Sunday, April 24, 2011

Chinese Firm Buys 17.7% of Gold One Int. (GDO)

A few weeks ago I reported that ASX listed Gold miner GDO had announced the potential for a takeover offer:
Gold One International (GDO) was issued with a 'Price and Volume' query (commonly referred to as a 'speeding ticket' on share trading forums) yesterday. Their response was posted this morning to the ASX and included some interesting information regarding a potential takeover offer. Bullion Baron
During trade on Thursday an announcement was released showing that a Chinese mining group had purchased a significant stake in GDO at a large premium to the current share price:
A Chinese mining group has bought 17.7% of Australian and locally-listed precious metals miner, Gold One International, in a move seen as a precursor to it making a bid to buy the company.

Chinese mining group Baiyin Non-Ferrous Group bought the Gold One shares at a 20% premium.

A Sens announcement by Gold One said Baiyin had become an "initial substantial holder".
Business Live
Comments from GDO management were interesting, indicating that this may just be the beginning and possibly there are other deals still pending:
Neal Froneman, the CEO of Gold One, said the acquisition does indicate that a further offer will be made; however, he did leave the door open to the possibility of a takeover of Gold One by either Baiyin or any other suitor.

"Gold One is currently assessing a potential acquisition transaction, and also a potential change of control transaction for the company which, if it were to proceed, could involve an offer to Gold One shareholders to acquire all of their shares, on terms and conditions yet to be determined."
Trading on Thursday was slow to respond to the news and I had an opportunity to top up my own holdings at 45c before it ran hard to a 50c close, after trading at a new 52 week high of 51c (still below the price paid by Baiyin).

GDO is now my second largest share holding (second only to CCU) and I am quite confident we will see higher prices in the short to medium term as the market digests the Chinese buy-in announced Thursday and potential for a takeover offer in the near term.



BB.

Disclosure: Position held in GDO & GOLD. Not investment advice. Do your own research.

7 comments:

  1. Thanks for the tip. They look like a company well worth having a look at.

    Cheers,
    Colin

    ReplyDelete
  2. Certainly worth a look, but like always suggest everyone do their own due dilligence.

    They went into a trading halt this morning pending details of an acquisition, will be interesting to see what it is.

    Cheers
    BB.

    ReplyDelete
  3. Yes good advice that everyone do their own research definitely. I've done a bit since reading your post and signs are all quite positive.

    The fact that they've gone into a trading halt today would you say the horse has bolted however?

    C

    ReplyDelete
  4. It all really depends on what this acquisition announcement entails and how the share price reacts afterward. For example if the market doesn't like the acquisition or thinks GDO have overpaid for whatever they are buying this might push short term sentiment down and create a buying opportunity. Or of course we could see the opposite (positive market reaction and higher SP). Will certainly be watching for the details with interest!

    ReplyDelete
  5. Here's the latest news on GDO's aquisition.

    http://www.proactiveinvestors.com.au/companies/news/15796/gold-one-international-to-acquire-gold-producer-rand-uranium-for-us250-million-15796.html

    Share price down a few cents to 47 atm.

    C

    ReplyDelete
  6. Yes, very interesting C. Seems Rand have quite high costs, but even $200 profit per ounce is around $30m profit per year on 150koz pa. Look forward to seeing GDOs plan to get the costs down. Adding a huge amount of Gold reserves and resources. Market has reacted negatively short term, will be interesting to see how things track from here. BB.

    ReplyDelete
  7. BB I read something similar to that myself saying that the cost per ounce of production was high for Rand. And yes perhaps that's why the reaction was lukewarm. I think that conversely that just shows up much potential upside there is to the deal because if either costs per ounce come down or price of gold keeps going up (both likely) then theres a lot more profit to be unleashed than perhaps has been factored in at the moment. Or that could just be me being optimistic because I'm now a GDO shareholder (small amount). Anyway, indeed we'll see how things go from here.

    C

    ReplyDelete