Batero Gold (BAT.V) has announced it’s making an offer to acquire CB Gold (CBJ.V) which currently is the target of an all-share deal by Red Eagle Mining (RD.V). Batero is offering C$0.0275 in cash and 0.3056 new shares of Batero Gold in exchange for a share of CB Gold. What’s interesting here is that Batero Gold is effectively controlled by the Grau Navarro family (remember Michelle Grau Navarro wanted to acquire the Vetas project in exchange for a Net Smelter Royalty with OM L Trading, one of the Grau Navarro vehicles).
The money value of the offer is indeed higher than the offer from Red Eagle which is currently on the table, but Batero’s main project doesn’t have any chance of being developed in the current gold price environment as the low-grade copper-gold project will very likely need a substantially higher copper and gold price. On top of that, we think it will be very difficult to get a massive open pit project permitted in Colombia. Don’t get us wrong, Batero’s gold and copper is definitely there, but the main question is if any additional value could be created based on the current gold price and mining policy in Colombia.
CB shareholders will have to choose between Batero’s main project and Red Eagle’s fully permitted and fully financed Santa Rosa project which will go into production by the third quarter of next year, with an all-in sustaining cost per ounce which will very likely be less than $700/oz, due to the depreciation of the Colombian Peso which is now trading 50% (!!) lower than the value used in the feasibility study. We are prejudiced because we own shares in Red Eagle Mining and the company also is a sponsor of this website, but we’d prefer to take Red Eagle stock instead of Batero stock at this point in time.
Disclosure: The author holds a long position in Red Eagle Mining. Red Eagle Mining is a sponsor of the website. Please see our disclaimer for current positions.