Capital Gold shareholders love a good fight (March 21, 2011)

Sometimes a fight can be a beautiful thing.

And that is just the position that Capital Gold (CGC-A) shareholders are taking as they sit back and watch two rivals up their bids for the prized shares they hold.

The latest round of sweetened offers came courtesy of Timmins Gold (TMM-V), which boosted its offer for the company by 25¢ per share on March 15.

Word of the increase put Gammon Gold (GAM-T, GRS-N) in a more generous mood as it decided to up its bid to $1.09 in cash plus 0.529 of a Gammon share.

Timmins offer also includes a share component, 2.27 Timmins shares for every Capital share. And while its offer is currently richer than Gammons, the larger cash component of Gammon’s offer is holding sway with Capital Gold’s management, which re-iterated its support for a Gammon takeover.

But management’s approval far from locks up the asset for Gammon, as despite management’s position one of Capital’s key shareholders, Sprott Asset Management, is firmly in favour of the Timmins bid. Sprott holds 12.5% of Capital’s shares and holds considerable sway with mining investors.

Both Timmins and Gammon are looking to solidify their position in Mexico by securing New York-based Capital’s El Chanate mine in Sonora, Mexico. The mine is slated to produce roughly 70,000 oz. of gold in 2011.

Capital Gold has 61.37 million shares outstanding meaning the Timmins offer values it at roughly $365.8 million, while Gammon’s offer puts a $329.6 million price tag on the company.

On Mar. 18, Capital announced that shareholders would be getting more time to mull over the two offers as the special meeting was pushed back two to April 1.

When Gammon first announced its friendly offer for Capital Gold, back on Oct. 1, its share price was sitting at $6.99. In Toronto on March 21, the Gammon’s shares were trading for $8.87.

When Timmins Gold announced its proposed merger with Capital on Sept. 27 of last year, its shares were trading for $1.88. In Toronto on March 21 the company’s shares were trading for $2.56.

Those gains, however, have been dwarfed by those made by Capital Gold. Before the acquisition talk heated up, the company’s shares were trading in the $3.60 range. In New York on March 21, the company’s shares were trading for $5.67, proving that a fight isn’t always a bad thing for everyone involved.