Replies to post #168114 on Zeev's Turnips Patch-No Politics (ZEEV)

[basserdan]

What do you think of speculation that AEM is now NEM's take-out target?
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G'morning Dan,
I'd be surprised if that deal comes about. It's been a while since I even looked at AEM, but I seem to recall them having a relatively small reserve (under 5 million oz?)and a lot of operational problems that seem to be showing up in their shareprice.

In my view, not what a mega producer like NEM would be looking for, although AEM's under a billion $$ market cap could make them a relatively cheap acquisition compared to PDG, who would be my choice of a NEM buyout, at over six times the cost.

I could more easily see NEM taking out PDG and then selling PDG's Campbell mine to next door neighbor Goldcorp to reduce NEM's overall cost exposure while picking up some decent reserve numbers for themselves.

I definitely believe NEM is now shopping for new reserves and it should be a bit of a spark for the entire sector when they decide to make their objectives known.

I'd be very interested in hearing your views on this matter.

[basserdan]

*** Gold related post (NEM/PDG) ***

Dan,
Following up this AM's response.....


Placer rises on Newmont bid talk; analysts divided

Wednesday November 5, 3:00 pm ET
By Nicole Mordant

(Figures in U.S. dollars unless noted)
VANCOUVER, British Columbia, Nov 5 (Reuters) - Shares in Placer Dome Inc. (Toronto:PDG.TO - News) jumped on Wednesday on speculation it could be in the takeover sights of rival Newmont Mining Corp. (NYSE:NEM - News), but analysts were divided on whether the world's No. 1 gold producer was preparing to pounce.

The Vancouver-based miner's shares rose more than 5 percent in heavy volume to a 17-month high of C$21.01 on the Toronto Stock Exchange (News - Websites) , a day after Denver-based Newmont announced it was raising around $1 billion through a public share offering.

Newmont said the money would be used for general corporate purposes, which could include new project development costs, other capital expenditures and reducing its $1 billion-plus debt burden. But its statement did not stop the rumor mill.

"The quick buzz around the street is that Newmont will go after Placer," said Barry Allan, an analyst at Research Capital in Toronto.

"I know that rumor's out there, but I personally think it's misplaced," Allan added.

An analyst who asked not to be identified told Reuters shortly after Newmont announced the share issue on Tuesday that the 7.5 million-ounce-a-year producer could be looking at taking out Placer as a way to replace the large chunk of reserves it mines out every year and to expand output.

"Their biggest problem is, although they have organic growth, that that growth won't allow them to increase production by more than 5 percent over the next four to five years," the analyst said.

NEWMONT WON'T BUY FOR CASH

Placer is regarded as an attractive target due to its suite of resource-heavy development projects and its relatively small hedge book. Newmont is a vocal critic of forward gold sales.

But Allan said if Newmont did in fact have any designs on Placer, the U.S.-based producer would not have issued equity to raise cash to make a bid. It would more likely make a straight share offer using its high-priced stock, which has risen about 50 percent this year.

"Newmont is also not going to be telegraphing what they are going to do," he said, referring to the miner's public notice it planned to issue up to 22 million shares -- about 5 percent of its share capital -- at a price to be decided by the market on Wednesday.

Allan said it made sense for Newmont to replace debt with some equity. A stronger gold price this year has increased demand for the stock of gold companies, and mining companies have wasted no time in taking advantage.

Michael Jalonen, an analyst at Merrill Lynch, said the stock issue would be positive for Newmont as it would reduce its net debt to virtually zero while also giving a boost to its bottom line.

"The removal of high cost debt will lower interest expense, which should have a modestly positive impact on future earnings per share and cash flow per share," he said.

By mid-afternoon, Placer's stock had eased from session highs, but was up 80 Canadian cents at C$20.75. Newmont shares in New York dipped 69 cents to $42.62.

($1=$1.33 Canadian)

http://biz.yahoo.com/rc/031105/minerals_placer_stock_1.html