- By Alberto Abaterusso
After receiving approval from British Columbia's Supreme Court on July 7 and from Integra Gold Corp.'s (ICG.V) shareholders at the end of the company's special meeting on July 4, Eldorado Gold Corp. (EGO) finally completed its acquisition of Integra for 590 million Canadian Dollars ($432.4 million).
As a result of the deal, Integra is wholly-owned subsidiary of Eldorado Gold. Integra's securities will be removed from the TSX Venture Exchange.
The total value of the transaction includes the volume of Integra shares that are already held by Eldorado Gold.
According to a news release, Eldorado will pay Integra shareholders - for the portion of shares it does not own yet - approximately CA$129 million, plus 77 million of its ordinary shares.
The volume of ordinary shares Eldorado will use as means of payment represents about 10% of its total ordinary shares.
This transaction is part of Eldorado Gold's strategy to fill in the gap of 325,000 to 330,000 ounces of yearly gold production created with the sale of its Chinese assets, which included the White Mountain and Tanjianshan mines, the Eastern Dragon development project and the Jinfeng mine.
With the acquisition of Intergra, Eldorado will add the Lamaque project to its asset base. The project is located in the Canadian province of Quebec, close to Val-d'Or. Eldorado will focus on developing this metallic project as its expects to add a significant volume of gold to its total production in the near term.
The company also expects a lot from this project in terms of cash flow generated from operations. Once it is completed and running, Eldorado expects to support its business with the profits coming from the sale of 123,000 ounces of gold every year over a total span of 10 years (life of mine) at an all-in sustaining cost (AISC) of $634 per ounce of gold. This is an estimate based on a preliminary economic assessment (or PEA) completed by Integra last February. The production is expected to be sustained by mining gold through underground techniques.
The preliminary document also says Lamaque hosts about 5.1 million tonnes in mineral resources, grading 9.13 grams of gold per tonne of ore. Tthese are not classified as gold reserves yet, however, because the company has to undertake more drilling activities in order to define the gold deposit, its economic viability and financial robustness, which will be disclosed in a feasibility study report.
The high grade of the mineralization, the preliminary estimates concerning costs and the life of the mine and the location of Lamaque are all good preconditions for building a successful, producing asset.
Eldorado is currently trading around $2.44 per share with a price-earnings (P/E) ratio of -5.18, a price-sales (P/S) ratio of 3.70, a price-book (P/B) ratio of 0.50 and an EV/Ebitda ratio of 11.46.
The analysts' average target price per share is $4.60, ranging between a low target price of $3 per share and a high target price of $6.75 per share. The recommendation rating is 2.3 out of 5. The recommendation rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).
Disclosure: I have no positions in Eldorado Gold Corp.
This article first appeared on GuruFocus.