Fox-Davies Capital
Hochschild Mining will try to retain 40% holding in Lake Shore Gold - Fox-Davies Capital
Event
Hochschild has announced the purchase of 26.1M shares in West Timmins Mining Inc for a total cash consideration of C$61.6M or a weighted average price of C$2.36/share through several market transactions.
Comment
Since 2008 when Hochschild first acquired an interest in Lake Shore Gold, it had built up its position to 40%, at a total consideration of $182M. Lake Shore commenced production at its Timmins project began in the first quarter of 2009, and is expected to be at 500tpd by the end of the year yielding around 30,000oz of gold. Production levels are then expected to increase to 1,500tpd by the end of 2010 yielding 100,000oz of gold and the target for 2011 is 200,000oz of gold. The company also has several gold exploration properties in the area. In August 2009, Lake Shore Gold announced it would acquire all of the outstanding common shares of West Timmins Mining Inc. (“WTM”), and Hochschild Mining is fully supportive of the transaction.
Under terms of the agreement, which is subject to shareholder approval, WTM shareholders are to receive 0.73 Lake Shore Gold shares per WTM share, valuing WTM at approximately C$319 million.
Hochschild had said that it wished to keep its investment at the 40% level and we see this move as the first step in achieving this target. We calculate that it ensures that once the acquisition is complete, then Hochschild's position in Lake Shore will not drop below 30% compared to 26% if it had not purchased the shares.
When converted into Lake Shore shares at 0.73 Lake Shore Gold shares per WTM share, it represents an entry price of C$3.233/share compared to the current spot price of Lake Shore of C$4.08/share. We believe that this indicates that Hochschild are being prudent and not overpaying to maintain its 40% interest.
We anticipate more moves by Hochschild’s to retain as near as possible a 40% holding in Lake Shore Gold.
Other Fox-Davies Capital news
-
09/02/10 Fox-Davies Daily Newsflash including Victoria Oil & Gas, Atlantic Coal, Red Rock Resources, European Nickel, Mediterranean Oil & Gas and others
-
08/02/10 Fox-Davies Capital Daily Newsflash including Xcite Energy, Heritage Oil, Petrolatina, Greystar Resources and others
-
05/02/10 Fox-Davies Capital Daily Newsflash Including Melrose Resources and Kirkland Lake Gold
-
04/02/10 Fox-Davies Capital Daily Newsflash including Victoria Oil & Gas, Jubilee Platinum, Circle Oil, Frontera Resources, Alexander Mining and Resaca
-
03/02/10 Fox-Davies Capital Daily Newsflash including Red Rock Resources, Stratex International, Beowulf Mining, Global Energy and Anglo Asian Mining
-
02/02/10 Fox-Davies Capital Daily Newsflash including Ascent Resources, Sterling Energy, Petroceltic and Cove Energy
-
01/02/10 Fox-Davies Capital Daily Newsflash including Nyota Minerals, Circle Oil, Petroneft, Serica and Baobab Resources
-
29/01/10 Fox-Davies Capital Daily Newsflash including Pana Petroleum and Weatherly International
-
28/01/10 Fox-Davies Capital Newsflash including Aurelian, Petroneft, Leed Petroleum, Tullow, Afren, Xcite and more
-
27/01/10 Fox-Davies Capital Daily Newsflash including Aurelian Oil & Gas, Thor Mining, Tullow Oil, Petroneft, Leed Petroleum and others







