Yamana Gold Merger Could Face Rival Bidders

Includes: AUY, MDG, NTO
by: FP Trading Desk

A successful three-way merger of Yamana Gold Inc. (NYSE:AUY), Meridian Gold Inc. (MDG) and Northern Orion Resources (NTO) should establish Yamana as a leading South American miner. But given that the plan includes a friendly merger between Yamana and Northern Orion, and a hostile offer for Meridian, the chances of a competing offer for the latter may be greater.

In fact, Meridian’s asset base appears to fit well with precious metal producers like Hochschild Mining Plc, Buenaventura Mining (NYSE:BVN) and Hecla Mining (NYSE:HL), RBC Dominion Securities analyst Michael Curran said in a note to clients.

He thinks there is a “moderate” chance of a competing bid emerging, but added that Xstrata Plc (OTC:XSRAF) may be interested in Northern Orion’s assets.

Mr. Curran also noted that the deal would alleviate some of the concerns related to Meridian’s lack of growth. However, a merger would also alter its gold and silver asset base by including base metal exposure through copper and molybdenum.