Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
AuRico Gold (TSX:AUQ) has announced that it will buy back shares worth up to USD$300 million following the sale of mining assets in Mexico which have left the Canadian gold producer flush with cash.
The Northern Miner (paywall) reports that AuRico recently obtained a USD$750 million cash windfall from the sale of the its Ocampo mine and the adjacent exploration properties of Venus and Los Jarros in the Mexican state of Chihuahua, as well as the disposal of the company’s 50% stake in the Orion exploratory project in Nayarit state.
In addition to using the funds to pay off USD$128 million in outstanding debt AuRico also plans to launch a USD$300 million share buy-back program, with shareholders permitted to tender shares at prices in 5c increments between USD$8.30 and USD$9.30.
Analyst Rahul Paul of Canaccord Genuity has given AuRico a buy rating with a target price of USD$11 per share. Paul expects that if the maximum number of shares are tendered then gains in estimated earnings per share and cash flow per share in 2014 will be in the vicinity of 12.8% and 14.6% respectively.
AuRico closed down 3.9% on the New York Stock Exchange on Tuesday at USD$8.07.
The share offer is slated to end on January 23.
