Market Overview

Yamana Gold Will Acquire Extorre for $403 Million

Toronto-based Yamana Gold (NYSE: AUY) announced on Monday morning that it has agreed to buy Extorre Gold Mines (AMEX:XG) for around $403 million in cash and stock. The deal will give Yamana control of the Cerro Moro mining project based in Argentina. The deal price represents a 54 percent premium over Extorre's 20-day volume-weighted average price. On Monday, Extorre, which is based in Vancouver, has surged 54% to $4.09 on the AMEX exchange.

In a statement, Extorre cited its sliding share price, economic uncertainty, and financing concerns related to the Argentinian project for the sale. The stock had lost 66 percent in 2012 before today's announcement. Investors have been very concerned about foreign resource companies operating in Argentina after the country's government seized control of oil producer YPF SA from Spain's Respol YPF SA earlier this year.

Market reaction to the deal has been largely positive, and Yamana shares were last trading up slightly on the day. TD securities analyst Steven Green said in a note that the acquisition “makes a lot of sense from Yamana's perspective, adding a high-quality project opportunistically.”

Yamana will be able to finance the gold and silver project in Argentina's Santa Cruz province according to Extorre. Yamana's CEO Peter Marrone said that while the transaction only represents around 3 percent of Yamana's market cap, it could eventually account for more than 10 percent of the company's gold-equivalent production, an industry measure of output. Under the terms of the deal, Extorre has said that it will not solicit other offers.

Posted-In: News Commodities M&A Markets

 

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