* Two bids financially near identical, tied to share price
* Gammon deal favored for $0.79 cash, management team
* Analysts say confused shareholders should sell
* Capital Gold shares up 40 pct over 3 months at $4.80
(In U.S. dollars unless noted)
By Julie Gordon
TORONTO, Dec 3 Six of one or half a dozen of
That about sums up the decision faced by shareholders of
Capital Gold CGC.A (CGC.TO), the New York-based gold miner
that owns the El Chanate mine in Mexico's northern state of
Both Gammon Gold GAM.TO and Timmins Gold TMM.V are
circling Capital, with Toronto-based Gammon offering a cash and
share takeover deal, and Vancouver-based Timmins offering an
For the average investor, the deals are near carbon copies
and the decision is made even tougher by the fact that Capital
Gold appears to be floundering since its longtime president and
chief operating officer stepped down in July.
Capital Gold is now being run by the former president of
Nayarit Gold, an exploration company Capital absorbed in
"I think both deals are pretty similar as far as the
implied value per share," said Dahlman Rose analyst Adam Graf,
adding that picking who should manage those assets may be
"Capital's assets may be valued better in the hands on
someone else," he said. "Creating a bigger, better company with
better direction would be advantageous."
The value of the deals is heavily influenced by the market,
which has favored either company at different moments.
At market close on Friday, the Gammon deal was worth C$4.87
a share, while the Timmins deal was worth C$4.77. By midday on
Monday, the valuations had flipped and the Timmins deal was
worth C$5.13 a share, while Gammon's was worth C$4.82.
Analysts say shareholders need to look past the dollars and
cents, and focus on which deal has "certainty to close".
This means, much like in real estate, picking the deal with
the fewest "onerous" conditions.
CASH IS KING?
While analysts say the fewer conditions the better, the one
factor that might see investors back Gammon over Timmins is the
79 U.S. cents a share in cash that Gammon is using to court
"Cash is cash, right?" said Graf, adding that most
investors will prefer a deal that "should make it easier for
them to cash out."
But Graf expressed some concern that both bids ignored
growth prospects at Capital, which also owns the Orion
development project in Mexico's Nayarit state.
Graf said the project could add another $2 per share to
Some analysts say it may be time for confused shareholders
to just walk away as the stock trades at a 40 percent premium
to three months ago and the inexperienced management team mulls
the two offers on the table.
"I think if (shareholders) can't decide, they should just
sell the stock, because it's fully valued," said Octagon
Capital analyst Annie Zhang.
Before the offers, her target price for the gold miner's
U.S. shares was $3.76. On Monday, the stock was at $4.80 on
Amex, while its Canadian shares were at C$4.84 on the Toronto
Zhang added that Capital Gold has been floundering since
former president and chief operating officer John Brownlie left
the company in July.
"The situation is only getting worse for Capital Gold,"
said Zhang. "There's no one to run the company right now."
She added that while, financially, Timmins seemed to offer
more to shareholders, she said there had been friction between
the two companies and she would not back that deal.
"I personally I don't think it would be a good fit,
management-wise," she said. "I would be more comfortable with a
(Editing by Pav Jordan and Rob Wilson)