St Barbara Ltd (SBM) recently announced the acquisition of Atlantic Gold Corporation (TSX-V: AGB) for a total cost of A$768m. AGB owns and operates the Moose River Consolidated (MRC) gold operation in Nova Scotia, Canada. MRC has Resources of 2.4Moz and Reserves of 1.9Moz. The acquisition will be funded by a $490m non-renounceable entitlements issue, $291m cash. Combined group production will initially see rates lift by circa ~90kozpa and longer term by up to ~250kozpa. Argonaut believes this to be a premium priced deal with reserves based on high gold pricing, complex ownership and significant capital required to bring the project up to its forecast +200kozpa run rates. SBM is a solid mine operator, but spreading operations across three jurisdictions is not without its risks. We revise our forecasts to include MRC and the equity raising. As a result, our target price falls to $3.25ps (from $4.03ps). We maintain our BUY recommendation after recent share price weakness.

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