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1/30/17

Mailbag on Yamana (AUY) (YRI.to) and Brio Gold (BRIO.to)

Last week your humble scribe noticed that the hilarious whores at Canaccord had opened up coverage on Brio Gold (BRIO.to), calling it the next wonder thing and with seasoned management and optionality on gold and every other cliché they could roll out about this Marrone/Clausen anal violation of shareholders. So it was a relief to get some smarter words on AUY and Brio from A. Reader this weekend, who has a fine memory for the way Marrone has ripped off the market on previous occasions and was kind enough to write in with this:


Dearest Otto,

What does the Aura Gold Transaction by Yamana in 2010, have in common with the Brio Gold conundrum today? The Aura one was an asset sale which cost shareholders of YRI-AUY hundreds of millions, while the Brio one is..., well. The Brio one is...good?
"Aura has agreed to purchase 3 open-pit heap leach gold mines in Brazil and Honduras from Yamana Gold (AUY-NYSE, $9.50).  The acquisition cost has an assumed total value of $257.1 million.  This purchase price comprises $90 million in cash (two instalments), 100 million in common shares (pre-rollback), a $70 million promissory note and up to $40 million of contingent royalties, based on production. The net present value of this transaction is slightly less than $250 million.

If the change in Yamana's market cap is to be considered a proxy for the transaction, Aura appears to have picked up assets on the cheap.  One view regarding the low sale price may have to do with the fact that several key Yamana Gold executives work for Aura Mining.

The deal was considered to be at arm's length and passes a cursory test. In the real world, however, some arms are much shorter than others."

In addition, it gets even funnier when you take in the multiple conflicts of interest by Mr. Marrone and his jolly crew.