CapGold Pushes Shareholders to Reject Timmins

US-based miner Capital Gold (CapGold) has sent a letter to shareholders asking them to vote for the merger with Gammon Gold and to reject the rival offer from Canada’s Timmins Gold. In October, Gammon, also based in Canada, offered to acquire CapGold for $288m or $4.57 per share. The offer came soon after Timmins had offered to acquire CapGold for $275m, an offer CapGold’s board immediately rejected. CapGold has turned Timmons away 4 times. In its letter to shareholders, CapGold says that Timmins “will need to raise an estimated $100m this year to complete the transaction and deliver on capital requirements which will be dilutive to stockholders.” It also says it believes that Timmins’ management does not have substantial operating experience and lacks sufficient depth to execute a transformational merger and to operate the combined companies. “Since there is no cash component to the Timmins offer, this may require that CapGold’s taxable US investors sell Timmins shares to cover tax liabilities arising out of a Timmins/CapGold merger,” it adds. As for Gammon’s offer, CapGold says it represents a 54% premium to the 20-day volume weighted average price on the Amex on the day before the offer was made. It also praises Gammon’s “strong management and operating track record” and “visibility as a mid-tier producer.” Gammon’s financial advisors are Dundee Securities and UBS, while CapGold’s is Comark Securities. Both companies have mining operations in Mexico.