* Open to paying dividends, new acquisitions on merit
* Quick ramp up of Nayarit
* Prefer debt to equity raise, neither seen to 2011/2012
By Pav Jordan
TORONTO, March 11 (Reuters) - A year after it was nearly bought at C$0.76 a share, Capital Gold Corp CGC.A is a small gold miner with big dreams, weighing the benefits of buying other rivals and growing, or cashing out and being bought.
Capital Gold, now C$3.91 a share, is in the middle of a merger with Nayarit Gold Inc NYG.V that will help produce 200,000 ounces per year by 2012 from properties in Mexico, El El Chanate and Saric.
"Everybody wants to get to the next level and go forward. Every time you add ounces you add value," Capital Gold Corp President John Brownlie told Reuters on the sidelines of the Prospectors and Developers (PDAC) mining conference.
The global gold market is in a frenzy to churn out the metal amid sustained prices for the metal above $1,000 an ounce, with some reputable pundits saying it could jump to five times that. Canadian prospectors and developers are leading the merger charge.
Gold miner Kinross (K.TO) said on Thursday it agreed to acquire exploration company Underworld Resources UW.V in a deal worth C$139.2 million ($135.3 million), expanding its asset base in northwest North America.
A year ago Capital Gold was almost acquired by Canadian rival Gammon Gold Inc GAM.TO in a friendly deal. But the two companies could not agree a price.
Today the Capital Gold share price has multiplied and Brownlie is eyeing growth, both organic and via acquisitions.
He said step one is to complete the acquisition of Nayarit and get it into production as soon as possible.
That means driving early into the ore body, spending about C$2.5 million in the first 8-9 months to build a mine ramp.
He hopes El Chanate could produce 125,000 ounces a year by 2012, with Nayarit and Saric bringing in another 50,000 ounces each.
Cash-rich Capital Gold has C$7 million in the bank as well as a C$15 million line of credit with Standard Bank SBC.MV.
Brownlie said some bankers have urged him to do another equity raise, but he rejects the idea of going to market so soon, unless an acquisition opportunity comes along that he can't resist.
"We've got people at this show who would love to get us an equity raise," Brownlie said at the conference, which attracted more than 20,000 miners, prospectors, bankers, government delegates and other players to Toronto this week.
Brownlie says Capital Gold is undervalued, so he'd prefer to borrow than to raise equity. But he sees no need for major spending until late 2011 or early 2012, when the company will spend some C$30 million on big cash items at Nayarit.
"Look, if something appropriate came along and I wanted cash, I've got a liquid stock. I've got a stock that's got value. It could be done fairly quickly, a capital raise," said Brownlie, who is looking for more properties in Mexico.
"I'm not going to load our portfolio with grass-roots or brownfields. I'm only going to focus on near-term producers, strong mineralization, upside potential or another producer that just needs a helping hand to join with a company like Capital Gold, to take them through the glass ceiling of 100- 150,000 ounces." (Reporting by Pav Jordan; editing by Janet Guttsman)