Tahoe Resources (THO-T) and Lake Shore Gold (LSG-T) plan to join forces in a nearly $1 billion all-stock deal that sees Tahoe gobble up Lake Shore.
Lake Shore shareholder are to end up with 26% of the combined company and get a roughly 25%-30% premium to recent Lake Shore shareprices.
That the deal might be coming was leaked last week by the blog Incakolanews on news of management travel. Lake Shore shares popped – precipitating a halt – and Lake Shore issued a statement Friday saying it was not aware of “material, undisclosed developments that would account for recent trading in its stock.”
The deal will come under scrutiny today, as Tahoe and Lake Shore plan a conference call at 1:30PM EST.
Early this morning, analyst Kerry Smith, at Haywood Securities, expressed slight reservations on the question of whether Lake Shore is getting a good price.
“It’s a decent deal, I guess,” Smith said.
Gold bulls might wish Lake Shore management held onto the company longer, Smith said, with the gold price recently showing strength (nearing $1,200 today) and Lake Shore’s turnaround at Timmins Creek gathering steam in recent quarters, with new resources from a recent discovery area bolstering production plans.
The sale “probably comes a bit early,” Smith said. It would have been nice to see Lake Shore operating for longer.
“But these things can be outside of management’s hands,” Smith acknowledged, referring to a board having to consider an offer.
The deal sees relatively weak Lake Shore management representation in the combined company. Lake Shore’s President and CEO Tony Makuch is to become President Canadian Operations. Lake Shore Chair Alan Moon is to join the board of the combined company, assuming the deal goes ahead.
Combined, the duo create a new force in gold-silver mining. Tahoe runs the Escobal silver mine in Guatemala and is ramping up the Shahuindo gold project in Peru to production. In 2015 it expects to produce 18-21Mozs Ag and 200-220kozs Au at high consensus operating margins.
Lake Shore runs gold operations in Ontario, and produced 183,300 ounces gold in 2015.
Both companies have strong cash balances and low debt.
More updates to come.