Allied Nevada Gold Stock Shoots Up On ‘Erroneous’ Chinese Buyout Offer

Shares of Allied Nevada Gold Corp. (NYSEMKT:ANV) (TSE:ANV) shot up to a high of $4.95 yesterday on the news that China Gold Stone Mining Development, a little-known Chinese mining company had commenced a cash tender offer for all of its outstanding shares of common stock, and related stock purchase rights, for $7.50 per share in cash, with the said offer scheduled to expire on January 24, 2014.

Allied Nevada Gold puts shareholders and exchanges on alert

Allied Nevada Gold Corp. (NYSEMKT:ANV) (TSE:ANV) responded to the ‘offer,’ saying it “questions the credibility of the Proposal and advises shareholders to review announcements from China Gold Stone with caution.” Trading in shares was halted following the news.

The company pointed out that there was little information on China Gold Stone and there was “no public information available to indicate that China Gold Stone has the financial resources to complete the proposed transaction.” It further pointed out that the offer was bad in law because a Schedule 14D-1 filing had not been made, and that the expiry date of January 24, 2014 was “contrary to U.S. and Canadian securities law.”

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Obscure buyer, mysterious retraction

According to, China Gold Stone is “a private Chinese exploration and development company that claims to own three gold mines in China valued at about US$15 billion and also operates assets in the rare earths sector.”

Strangely, later yesterday, the Chinese firm retracted its press release of the morning saying it was “issued in error and without the advice of counsel.” Note that it did not deny outright the offer as a hoax or forgery, but instead claimed it was a mistake.

The impact on the stock

Chart source: Yahoo Finance

Very often the undertone of a stock can be gauged from what it does not do.

Despite the incident, note that the stock closed well above the lows of the day as well as the previous day’s close, up 7.19% to $4.62. Though the spot price of gold has been rising since end-December, yesterday it closed in the red by 0.59% at $1244.90. Save some volatility, Allied Nevada Gold Corp. (NYSEMKT:ANV) (TSE:ANV) is none the worse for wear for yesterday’s fiasco.

It appears there is more than meets the eye here.

Paulson’s holding

As the above chart shows, Allied Nevada Gold Corp. (NYSEMKT:ANV) (TSE:ANV) gained 23.86% over the last five trading days. Guru investor John Paulson holds 1.5 million shares in ANV, and probably did not mind yesterday’s turn of events.