GOLD STOCKS NEWS - Gold stocks were nearly unchanged as the Market Vectors Gold Miners ETF (GDX) advanced $0.01 to $44.97 per share while the gold price traded at $1,107 per ounce. Gold stocks opened lower this morning, with the GDX declining as much as $0.71 to $44.25 on the heels of weakness in the gold price. However, the GDX quickly recovered its losses and rose as high as $45.26 before stabilizing near the $45 level. If gold stocks can manage to close in the black, it would snap the GDX’s three-day losing streak that has seen the gold stocks ETF fall over 3% this week.
News flow in the gold stocks sector has been elevated this week with today’s headlines centered on merger and acquisition activity. Canadian-based Kinross Gold (KGC) announced an agreement to acquire Underworld Resources (UW.TSXV) by way of a “friendly“ take-over. Underworld is a junior gold exploration company whose primary asset is the White Gold project, located in the Tintina gold belt, approximately 95 kilometers south of Dawson City, Yukon Territory, Canada. Under the terms of the transaction, Kinross will offer 0.141 common shares plus $0.01 in cash, which represents an implied offer price of approximately $2.62 per share based on Kinross’ most recent closing price of $18.54.
The transaction values Underworld Resources at $139.2 million, and represents a 36% premium to its closing price yesterday of C$1.93 per share. Tye W. Burt, President and CEO of Kinross Gold, stated that “The offer will provide Underworld shareholders with immediate value for Underworld’s current assets and future growth potential. It will also give Underworld shareholders the opportunity to participate in a senior gold producer with a proven track record and significant upside potential as we advance the next wave of our growth program.” Shares of Kinross fell $0.22, or 1.22%, to $17.85, while Underworld shares surged C$0.64, or 33.2%, to C$2.57 in mid-day trading.
In other gold stocks news, Lake Shore Gold (LSG.TSX) reported 2009 gold production of 7,700 ounces from its Timmins Mine but revised 2010 production guidance lower - to 65,000 ounces from a previous estimate of 100,000 ounces. The Canadian-based gold producer cited a shift in priorities in order to emphasize increased underground waste development, diamond drilling and infrastructure plans necessary to support the preparation of 43-101 compliant resource estimates at its Thunder Creek and Bell Creek projects as the primary reasons for the forecast reduction.
Anthony (Tony) Makuch, Lake Shore Gold’s President and CEO, stated that “We are excited about bringing the Timmins Mine into commercial production in 2010. The revised plan to focus our underground exploration program on completing mineral resource estimates for Thunder Creek and Bell Creek will result in less gold produced in 2010 than previously anticipated. However, this establishes the foundation for maximizing value and helps to fast track these projects to commercial production.” Shares of Lake Shore declined C$0.14, or 4.5%, to C$2.75.
