In fact, until Gammon Gold stepped to the plate last week with phenomenal fourth-quarter earnings, Timmins' hostile bid held the upper hand on a valuation basis (although Gammon offered a greater cash component). After revealing record fourth-quarter revenue, and record operating cash flow of $35.6 million, Gammon shares gained sufficient momentum during recent days to grant its bid a superior valuation. The rest is now history, and the future for Gammon Gold has never looked brighter.
It seems that everything Gammon touches turns to gold lately, and Capital Gold's exciting growth profile based upon an impressive property portfolio shows no signs of interrupting that trend. The acquisition will prove easily accretive as Capital's assets boost Gammon's production profile immediately by 65,000 gold-equivalent ounces (GEOs) per year. Through ongoing enhancements at the company's flagship, low-cost El Chanate mine, and the planned fast-track development of the newly acquired Del Norte deposit for another 50,000 GEOs per year, Gammon will access a game-changing production growth spurt as these assets alone achieve 120,000 ounces by 2013.
Gammon's purchase price of $280 per ounce of gold reserves identified at El Chanate represents an attractive bargain for a highly profitably mining operation; even if that were the extent of the assets obtained. Fools may recall that Royal Gold
Meanwhile, Gammon's pre-existing asset portfolio was already beautifully poised for a substantial growth spurt of its own. The miner continues to open new deposits within the flagship Ocampo mine to production, and resumed production from the El Cubo mine (following a disruptive labor impasse) is now imminent. The longer-term development pipeline continues to shine with highly successful exploration results at Guadelupe y Calvo, and investors can now look to the release of a preliminary economic assessment for that property during the second quarter as another looming catalyst for further upside in Gammon shares. As further icing on that cake, Capital Gold's underexplored Saric property now joins this expansive and promising development pipeline.
With this transformative acquisition now secured, Gammon's pole position among my top 10 gold or silver stocks for 2011 has never looked more fully deserved. As Yamana Gold
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Agnico-Eagle Mines, Gammon Gold, Royal Gold, Teck Resources, and Yamana Gold. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.