http://investorintel.com/gold-silver-intel/clausi-takeover-targets-weeks-rumours/

The last rumour is a persistent one. Is IAMGOLD stalking Lake Shore?

IAMGOLD is a mid-level multi-national gold producer with (as of Sept 30, 2014) over $4B of assets on its books, against $1.3B of liabilities (in USD). Net cash from operating activities for the third quarter 2014 was $115 million during which it produced 225,000 ounces of gold. IAMGOLD recently sold its Niobec mine in Quebec for $500 million in after-tax proceeds. Management has indicated that it is looking to put its strong balance sheet to work on acquisition opportunities.

(In support of the here-comes-China rumour above: the purchaser of the Niobec mine was backed in part by CEF Holdings, a Hong Kong based investment company, and by Temasek, a Singapore-based investment company.)

At $3.30 a share, IAMGOLD is off its 52 week high of $4.80 but double its low of $1.60, with a market cap of about $1.2B.

Lake Shore Gold is in gold production and is also pursuing growth through three wholly owned, multi-million ounce gold complexes in the world-famous Timmins Gold Camp. It has two operating mines and of note a central mill. Production in the first nine months of 2014 totaled 142,500 ounces, at an average cash operating cost per ounce sold of US$588 and an average all-in sustaining cost per ounce sold of US$861. These numbers make Lake Shore an attractive target, especially with its stock down from its 12-month high of $1.40 to $1.07. Its market cap is about $470M, easily digestible by IAMGOLD.

Both IAMGOLD and Lake Share have assets proximate to Probe Mines’ Borden Lake Deposit. It was this multimillion ounce deposit behind Goldcorp’s recent acquisition of Probe last week for $526M. This is mining country.

Since Lake Shore and IAMGOLD operate in relative closeness in the same jurisdiction, an acquisition could eliminate some corporate duplications of cost, to the benefit of shareholders. This fact alone could drive a deal.

What might seal this deal could be IAMGOLD’s Cote Gold deposit near Gogama, only 130 km southwest of Timmins. This puts Cote Gold less than 100 km south of Lake Shore’s mill.

The updated mineral resource estimate from October, 2012 estimated Cote Gold’s open pit mining operations to occur at about 60,000 tonnes per day of ore production. (The entire report should be read.)

If IAMGOLD were to buy Lake Shore, it could use Lake Shore’s mill to process the Cote Gold ore. Highway 144 would provide reliable access for a steady stream of trucks rolling on down the highway. In this era of squeezing every dollar until the ink runs, filling and owning a functioning mill could accrue significant financial benefits to the IAMGOLD / Lake Shore shareholders. The lower cost of petroleum products adds to the attractiveness of trucking the ore.

This would have to be a friendly takeover. Things could get very ugly very quickly if it were anything other than a negotiated marriage.