It was a big day for Alamos Gold (TSE:AGI), as the Canadian gold stock picked up a new mine. Specifically, the Magino mine in Canada, which was certainly a gold medal win as far as investors were concerned. Alamos Gold shares shot up over 6% in Wednesday afternoon’s trading as a result.
Alamos picked up the Magino mine in a stock deal that would see Argonaut Gold (TSE:AR) shareholders receive 0.0185 shares of Alamos stock and one share in a new company for every share of Argonaut they hold. With this ratio in place, that means Alamos shelled out around $440 million to get its hands on the Magino mine.
Further, to make the deal happen, Alamos agreed to offer $50 million in private placement equity financing for Argonaut, which would give Alamos a 14% equity stake in a newly created company. Once the new company is established, Alamos will increase its ownership stake to 19.9% and pay accordingly.
A Spin-Off Follows
But that’s not all that’s going on; Alamos also picked up several other elements of Argonaut Gold in the process but won’t be keeping these elements on hand. The Florida Canyon mine in the United States and three Mexican projects—the Cerro del Gallo, the La Colorada, and the El Castillo Complex—will all be spun off under the terms of the new agreement.
The end result will be that Alamos Gold will own one of the largest gold mines in Canada, and one of the lowest-cost to operate. That’s due mostly to the presence of the Island Gold mine, which is very close to the Magino mine, and can be effectively combined.
Is Alamos Gold a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AGI stock based on seven Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 24.69% rally in its share price over the past year, the average AGI price target of C$20.88 per share implies 6.92% upside potential.
