TORONTO (miningweekly.com) – The battle for New York-based Capital Gold intensified on Tuesday, with rival bidders Gammon Gold and Timmins Gold both announcing increases to their offers for the company.

Gammon increased the cash component in its friendly offer by $0,30 a share, bringing the total offer to 0,5209 of a Gammon share and $1,09 in cash for each Capital Gold share.

Earlier in the day, Timmins announced it was adding a cash component of $0,25 a share to the 2,27 of its own shares it is already offering.

The board of Capital Gold has backed the Gammon offer, and proxy advisory firms ISS and Glass Lewis also recommended shareholders approve the Gammon transaction, although that was before Timmins announced its amended bid.

Timmins has tried repeatedly to get the Capital board to negotiate a friendly deal, and eventually said last month it would take the offer straight to Capital shareholders.

Although the proxy advisory firms have backed Gammon's bid, the Timmins offer for Capital received a boost with the news on Monday that Sprott Asset Management, which controls about 12,5% of Capital Gold, said it would vote against the Gammon deal and planned to back the proposed tie-up with Timmins.

Timmins Gold CEO Bruce Bragagnolo on Tuesday urged the Capital Gold board to determine that the company's latest offer was superior and withdraw its backing for the Gammon transaction.

“We know there is widespread support for the merger of Timmins Gold and Capital Gold, including from some of Capital Gold's largest institutional shareholders,” he said in a statement.

The company said at the same time it had arranged a C$15-million credit line and a C$5-million working capital facility from Sprott Resource Lending Partnership.

All three firms have mines in Mexico - Capital owns the El Chanate mine and Timmins poured the first gold at its San Francisco mine in December 2009.

Gammon is currently operating the Ocampo mine, and said last week it expects to restart operations at its halted El Cubo mine in April, after reaching a new agreement with the local union.

Gammon CEO Rene Marion said on Tuesday the company's latest offer was “firm and final”.

“Timmins’ recent proposed offer does nothing in our view to increase the attractiveness of their company or to reduce the considerable risk and timing delay of their proposed hostile transaction,” Marion said.

Merger and acquisition activity in the mining sector reached a record last year, as companies compete for resources and projects amid record prices for many commodities.

There were a record $27-billion of deals announced in just the first month and a half of 2011, PWC said in a report last week.

The group expects the high intensity of transactions will continue and is forecasting another record year for corporate activity in the sector in 2011.