UPDATE 2-Canada’s Argonaut to buy Pediment Gold for C$137 mln

* To pay 0.625 share of Argonaut for each Pediment share

* Values Pediment Gold at $2.56/shr, about 51 pct premium

* Deal to raise Argonaut’s leverage to gold resources

* Argonaut shares fall, Pediment shares jump
(Adds details, analyst comments, share movement)

By Aftab Ahmed

BANGALORE, Oct 19 (BestGrowthStock) – Canada’s Argonaut Gold Inc
(AR.TO: ) said it agreed to acquire junior miner Pediment Gold
Corp (PEZ.TO: ) for about C$137.1 million ($134.8 million) in an
all-stock deal, to increase its leverage to gold resources.

The deal values Pediment shares at C$2.56 each — a premium
of about 51 percent to their Monday’s close on the Toronto
Stock Exchange.

Pediment’s shares soared 42 percent to C$2.41 in early
trade to its highest levels in more than two years, though
below the price offered by Argonaut — sometimes an indication
that shareholders are satisfied with the offer.

Argonaut’s shares fell 13 percent to C$3.58.

“Sure the market is going to be disappointed it is a share
deal … but they are buying the best,” said Mackie Research
Capital analyst John McClintock.

With cash costs of about $500 per ounce, there is still a
50 percent EBIT margin and a big premium is affordable,
McClintock said.

This year a lot of junior miners have fetched hefty
premiums as the gold miners rushed out to buy smaller companies
that own reserves, instead of looking to make their own
discoveries. [ID:nSGE6820GI]

Mining-related mergers and acquisitions are happening at a
record pace in 2010, with 40 percent of all global deals
involving gold companies, according to PricewaterhouseCoopers.

Under the terms of the deal, each Pediment share will get
0.625 share of Argonaut, the companies said in a statement.

Pediment, which was formed in 2005 through the reverse
takeover of Minera Pitalla, focuses on exploring and developing
low-cost gold in Mexico. Its most advanced project is the San
Antonio mine in the state of Baja has the potential to produce
about 80,000 ounces of gold per year by 2013.

“They are paying up for everything they are buying right
now, but there’s a lot more in there that the market not seen
for sure,” McClintock said.

Argonaut forecast 2010 production of 47,000 ounces of gold
at a cost of $600 per ounce.

Upon completion of the deal, Argonaut and Pediment
shareholders will own about 63 percent and 37 percent of the
combined company respectively.

GMP Securities is the financial advisor to Argonaut, while
Pediment has engaged Canaccord Genuity, PI Financial and Axemen
Resource Capital.

Argonaut’s shares, which have gained 9 percent
year-to-date, were down 11 percent at C$3.65 in late morning
trade on the Toronto Stock Exchange. Pediment shares were
trading up 53 Canadian cents at C$2.23.

Meanwhile, gold extended losses to slide nearly 2 percent
on Tuesday, breaking through resistance at $1,350 an ounce, as
the dollar rose sharply after China raised its benchmark
interest rates by 25 basis points.
($1=1.017 Canadian Dollar)
(Reporting by Aftab Ahmed; Editing by Gopakumar Warrier)
([email protected]; within U.S. +1 646 223 8780;
outside U.S. +91 80 4135 5800; Reuters Messaging:
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UPDATE 2-Canada’s Argonaut to buy Pediment Gold for C$137 mln