Gold and silver have been valued above most metals for centuries. The globally priced metals are mined by both specialty miners and their larger, diversified peers. For the past five months, gold has been on a nice run, up about 14%, to its most recent close on Oct. 9 of $1,765 an ounce. Over this same time frame there have been a few North American deals in which mid-cap miner AuRico Gold & Silver (NYSE: AUQ) has trimmed some of its mining assets to concentrate on its two core mines in Canada and Mexico.
Back in July, we reported on the sale of AuRico's El Cubo mine, along with several neighboring projects, to Endeavour Silver (EXK -0.78%). Well, the company is trimming back again this month, announcing a $750 million sale of its Ocampo mine, and neighboring Venus and Los Jarros sites, to Minera Frisco. On top of this, it's selling a 50% stake in its underperforming Orion "advanced development project," which it will continue developing with Minera Frisco over the next few years. Investors have voiced their opinion of the deal in trading today, as the stock closed up more than 20%.
The company made this move as it looks to continue shoring up its balance sheet to capitalize on its two core operations in its "long life, low cost Young-Davidson and El Chanate" plays. According to its new CEO and president, Scott Perry, AuRico is "well positioned to meet its key objectives of growing its profitability and cash flow" because of the flexibility that this cash deal will offer moving forward. It's also highly optimistic about the joint venture at its Orion project, which is estimated to contain around 330,000 gold equivalent ounces, which this deal leads to.
This sale is a clear case of management that reevaluates its company's strengths, positioning it to succeed based upon that assessment. A comforting fact is that this was a strategic move and not one that was rushed or made with a forced hand. Look for the more streamlined company to be better positioned to compete with its Canadian brethren, Silver Wheaton (WPM 0.04%) and First Majestic Silver (AG -1.02%).
