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Stock analysis is a serious hobby for me. I compete at Ken Kam's Marketocracy, where they do capital management using the best member mutual fund track records with extensive tabulations of alpha, beta, R-squared, and many other fund management evaluations. I've been running 4 funds there for... More
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  • More On KMKCF 0 comments
    Sep 21, 2010 3:15 PM | about stocks: KMKCF

    If you're one to speculate on takeover bidding wars, you may find Continental Minerals of interest.  The buyout of this Canadian gold junior by China's Jinchuan Group announced Friday has some curiosities about it. What they've agreed on thus far allows for such a war as stated in a Wall Street Journal article

    Continental has granted Jinchuan the right to match competing unsolicited bids. The arrangement also provides for a C$13.4 million breakup fee in certain circumstances.

    Continental expects to hold a shareholder vote on the matter in November.

     
    Continental has been a heavy take-over possibility for some time now.  The Grandich Letter made this stock a prime gold stock for 2011 back in April and a prime take-over candidate:
     

    “The company has proven up 220 million tons of measured and indicated reserves in its high grade-porphyry copper-gold Xietongmen deposit grading 0.43% copper and 3.9 grams of gold per ton. This translates into 2 billion pounds of copper and 4.3 million ounces of gold.

     
     
    “For one, the Hunter Dickinson Group, under whose wing the company was formed and nurtured has a long history of buying up unseasoned prospects, financing them, proving them up and then selling them to a major mining company.
     
    “Second, no project makes more sense to go this route given it’s far away in China than this project.
     
    “As an example, we note that a few months ago, the same day Pepsi Bottling company rejected PepsiCo’s takeover over and concurrently announced a shareholder rights plan to protect itself in the event of a takeover.
     
    “That takeover has since happened at a better price. Continental coincidentally announced a similar plan. That’s what first made the light bulb come on here.
    “Then a new party suddenly entered the picture when a Chinese mining company, Zinjin, suddenly purchased 21 million shares and was given a seat on the board.  Then I even read that this company had stated that it intended to acquire Continental.
     
    “Also China’s shopping trip for resources all around the globe is well documented and none makes more sense than one owned by a Canadian company right within China’s borders.
     
    “Finally the CEO of Continental was redeployed to be the CEO of the latest company birthed by the Hunter Dickinson Group (Heatherdale Resources, also worth a look)… hmmm, odd timing. They say they don’t ring a bell, but I sure hear something.”
    “I think signs are abundant that Continental is a takeover target, hopefully in the $3 range:


    This was the subterfuge back on May 25.  Now a Chinese company puts forth an insult of a takeover premium (only about 13% above trading price) and the Continental Board immediately takes it.  That seems odd with gold pundits deeming any buyout under $3 not worthy.  The inclusion of the competing bid clause almost sounds like they are waving a red flag in the face of all the China gold bulls saying "Let the bidding begin - I have $2.50, do I hear $3.00 ?". 

    I wouldn't hold my breath for a bidding war to begin, but it seems a bit odd what they are doing.



    Themes: gold miners Stocks: KMKCF
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