B.C.-focused juniors Serengeti Resources (TSXV: SIR) and Sun Metals (TSXV: SUNM) plan to combine to create a "premier Canadian multi-asset copper-gold developer."
The merger will bring together the companies' adjacent projects in north-central British Columbia - Serengeti's 67%-owned Kwanika project and Sun Metals' Stardust project. It will also bring together Sun Metals' Lorraine project, 40 km north of Stardust, with the neighbouring Top Cat project, which is under option to Serengeti.
"Against the backdrop of a resurgent copper market, this transaction consolidates the ownership of a robust copper-gold portfolio, with near-term development synergy at Kwanika-Stardust and several high priority exploration targets," David Moore, Serengeti's interim president and CEO, stated in a news release.
"This unique corporate combination creates an exciting, diversified copper-gold developer with a large pipeline of projects, in one of Canada's most prolific porphyry mining camps," added Mark O'Dea, a director of Sun Metals who will also be executive chairman of the combined company. "We are bringing together exploration, development and operational synergies at multiple projects along with ongoing resource expansion opportunities and new discovery potential."
Before the all-share transaction takes place, Serengeti will complete a two-for-one share consolidation.
Under the deal, Serengeti will acquire all shares of Sun Metal, with each share of Sun Metal exchanged for 0.43 of a share in Serengeti (on a pre-consolidation basis).
As part of the transaction, Sun Metals is concurrently raising $9 million (up from $8 million originally) in a bought-deal private placement financing consisting of 72 million subscription receipts priced at 12.5 ? apiece. Each subscription receipt, for a share and half a warrant, will be exchangeable for securities of Serengeti (on a post-consolidation basis) when the transaction closes. The underwriters may offer an additional 10.8 million subscription receipts for up to $1.35 million.
A shareholder vote on the merger is expected to take place in February.
Once the deal closes, Sun Metals will be entitled to appoint three directors to the combined company's board, including O'Dea. Moore, Serengeti's interim CEO, will stay in the role until a permanent CEO is appointed.
The 259.3-sq.-km Kwanika project, located in the northern Quesnel Trough, holds measured and indicated resources (open pit and underground) totalling 1.3 billion lb. copper and 1.8 million oz. gold and 6.3 million oz. silver in 223.6 million tonnes grading 0.27% copper, 0.25 gram gold per tonne and 0.87 gram silver per tonne. It is 33% held by Posco International Corp.
Sun Metals' 96-sq.-km Stardust project contains indicated resources in the Canyon Creek zone of 985,000 tonnes grading 1.34% copper, 1.59 grams gold and 36.8 grams silver. Inferred resources add 2 million tonnes grading 1.24% copper, 1.72 grams gold and 30.5 grams silver.
The combined company will also hold Seregeti's 207.5-sq.-km East Niv grassroots exploration project, plus several other exploration properties in B.C.
This article first appeared in the Canadian Mining Journal, part of Glacier Resource Innovation Group.