Temex Resources Gains 110 Percent on Rival Takeover Offer

Temex Resources (TSXV:TME) made headlines last month for its involvement in a five-way gold company merger with Oban Mining (TSX:OBM), Eagle Hill Exploration (TSXV:EAG), Ryan Gold (TSXV:RYG) and Corona Gold (CSE:CRG). Now, the junior gold stock is in the news again following a rival takeover bid from Canadian producer Lake Shore Gold (TSX:LSG).
Lake Shore submitted a proposal this week, and under its terms Temex shareholders would receive 0.105 of a share of Lake Shore for each share of Temex held for a value of about $0.13. Temex has already entered into an agreement with Oban. However, the terms of that agreement allow Temex to consider a “superior proposal,” and the company’s lawyers have assured Temex that Lake Shore’s offer fits the bill.
Oban has 10 business days to match or beat the offer, and if it doesn’t, Temex may enter into an agreement with Lake Shore instead. It would have to pay a termination fee of $691,856 to Oban.
The share price of the junior gold stock jumped roughly 110 percent to close at $0.115 following the news. Approximately 7.29 million shares of the company traded hands, over 10 times the average trading volume for the company.
What’s attracting Lake Shore to Temex is the company’s Whitney property, which sits roughly 2 kilometers away from Lake Shore’s Bell Creek mill. Whitney is 60-percent owned by Temex and 40-percent owned by Goldcorp (TSX:G,NYSE:GG).
Kerry Smith of Haywood Securities states in a note sent to clients on Wednesday that the property is within trucking distance of the mill. Furthermore, he suggests that Whitney “also has good exploration upside, which Temex was not able to fully evaluate, given its inability to fund exploration in the current market.”
Certainly, that thesis falls in line with statements made by Lake Shore President and CEO Tony Makuch on Thursday. “Our proposed acquisition of Temex provides an attractive opportunity to increase our asset base in the Timmins Camp by combining Whitney’s significant high-grade gold resource with our very efficient and effective processing capabilities at the Bell Creek Mill,” Makuch said in a press release. “We have considerable capacity in our mill, and adding a resource of Whitney’s quality and quantity, particularly given its close proximity to Bell Creek, makes a lot of sense as we work to grow our company.”
Smith currently has a “buy” rating for Lake Shore with a target price of $1.70. The company’s share price closed at $1.21 on Thursday, down 3.2 percent on fairly average trading volumes.

Hope for a junior gold stock?

Certainly, having both bids puts Temex in an enviable position relative to other junior gold companies at the moment, especially since the gold price has fallen again this week. The spot gold price dropped 0.37 percent to about $1,145 per ounce on Thursday.
What’s more, Lake Shore’s bid appears to have inspired some investor confidence in at least one junior gold stock. Not all investors were pleased with the Oban deal, and it’s certainly interesting to see the junior get another competing offer.
However, it’s still a tough market out there, and Temex is definitely the exception to the rule when it comes to upticks in share price. Those following the junior gold space will no doubt be watching closely for Oban’s next move.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.