The market seems to think Canada's Aura Minerals Inc. got the better of its larger rival Yamana Gold Inc. (NYSE:AUY) when it agreed to buy at least $200 million of unwanted assets.
On Tuesday, Toronto-based Aura agreed to buy three gold mines from Yamana, also of Toronto -- the San Andres mine in Honduras, and two Brazilian mines, the Sao Francisco and the Sao Vicente. The price could escalate to $240 million, including an earnout.
Since then, the two companies' stocks have charged in opposite directions. Aura's shares have soared 43% to C$0.62 while Yamana stock has plunged 8.6% to C$10.97.
Analysts basically say that the purchase makes Aura -- which already had properties in Brazil and Mexico -- more of a player because it will double cash flow to about C$0.13 per share. Aura said Tuesday the mines contain 1.8 million ounces of proven and probable reserves of gold.
For its part, Yamana described the assets as noncore and indicated it has bigger fish to fry -- namely, the assets it picked up two years ago with its $4.6 billion purchase of both Meridian Gold Inc. of Reno, Nev., and Northern Orion Resources Inc. of Vancouver, British Columbia.
Overall, observers are applauding Aura's move. The National Post newspaper said Thursday Raymond James analyst Tom Meyers had upgraded Aura to a "strong buy'' because the deal makes it a producer with reasonable size and strong cash flow.
Andrew Willis in the Globe and Mail's Streetwise blog said Aura is on the verge of a re-rating.
Aura was advised on the deal by Genuity Capital Markets and the law firm DuMoulin Black LLP. Blake, Cassels & Graydon LLP advised a special committee of Aura' s board. Yamana sought financial advice from the National Bank of Canada and legal advice from Cassels Brock & Blackwell LLP
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