Yamana Gold to Acquire Viceroy in Stock Swap
By David Friend
17 Aug 2006 at 11:00 AM EDT
TORONTO (CP) -- Keeping its eye on Brazilian resources, Yamana Gold Inc. [TSX:YRI; AMEX:AUY] has made a deal to acquire Viceroy Exploration Ltd [TSX:VYE; AMEX:XVE] in a C$577-million stock swap.
The move is the latest in a long line of gold explorers pledging to expand their presence in the Latin American country.
Yamana said it will offer Viceroy shareholders 0.97 of a Yamana common share for each Viceroy share. Both companies' boards have approved the takeover.
The deal is valued at C$10.86 per Viceroy common share, based on closing prices on the TSX Wednesday of C$11.20 for Yamana and C$8.65 for Viceroy, representing a 25.5% premium.
In early trading on the Toronto stock market, Viceroy shares headed C$1.97 higher to C$10.62 while Yamana shares lost 31 cents to C$10.89.
The hot Brazilian gold market has been a target for plenty of companies willing to invest major funds in the country over the past few years.
On Wednesday, Luna Gold Corp. [TSXV:LGC] struck a deal to acquire a 50% stake in Brazil-based miner Aurizona Goldfields for US$6.67 million. And earlier this month, Kinross Gold Corp. [TSX:K; NYSE:KGC] announced a US$470-million expansion at one of its Brazilian projects.
As for Yamana, the latest acquisition builds on its presence in the country. Earlier this year, the company added Brazil's Desert Sun Mining Corp. to its portfolio.
Viceroy's advanced-exploration Gualcamayo gold project in Argentina will also come under Yamana's control once the deal is completed. The new company would be held 85% by Yamana stockholders and 15% by Viceroy shareholders.
Peter Marrone, CEO of Yamana, told analysts in a conference call that one of the company's main objectives is to reach production of more than one million ounces of gold per year by 2008. Marrone added that the company could surpass that goal.
''Viceroy represents a unique opportunity for us as it complements our already dominant mining platform in Brazil,'' he said.
Catherine Gignac, an analyst for Wellington West CM, said Yamana is delivering on its promise to expand while keeping its main focus on gold.
''They came out with a strategic long-term plan in October 2005 and, basically step-by-step, they've been implementing that plan,'' she said.
''Yamana's future growth prospects are much higher than some of the other companies (involved in Latin American production) simply because those companies may have seen their growth and now they're levelling off,'' she said.
Gignac said she is maintaining her ''buy'' recommendation at a C$17 target price.
Patrick Downey, CEO of Viceroy, said his company will benefit from being combined with another. ''That's something I believe is really undervalued at this time,'' he said.
Viceroy's market capitalization on the Toronto stock market is about C$458 million while Yamana is at C$3.2 billion.
Under the acquisition, Downey will join management at Yamana, most likely as executive vice-president of operations, continuing his role in the development of Gualcamayo.
© The Canadian Press 2006
