By Tim Wood
31 Aug 2006 at 02:52 PM EDT
St. LOUIS (ResourceInvestor.com) -- Today’s offer by Goldcorp [TSX:G; NYSE:GG] to acquire Glamis Gold [TSX:GLG; NYSE:GLG] is as full and fair as you will see in an opening gambit. This in no way excludes the possibility of the price being raised if the hedge funds have their way, but the signals from early trading are that it’s a done deal.
Based on Resource Investor’s tabulation of the merger details, merging the companies achieves accretion across many metrics, especially implied reserve value. The annualized rate-of-return for Glamis stock owners is a staggering 206% at the announced ratio of exchange.
The accretion was made possible by Glamis rolling the dice to acquire Western Silver for a quite pricey $1.2 billion. That bulked up its mineral resources in a way that made the company cheap, and now the risk has been mostly offset for Glamis shareholders through the premium offer and diluted stake in the new company.
Whilst Glamis has been trading at a ridiculous multiple of annual production, the gross resources could not be ignored.
That was especially the case for Goldcorp, which has never had a hang-up about a polymetallic mineral resource and revenue stream. It all gets converted into cash or assets anyway. Allied with Goldcorp’s superior multiples on most measures, Glamis had to be bought, and all the better for injecting its silver stream into Wheaton Silver which is looking increasingly like a central bank treasury operation.
PERTINENT TABLES ON MERGER INCLUDED IN LINK BELOW!
http://www.resourceinvestor.com/pebble.asp?relid=23324
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PEAK OIL - SUSTAINABLE LIVING #board-9881
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