CMKM Diamonds Inc. (fka CMKX)

[Ignutz]

All figures in US$ unless otherwise noted


Newmont Canada has agreed to purchase 8.95 million shares of Shore Gold’s 18.2 million share equity offering for Cdn$49.2 million ($39.6 million). Shore Gold is a diamond exploration company whose main asset is the advanced Star Diamond project in central Saskatchewan. If a 3.0 million share overallotment is exercised Newmont will subscribe for an additional 297,000 shares and will then own 9.9% of Shore Gold’s outstanding 90.5 million shares (after completion of the offering).


We are surprised to see Newmont take this equity interest given the early stage nature of the Star Diamond project; however, the company (i.e., the merchant bank division) has been diversifying away from gold sector. They recently bought a stake in the Canadian Oil Sands Trust as a hedge on oil prices and on the gold front took a 10.2% equity interest in Gabriel Resources.


Newmont (through Franco Nevada) had previously been exposed to diamonds through its equity interest in Aber Diamond Corporation.


This news does not change our valuation or rating of the company. We continue to rate Newmont a Sector Perform with a US$51.00 per share target.