Gold property acquisitions in 2009: an article on gold sector mergers and acquisitions and factors that influence prices paid.

What are the factors that lead to a high $/oz. acquisition price for a jr. gold co.? I found one article and chart on 2009 gold prop. acquisitions and their characteristics.

1. The most important factor appears to be how well drilled and proven the prop. is. As the proven (drilled) part of the Au-Ag in the prop. goes down, so does the $ amount paid by buyers.

2. The higher the percentage of reserves proven to resources proven, the higher the $ amount paid by the buyer. Even more widely spaced drilling that proves up resources makes the overall prop. base more valuable to the buyer, but drilled proven reserves are where the big money is made.

3. In the yr. 2009, the average $ pd./oz. Au in prop. acquisitions was $ 101./oz for reserves, and $34./oz. for resources.

4. Many of the acquisitions have existing infrastructure (previous mines).

5. The 2009 acquisitions have a reserve average/ prop. of 1.1 mil oz. Au, and a resource average of 2.9 mil oz. Au.

6. Average annual prod. of Au for purchased prop's. is 121,000 oz./y (that is 331 oz. Au equivalent/day) at a cop of $448./oz. Au.

7. Generally, the lower the cost of production of the purchased prop., the more the buyer will value the prop. in $/oz. paid.

8 There should be no problems in the production of Au that limit cash flow from the prop., no debt probs., no hedging, no permitting probs., prop must show adequate cash on hand from running the prop., and the prop. should be in a secure country.


The article is well done and worth the read.
Go to: The Global Speculator of 24 July 2009.

http://www.globalspeculator.com.au/documents/GoldSectorMergerandAcquisitionActivity.pdf

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I think there are conclusions to be drawn about SFMI and it's takeover offers coming in 2011-12, based on these real acquisitions.

1. If we take any offers seriously before large scale drilling proves the reserves and resources, our $/oz. sale price will be much smaller than if we wait for the drilling to give some tonnage and oz./ton figures.

2. Drilling which shows very high AU-Ag oz./t areas will excite retail buyers and up our price.

3. SFMI is positive on the following: we have existing mine infrastructure in the Sinker Tunnel, a small mill, low cost prod of Au of $250./oz. (?), no debt probs., no hedging, no permitting probs., historical documentation by the USGS and Idaho Bureau of Mines of the large size and high grams/ton content on WEM, and prop. is in a secure country