CapGold Buys Smaller Mexico Miner

US-based Capital Gold has acquired Canada’s Nayarit Gold in a share swap worth $41m. The move has puzzled mining analysts who cover Capital Gold stocks. “I think they paid an expensive price for a puny asset,” says equities strategist Christopher Ecclestone at Hallgarten. “Nayarit’s resource is small and does nothing to move Capital Gold towards its goal of production of over 100,000 ounces per annum in the short term,” he adds. Adam Graf, director of equity research at New York shop Dahlman Rose, also questions why Capital would buy a much smaller miner instead of a peer with similar assets. He adds that the latter abound in northern Mexico, where both seller and buyer operate. Company information shows that while Capital Gold has inferred gold resources of 157,000 ounces, Nayarit only has 19,000. Nayarit does however have inferred silver resources of 552,894 ounces, while Capital Gold has none. Investors also appear to have questioned the deal, as the companies’ stock prices dropped on the day of the announcement, with Capital down about 0.4% and Nayarit’s off almost 4.0%. Capital Gold president John Brownlie was not available to comment on the criticism of the deal. However, earlier in the day he did tell LatinFinance that after the purchase is completed, the company will seek more acquisition opportunities in northern Mexico. Jennings Capital is Capital Gold’s financial advisor. Nayarit’s legal counsel is Peterson Law in Canada and Kavinoky Cook in the US.