Posted by rahrens_1 on July 28th 2011 at 12:06 am
Things are certainly getting interesting with Rubicon Minerals (RMX) after the markets closed tonite, Agnico-Eagle Mines announced at $70 million strategic investment in RMX, representing 9.2%. As noted on stockhouse this is a similar pattern to before Goldcorp took out Golden Eagle. I find it interesting that Agnico started with a 9.2% stake, if they had put in a bit more, ie. just over 10%, they could have caused some grief to someone like Goldcorp to take it over, being able to get 90% makes a takeover much easier. If you can get 90% you can force the remaining 10% to accept but if someone held 10.2% let say, they can make this more of a challenge. Basically Agnico has left the table open to other players and allowing Agnico to make a nice quick profit.
Regardless, I think it’s safe to say Rubicon is now in play and the game is afoot, and all comers can only be winners while Goldcorp can only be a looser if they don’t play the game Agnico has started. Agnico is effectively forcing Goldcorp’s hand once again. Remember that Goldcorp owns the up slope of the F2 zone on the other side of Rubicon’s claim and the easiest way to make this smaller Goldcorp play economical would be to join it with Rubicon’s stake since the down slope is much more valuable.
It would seem the markets like what they are seeing, in after markets RBY has had a range of $3.29 – 3.98 USD and it’s currently around $3.65 USD with a last price of $3.74USD, see link here. The drop before 4pm may indicate someone got wind of what was up but most miners had a down day. The after market for Agnico is fairly flat, see link here. The big question is how long Goldcorp will wait in this game of brinksmanship. I find it interesting that the Agnico deal is to close tomorrow on July 28th, a very fast turn around time.
It should also be noted Agnico announced earnings today, second quarter adjusted earnings of $0.47 per share, which beat analyst estimates of $0.43. Also Goldcorp reported 2Q earnings of $0.52 per share beating estimates of $0.50. Revenues at Goldcorp were up 62% versus the same quarter in 2010, production expectations fell short and they lowered their 2011 production guidance to 2.5 to 2.55 million ounces versus its previous figures of 2.65 to 2.75 million ounces. It would seem that even though Goldcorp has indicated in the past they want to take time to absorb previous acquisitions, translation, they are trying to keep the value of other interesting plays under control as best they can by showing an “apparent” lack of interest, they really need the Rubicon resource.
Given a recent interview by Sean Boyd on Kingworld on July 21st, it would seem Agnico is likely using a gold price over $2000/oz in their calculations, it’s also interesting Sean’s comments on the miners given this deal was likely in the works when he made these comments on July 21st, 2011. See Sean’s comments here.
The big question is of course a takeover price. 6 months ago I would have said at least $9-10/share and maybe even as high as $12, but now I think $7-8/share is likely more realistic, even with better confirmation on the resource. Of course it will depend on whether Agnico is willing to put up a fight or not.
See Press Release here.