds a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating. 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.00 +3.09%
SANCHEZ ENE… SN 34.18 +2.67%
THE PANTRY… PTRY 21.02 +2.09%
INTEL CP INTC 35.15 +1.88%
PIPER JAFFR… PJC 54.54 +1.70%