Why Central Rand Gold just rocketed 466%

South Africa-focused Central Rand Gold is much like any other small mining company, certainly in terms of share price performance. Since losing much of its value five years ago, it's bounced along at bargain basement levels save for the odd spike every so often. So why did the shares surge almost six-fold at one stage early Tuesday to a two-year high?

Well, a non-binding memorandum of understanding (MOU) has just been signed with Hong-Kong registered Hiria Group, a subsidiary of Canadian vehicle and yacht financial leasing giant Marsa. It sets out terms of a $150 million (£95 million) cash offer for Central Rand Gold (Netherlands Antilles), which owns the assets of the Central Rand Gold Group.

For the deal to go through, both must complete due diligence, obtain all the right regulatory and exchange approvals for a possible sale, and enter into a formal share sale agreement.

There's nothing ambiguous about broker Numis Securities opinion.

Positive…Will still need to go through the usual hoops to cement the deal, the main difficulty likely to be getting SA regulatory approval…but for that price we would be biting their hand off.

Both firms want to get the deal done by the end of March 2015, and Marsa is clearly keen to expand its growing mining empire beyond iron and nickel in Indonesia, Philippines and Tanzania. Of course, this is not an exclusive agreement, and Central Rand says it will continue to talk with "other parties who have recently expressed an interest to better understand the assets of Central Rand Gold."

Central Rand really needs this, or any other deal, to happen. Stubbornly elevated water levels have forced it to cut production rates from its underground mine, which "has placed strain on the company's gold production and cash resources." That means it's had to substitute higher grade underground ore with other lower grade material.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.