UPDATE 1-Capital Gold again backs Gammon bid over Timmins

Thu Mar 17, 2011 10:14am EDT

* Capital continues to back Gammon offer

* Gammon deal worth about $329.6 million

* Timmins deal worth about $365.8 million (In U.S. dollars unless noted)

TORONTO, March 17 (Reuters) - Capital Gold CGC.A reiterated its support for a takeover offer from Gammon Gold GAM.TO on Thursday, even though rival bidder Timmins Gold TMM.V boosted its offer by 25 cents a share.

Timmins and Gammon have been caught up in a bidding war to gain control of Capital Gold, and its El Chanate mine in Mexico, since October.

Vancouver-based Timmins, armed with the backing of one of Canada's top resource investors, is offering 2.27 Timmins common shares plus $0.25 in cash.

Larger rival Gammon has offered $1.09 per Capital share, plus 0.5209 of a Gammon common share.

"The board has carefully considered both proposals and believes that the Gammon transaction continues to be the best transaction reasonably available to its stockholders," said Capital Gold Chairman Steve Cooper in a statement.

With 61.37 million Capital Gold shares outstanding, the Timmins offer would value Capital at about $365.8 million, while the Gammon offer would value it at about $329.6 million, although those values vary considerably as share prices rise and fall.

Capital said it would convene a shareholders' meeting scheduled for Friday as it works with Gammon on an amended merger agreement.

Shares of Gammon Gold were down slightly at C$8.14 on Thursday on the Toronto Stock Exchange, while Timmins Gold rose 2.48 percent to C$2.48. Capital Gold rose 1.34 percent to $5.28 on the NYSE Amex.

($1=$0.99 Canadian) (Reporting by Julie Gordon; editing by Peter Galloway)