Earlier this month, Alamos, which operates the Mulatos mine in Mexico, made an unsolicited offer of $4.65 per share for Aurizon, which owns the Casa Berardi and Joanna mines in the Canadian province of Quebec. The C$780-million offer would have boosted Alamos’ gold production by 65 percent, to about 300,000 ounces, but Aurizon saw the offer as a lowball.
“This is a financially inadequate and opportunistic offer … It fails to compensate Aurizon shareholders for the true value of our assets,” stated George Brack, chair of a committee formed by Aurizon to examine the deal, in a statement released Wednesday.
Aurizon maintains that the offer represents a 21-percent discount to its 52-week high of $5.75, and is 4.1 percent less than its January 22 closing price; it should therefore be rejected. The stock shot up 33 percent when the offer was first announced on January 14.
Mining and exploration commentator Rick Mills has pointed out that Aurizon signed an option and joint venture (JV) agreement with Niogold Mining (TSXV:NOX) in 2010 that would be attractive to Alamos. The JV gives Aurizon the right to earn a 50-percent interest in Niogold’s Marban Block property by spending $20 million on exploration and then making a resource payment for half of the property’s estimated gold ounces.
Mills said before this week’s announcement that Alamos will “like the Marban Block deal and decide to continue Aurizon’s option if they are successful in their bid.” And if they are unsuccessful, which looks the more likely scenario, Mills predicts another offer could be forthcoming: “… the door is open for Niogold’s neighbor, Osisko (TSX:OSK), or somebody else, to step in.”
Gold slips back on technical resistance
Gold started off well this week, but fell back Thursday when those with long positions sold — after technical analysis revealed that the precious metal failed to break through its 50-day moving average, according to Kitco. Other factors in gold’s lackluster performance included news of a decline in US jobless claims, higher gold import duties from India, and a decision by the US Congress to keep borrowing money to pay America’s bills until the middle of May. The latter siphoned off some safe-haven demand for gold.
Gold for February delivery lost $16.80 to finish at $1,669 per ounce, while spot gold was down $17.40 to close the day at $1,667.40.
Earlier in the week, gold edged higher after the Bank of Japan announced that it would implement more stimulus measures to boost its flagging economy. The open-ended asset purchases, to begin in 2014, will raise Japan’s inflation rate to 2 percent. The news sent gold futures up to $1,693. 20 and spot gold to $1,691.24.
India raises gold import duty
India is hiking its import tax on gold in an effort to rein in its ballooning current account deficit. The world’s largest gold consumer said Monday that it will raise the import tax on gold to 6 percent from 4 percent, which would curb purchases and reduce the current account deficit, which reached an all-time high of 5.4 percent of GDP in the July to September quarter, Reuters reported.
One gold trade observer noted the action may not have the desired result. “The hike in duty will only lead to large scale smuggling and loss of revenue for the government. An increase of Rs 60 per gram will not drive away imports,” said Mohit Kamboj, president of the Bombay Bullion Association (BBA), as reported by Gold Investing News.
Mineweb concurred that previous efforts have been unsuccessful, commenting “[t]he Indian government’s decision to hike gold import duty twice last year has not had much of an impact, with gold imports at $10.46 billion in the second quarter, a fall of just $1 billion from the earlier quarter.”
Reuters reported that Turkey’s central bank has raised its gold reserve coefficients, a move that is expected to boost its gold reserves. “The bank raised its reserve option coefficients for gold by 0.1 points, meaning that banks holding a portion of their lira reserves in gold will now have to provide proportionally more of the precious metal in order to do so,” the article states.
China passing Germany as number-two gold holder
King World News reported acclaimed money manager Stephen Leeb stating that China may have moved past Germany to become the second-largest holder of gold reserves. Leeb said that China, which is notoriously secretive about disclosing its bullion holdings, could even compete with the United States for the number one spot.
“I’m focused on precious metals and this fascinating battle between the East and the West, Eric, especially China and the United States. There is an economic ‘Battle Royale’ going on right now, and I think the Chinese definitely have the upper hand,” he told King World News.
Colombia arrests three for kidnapping prospectors
Three members of guerilla group FLN were arrested for kidnapping five gold prospectors in Colombia last week. The prospectors, one Canadian, two Peruvians and two Colombians, remain in rebel hands, according to Colombia Reports. The group was working for Toronto-based Braeval Mining (TSX:BVL), which is developing a gold and silver project in Colombia’s Bolivar province.
Newmont Mining (TSX: AUQ, NYSE: AUQ), the world’s second-biggest gold producer, released a preliminary 2012 production report this week, along with an outlook for 2013. During 2012, Newmont estimates that it produced 5.0 million ounces of gold and 143 million pounds of copper, down 4 percent and 31 percent, respectively, from 2011.
For 2013, Newmont expects to produce between 4.8 million and 5.1 million ounces of gold and 150 to 170 million pounds of copper. The company also plans to spend $2.1 billion to $2.3 billion on capital expenditures this year. Forty percent of that will go toward developing new mines and expanding its existing projects.
IAMGold (TSX: IMG, NYSE: IAG) updated its NI 43-101 compliant resource estimate for its Côté project in the Canadian province of Ontario. The new estimate includes an indicated 7.61 million ounces of gold and inferred 1.04 million ounces. The indicated resource is up 114 percent from the company’s previous estimate. As well, IAMGold said that it produced 830,000 ounces of gold in 2012 and expects its 2013 output to rise to between 875,000 and 950,000 ounces.
Centerra Gold (TSX:CG) said Thursday that it has purchased the remaining 30-percent interest in the Öksüt gold project, located in Central Turkey. The deal announced in December specified a payment of $20 million to stake owner Stratex International (LSE:STI), a London-based exploration company. Centerra’s CEO, Ian Atkinson, said the company now plans to transition the project from exploration to development:
“Our immediate objective is to define the limits of the Ortaçam North deposit and complete enough drilling to calculate a resource estimate by the end of the year as we continue metallurgical and environmental baseline work,” he commented.
Nord Gold (FWB:RTSD) poured its first gold this week and expects to produce 100,000 ounces of gold this year from its Bissa mine in Burkina Faso, Bloomberg reported. The mine will be the seventh in the landlocked West African country.
Endeavour Mining (TSX:EDV,ASX:EVR) released a new, NI 43-101 compliant preliminary economic assessment for its Burkina Faso-based Hounde gold project, along with an updated mineral resource estimate. The report outlines average annual production of 161,000 gold ounces per year over a 10-year mine life.
Junior company news
Goldgroup Mining (TSX:GGA) announced that the lawsuit filed by DynaResource and DynaResource de Mexico is entirely without merit. Goldgroup intends to challenge the lawsuit and pursue all of its legal rights and remedies.
WestKam Gold (TSXV:WKG) announced that it will acquire an additional 17-percent interest on its existing seven claims on the Bonaparte gold property, thereby raising its ownership position to 92 percent.
Securities Disclosure: I, Andrew Topf, do not hold equity interests in any of the companies mentioned in this article.