* Timmins Gold has support of Sprott Asset Management
* Values Capital Gold at $5.89 per share
* Gammon Gold counters by sweetening its offer
* Key asset at play is El Chanate gold mine in Mexico
(Adds comments from Gammon. In U.S. dollars unless noted)
By Pav Jordan
TORONTO, March 15 Rival suitors for New
York-based miner Capital Gold raised their takeover bids on
Tuesday, opening another chapter in a fight spurred by soaring
gold prices for the El Chanate mine in Mexico.
Vancouver-based Timmins Gold TMM.V, armed with the
backing of one of Canada's top resource investors, raised its
offer for the company to the equivalent of $5.89 per Capital
Gold CGC.A share. The offer comprises 2.27 Timmins common
shares plus $0.25 in cash.
Larger rival Gammon Gold GAM.TO responded soon after by
raising the cash component of its offer to $1.09 per Capital
share, plus 0.5209 of a Gammon common share.
With 61.37 million Capital Gold shares outstanding, the
Timmins offer would value Capital at about $361 million, while
the Gammon offer would value it at about $335 million, although
those values vary considerably as share prices rise and fall.
Gammon says its offer is more compelling, starting with the
fact that Capital Gold shareholders would only have to pay tax
on the share component of its bid because Gammon is also listed
in the United States.
In an interview with Reuters, Gammon Chief Executive Rene
Marion also pointed to the greater liquidity of his company's
stock, a stronger cash position and exposure to silver as other
reasons shareholders should opt for the Gammon offer.
"We are not concerned whatsoever with the Timmins deal
activity today," he said by telephone.
The race for El Chanate, Capital's gold mine in the
northern Mexican state of Sonora, which is projected to produce
between 65,000 and 70,000 ounces in fiscal 2011, is emblematic
of increased dealmaking in the sector as gold prices hover near
Spot gold XAU= was trading around $1,391 an ounce on
Tuesday, more than five times its price a decade ago.
Last month, Newmont Mining (NEM.N) agreed to buy Fronteer
Gold Inc FRG.TO for C$2.3 billion, extending its presence in
the western United States.
Timmins, which owns the San Francisco open-pit gold mine in
northern Mexico, is renewing its bid for Capital Gold after
being rebuffed repeatedly by the company's board, which
recommended in December that shareholders accept Gammon's
Last month, Capital Gold cut off talks with Timmins,
apparently bringing the takeover battle to an end, until this
week when Sprott Asset Management (SII.TO), considered to be
among Bay Street's shrewdest investors, lent its support to
Sprott, which has the largest single voting block in
Capital Gold, with 12.5 percent of the shares, said on Monday
it would vote all of its shares in favor of the Timmins offer.
"In light of our increased offer, we urge the board of
Capital Gold to determine that our new proposal is superior to
the Gammon offer and to withdraw its support for the Gammon
transaction," Timmins Chief Executive Bruce Bragagnolo said in
Capital Gold stock was down 0.77 percent at C$5.17 on
Tuesday afternoon in Toronto, where gold-mining issues were
slumping along with the rest of the market due to the crisis in
Japan. Timmins fell 2.48 percent to C$2.36, while Gammon Gold
was off 6.27 percent at C$8.07.
Capital also owns the Orion development project in Nayarit
province. Gammon owns the Ocampo property in Chihuahua state,
also in northern Mexico, as well as the El Cubo property
Either way, the shareholders will not likely vote on a deal
for at least another 10 days after the new offers are
(Reporting by Pav Jordan, additional reporting by Euan Rocha;
editing by Rob Wilson and Peter Galloway)