striking a little bit of gold

Striking a little bit of gold


YES, a gold strike – of sorts. The shares in Western Australian gold digger Integra Mining (ASX code IGR), which the Punter bought at 29 cents a month ago, jumped to 40c last week on news of an agreed takeover by a larger mining company, Silver Lake Resources (SLR).
The Punter is a tad disappointed because the share-swap deal at current prices values IGR shares at a lot less than the 60c they traded at in January, and doesn’t even match the 49.3c the Punter paid for his initial holding last November.

Overall, he is still showing a loss.

He is tempted to just hang on and accept SLR shares in December after the deal has been formally approved by IGR shareholders.

In the absence of a higher bid, that approval will probably be a mere formality.

With central banks threatening to undermine the value of the US dollar and the euro by printing yet more paper money, gold remains attractive as a stable store of value.

That should underpin the gold price, and thereby the value of gold mining companies.

The deal seems to make good sense, with scope for both to benefit from economies of scale and sharing of expertise and facilities, especially since the two companies’ major operations in WA are virtually next door to each other.

The SLR/IGR group will have some $107 million in cash, with combined gold production rising to a forecast 400,000 ounces a year by 2014.

At the current gold price that implies an annual turnover of $600m.

Even before the merger was announced, SLR has indicated it should be able to pay a maiden dividend of around 7c a share in 2014.

And there is always the possibility that a rival bidder for IGR may emerge.

The proposed deal is one SLR for every 6.28 IGR shares.

Punter decided to hedge his bets and sold 6720 IGR at 40.5c and is keeping the equivalent of 1000 SLR shares, i.e. 6280 IGR. His average cost for the retained shares is 33.3c per IGR (or $2.09 per SLR).


Posted By: THE PUNTER on 21/08/2012 4:00:00 AM


http://theland.farmonline.com.au/blogs/the-punter/striking-a-little-bit-of-gold/2619082.aspx