Jaguar Mining (JAG) received a $1 billion takeover bid from Chinese state-owned Shandong Gold Group Co. on Wednesday, marking the latest deal in a growing trend of merger and acquisition activity in the gold sector.
The Wall Street Journal reported that the $9.30 per share offer values Jaguar at $1 billion, and represents a 72.5% premium to yesterday’s $5.39 closing price. The report cited “a person familiar with the matter” and noted that “the person declined to provide further financial details.”
Shares of JAG have been halted thus far today, and the Company has yet to publicly comment on the report.
Commenting on the report, J.P. Morgan equity research analyst John Bridges wrote in a note to clients that “We believe if JAG delivers on its operation and growth promises in the future, there is value in the stock, and the offer price is justified.”
Bridges – who has a Neutral rating and $5.00 price target on Jaguar Mining - added that “Our Dec-12 target price for the company is $5 based on a conservative NPV methodology after operational disappointments. If we apply our standard Black Scholes valuation methodology to JAG, the value is $11 to $12.per share.”
Bridges went on to say that “This bid, if successful, would solve the financing issues JAG faces as it seeks to build its Gurupi project. As the scope of the project grows, it could face higher capital costs. We believe at $9.30/share, the bid is a full one and we doubt there would be a competing bid.”
UPDATE – Jaguar later today put out a press release acknowledging the receipt of proposals (plural):
Jaguar Mining Inc. (“Jaguar” or the “Company”) (JAG: TSX/NYSE) in response to news articles today regarding an unsolicited offer to buy the Company, acknowledges that it has received proposals over the past few weeks.
The Company confirmed that, in light of the publicized unsolicited offer, the Board of Directors has determined to initiate a strategic process to explore alternatives to maximize shareholder value. At this time, none of these proposals has progressed beyond the exploratory stage. The Board has retained financial and legal advisors to assist in this regard. There is no assurance that the process will culminate in a change of control transaction.
Jaguar’s Board of Directors intends to update the shareholders of the Company at the appropriate time.
Colossus Reports New Discovery at Serra Pelada
- 736 soil geochemical samples over 0.1 parts per million (ppm), 163 over 0.5 ppm and 73 over 1.0 ppm, peaking at 21.9 ppm.
- These samples have outlined a large area, in excess of 50 hectares, in the Elefante and Young Garimpo sections of Area B and in Area C of gold-platinum-palladium surface anomalies.
- Initial auger drilling of these anomalies has intersected high grades in each of these areas including 124.78 grams per tonne (g/t) gold, 6.52 g/t platinum and 7.67 g/t palladium over 1.5 meters in Elefante.
