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Why Coeur d'Alene's Shares Dropped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Coeur d'Alene (NYSE: CDE  ) fell 10% today after the company offered to buy a Mexican silver miner.

So what: The company made a $383 million offer for Orko Silver, a competing bid from an offer by First Majestic Silver. The offer is for C$2.70 per share, a 26% premium to the competing offer, and it includes C$0.70 in cash, versus less than a penny in cash included in the First Majestic bid.  

Now what: The only winner in this bidding war is Orko Silver's investors, who can watch these two companies fight over them. First Majestic can now respond with another bid or give up the asset to Coeur d'Alene. I don't think this is a reason to buy the stock here given the bidding war, which rarely works out for the acquiring company.

Interested in more info on Coeur d'Alene? Add it to your watchlist by clicking here.

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  • Report this Comment On February 13, 2013, at 8:08 PM, EllenBrandtPhD wrote:

    Some are conveniently missing the most interesting point in this little melodrama:

    CDE is being advised by JPM!

    And JPM, at the center of most controversy in the Silver sector, has amazingly conceded that the price of Silver is likley to escalate sharply very soon, seemingly against its best interests.

    (JPM and those hedge funds closely allied with it are also rumored to have held the lion’s share of CDE’s current Short position, which has been more than HALVED over the past two months and is now actually quite small relative to the float.)

    Add to this the facts that:

    *** CDE has been strongly rumored – by Forbes, no less – to be the front-runner for the next metals slot opening up in the S&P 500.

    *** That among CDE’s strongest backers are David Dreman and Eric Sprott.

    *** That a CDE Board of Directors seat opened up YESTERDAY.

    *** And that if CDE were to get the next new mining slot in the S&P 500, the stock would probably escalate into a whole new range 50 or 60 percent higher than present, because it is egregiously under-owned by funds and banks that own the S&P.

    Yes, it IS rather Machiavellian!

    But in order to get that S&P slot, everyone knows that Coeur needs a big, sexy deal to make up for its Martha mine, which is winding down.

    Coeur will also benefit as a purely passive investor from any strong Rally in the juniors – perhaps spurred by M&A it is itself involved in – because it owns a whole portfolio of investment shares in small exploration stocks.

    In any case, much to ponder.

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