Amidst the Gold Gloom M&A is Heating Up Again
Since lastSunday afternoon, while investors continue to sell most of their juniorresource stock holdings in panic fashion, there have been three high-profilemerger/acquisitions announced in the complex. What is most encouraging is thefact that two of these deals were large premium, all-cash offers for juniorswho have been developing high-margin deposits.
On June 17th,BHP spin-off South 32 entered into an agreement to buy out the remaining 83% ofArizona Mining it doesn't already own in an all cash offer to shareholders. Theoffer price of C$6.20 per share represents a 50 per cent premium to the closingprice on 15 June and implies a total equity value for Arizona Mining of US$1.6billion. Directors and officers of Arizona Mining, who own 34 per cent of thecommon shares on issue, have entered into voting support agreements and thedirectors of Arizona Mining entitled to vote, have unanimously recommended totheir shareholders that they vote in favor of the transaction. The deal willgive the Australian based miner 100% ownership of the Hermosa Project in SantaCruz County, Arizona, which contains the high-grade base metals Taylor deposit.South32 said it expects to complete the transaction in the September quarterand the deal is subject to shareholder approval.
On thefollowing Monday, after the market close, Bonterra Resources announced thatthey have entered into a binding letter ofintent dated June17, to combine Bonterra and Metanor which would create a new advanced Canadiangold exploration and development company focused on building out and futuremining development of the Urban Barry Quebec Gold Camp. “The Transaction”contemplates that Bonterra will acquire all of the issued and outstandingcommon shares of Metanor for C$0.73 in equity consideration, at an exchangeratio of 1.6039 Bonterra shares, for each Metanor share. This represents anaggregate transaction value of C$78 million on a fully diluted in-the-moneybasis. Upon completion of The Transaction, existing Bonterra and Metanorshareholders will own approximately 58% and 42% of the pro forma company. Thepurchase price represents a 40% premium to the volume weighted average price ofMetanor's common shares on the TSX Venture Exchange on June 15, 2018 and apremium of 30% to the closing price on this date. The acquisition is expectedto be completed in the third quarter of 2018.
The thirddeal this week was a recommended all cash offer by OrionMine Finance to acquirethe remaining 79.6% of Dalradian Resources Inc. it does not already own onearly Thursday morning. Under the terms of the Arrangement Agreement, eachDalradian shareholder will receive cash consideration of C$1.47 for eachDalradian Share held (the “Consideration”), valuing Dalradian’s total equity atapproximately C$537 million, on a fully diluted in-the-money basis. TheConsideration represents a 62% premium to the closing price of the DalradianShares on the Toronto Stock Exchange on June 20, 2018 and a 49% premium to thevolume weighted average price (“VWAP”) of the Dalradian Shares over the last 30trading days. Dalradian controls the world class Curraghinalt Gold Projectlocated in Northern Ireland.
I amespecially encouraged to see all-cash deals happening again in the space, as thesearrangements become an instant pay day for speculators at the offered price. Withmany quality juniors being discounted this month, mid-tiers and majors, many ofwhich need new projects to replace their reserves and resources, could continueto be in a buying mood. These companies, whose margins on gold production havenot kept pace with the rise in the gold price over the last 12 years, are lookingfor low-cost projects, which means the right combination of grade andinfrastructure.
As I typethis missive late Wednesday evening, gold has hit the $1260 target I warned mayhappen quickly in last week’s column and is attempting to bounce off thislevel in overseas trade. The selloff in bullion is becoming very oversold on adaily basis and many juniors have been experiencing capitulation selling, whichhas created waterfall declines in their respective charts. This is a sign wemay be getting close to a significant bottom in gold stocks.
I am currentlytravelling to the Yukon for the annual Yukon Mining Alliance (YMA) Site Visit,so this column is appearing a day early. I will have a report from the tripwhen I return next week.
Recently,there have been many quality junior resource stocks being sold by impatientinvestors, creating opportunities for speculators with cash and patience. Ittakes a lot of time and effort to find these opportunities and it is best to beon the hunt for them when the gold space is out of favor. When this sectorturns, the stock prices in the quality issues move up quickly, so if yourequire assistance in choosing the best quality juniors to invest, please stopby my website and check out the subscription service at http://juniorminerjunky.com/
By David ErfleContributing tokitco.com
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