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Agnico-Eagle Closes Urastar Buy

Zacks Equity Research

Agnico-Eagle ( AEM) has wrapped up its takeover of mining company Urastar Gold Corp. The Canadian miner acquired all the outstanding shares of Urastar pursuant to a statutory plan of arrangement under the Business Corporations Act (British Columbia). Following closure of the deal, Urastar is now a fully-owned subsidiary of Agnico Eagle.


Agnico-Eagle penned a definitive agreement with Urastar in March 2013. Urastar is engaged in the exploration of former gold producing regions in Sonora, Mexico, which is among the richest gold producing belts globally. Under the deal terms, each Urastar shareholder will receive C$0.25 in cash in exchange for each Urastar share they held. 


Holders of in-the-money share purchase warrants who have not otherwise exercised their warrants will receive C$0.15 in cash for each warrant they held. Out-of-the-money warrants and options will be cancelled as part of the deal. The value of the deal (on a basic shares outstanding basis and assuming exercise of in-the-money warrants) is roughly C$10.7 million (around $10.5 million).


The deal was cleared at a special meeting on May 14 by 99.76% of Urastar shareholders, voting together as a single class. Final approval for the acquisition was secured from the Supreme Court of British Columbia on May 15.


Agnico-Eagle, which is among the prominent Canadian gold miners along with Barrick Gold ( ABX), Goldcorp ( GG) and Kinross Gold ( KGC), announced tepid first-quarter 2013 results last month. Its profit, as reported, slid roughly 70% year over year to $23.9 million or 14 cents a share. Revenues slipped roughly 11% year over year to $423.2 million in the reported quarter. 


The results were hurt by a decline in payable gold production which dropped 7% year over year to 236,975 ounces, mainly due to the suspension of the Creston Mascota heap leach facility. While Agnico-Eagle achieved record quarterly throughput at its Meadowbank mine in northern Canada, its Kittila mine in northern Finland recorded an 8% decline in payable gold production in the quarter.


Agnico-Eagle backed its production guidance for 2013 and sees payable gold production in the range of 970,000 ounces to 1,010,000 ounces with second half of the year contributing significantly to the overall production. 


Resumption of production at Kittila, higher production at Creston Mascota, the ongoing ramp up of production at LaRonde mine in Quebec, higher expected grades at Meadowbank, and the start of production at the Goldex mine in Quebec are expected to be the contributing factors.


Agnico-Eagle currently retains a short-term (1 to 3 months) Zacks Rank #5 (Strong Sell).

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