Alamos Gold Bids for Aurizon Mines

Aurizon shares finished up 32% today after Alamos Gold offered $792 Million for the company.

Bloomberg Reports:

Aurizon is considering the proposal, Jennifer North, a spokeswoman for the Vancouver-based company, said during a phone interview. Aurizon rose 34 percent to C$4.57 at 12:55 p.m. in Toronto after earlier rising as much as 36 percent, the most intraday since May 23, 2006. Alamos fell 9.9 percent to C$15.25, the most intraday since June 28.

Aurizon has eight projects in Abitibi including the operating Casa Berardi mine, according to the company’s website. The bid is “opportunistic” given the decline in Aurizon’s shares, said Steven Green, an analyst at TD Securities Inc. in Toronto. The stock dropped 37 percent in the 12 months through Jan. 11 while the S&P/TSX Materials Index declined 13 percent.

“At surface it looks to be off-strategy,” Green, who has a buy recommendation on Alamos, said in a note. “Alamos is a low-cost, open-pit heap leach producer in Mexico and Turkey, while Aurizon is a high-cost underground producer in Quebec.”

Alamos Gold has been a strong performing producer while Aurizon is a company that has strong cash flow but is lacking immediate production growth. The Abitibi is becoming a hot area and Alamos may like the value in Aurizon combined with the potential of the company’s holdings in the area.