Brazilian Billionaire Eike Batista Reaffirms $1 Billion Bid for Ventana Gold

Brazilian Billionaire Eike Batista is reaffirming his $1 billion bid for Ventana Gold. This values Ventana’s gold in the ground at a staggering $434 an ounce or 8.3 times Ventana’s assets. This makes Batista’s bid the most expensive all-cash bid in the past ten years.

Gold mining acquisitions are becoming more expensive as we move through this bull market. There were 91 deals last year, and average takeover premiums rose to 50%, the highest level in more than 13 years.

There is absolutely no question that senior and mid-cap producers are going to have to purchase junior explorers in order to replace depleting reserves. Although they will deny it, pressure is definitely mounting for majors to do something to replace reserves.

This is typical of secular bull markets to see this type of acquisition fever sweep a sector and generally this takeover phase lasts for many years. While some may look at Batista’s bid as expensive, he is incredibly shrewd and I am sure he is basing this acquisition on the fact that he knows gold will trade much higher in the long run.

Savvy investors who are able to position themselves in the right juniors will experience extraordinary returns as we grind through this acquisition phase prior to the final mania.

Most high quality gold companies are undervalued at this point in the bull market, but quality juniors are particularly undervalued. Just remember that even though the junior sector has plenty of properties that will become gold mines, it also is full of land mines, so buyer beware.

February 14, 2011

Source: King World News

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