Capital Gold still reject the offer Timmins Gold

Despite the persistent overtures of Timmins Gold Corp., Capital Gold (TSX, NYSE Amex: CGC) again reiterated its support for a merger with Gammon Gold (NYSE Amex: GRS, TSX: GAM), which beat Timmins "final" US$275 million offer with a US$288 million bid.

On Oct. 1, 2010, Gammon and Capital Gold entered into a definite merger agreement in which each common share of Capital Gold will be exchange for 0.5209 common shares of Gammon Gold and a cash payment of US$0.79 per share.

Capital Gold owns and operates the El Chante gold mine in Sonora, Mexico, as well as the Orion development project in Nayarit Mexico.

At the time Rene Marion, Gammon Gold CEO, said, "We anticipate that this transaction will transfer Gammon Gold into a well-diversified Mexican gold producer..."

On Dec. 3, 2010, Timmins Gold (TSX-V: TMM) reiterated its proposal that each share of Capital Gold common stock would be exchange for 2.27 common shares of Timmins Gold. The junior explorer asserted its proposal has a value of US$4.48 per Capital Gold share, which exceeds the value of the Gammon offer by US$0.20 per Capital Gold share.

Timmins CEO Bruce Braganolo said the Timmins/Capital Gold combination would create "a solid mid-tier gold producer, with production of approximately 180,000 ounces of gold and estimated reserves of approximately 2.2 million ounces of gold, which we believe will generate a unique re-rating opportunity that will benefit Capital Gold and Timmins Gold shareholders alike."

Timmins also noted that Capital's El Chanate Mine and Timmins' San Francisco Mine are located within 65 kilometers of one another in the Sonora region of Mexico, "making the combination of these assets ideal from an operational and strategic perspective."

However, the Capital board responded Sunday that they still considered the Gammon offer a superior proposal and continues to unanimously recommend to Capital's shareholders that they vote in favor of the transaction.

In fiscal 2011, Capital expects to produce 65,000 to 70,000 ounces of gold.

Gammon expects its Ocampo mine in Sierra Madre Occidential, Chihuahua, Mexico, to produce between 100,000 and 110,000 ounces of gold and between 4.40 million and 4.95 million ounces of silver, or 180,000 to 200,000 gold equivalent ounces. The company recently idled its El Cubo mine, located approximately 10 kilometers east of the city of Guanajuato in Mexico.