PERTH (miningweekly.com) – Precious metals developer Intrepid Mines on Thursday announced a merger with fellow-listed Blackthorn Resources to create a copper company with assets in Zambia.

Under the terms of the agreement, Blackthorn shareholders would receive 1.078 Intrepid shares for each Blackthorn share held, giving Blackthorn and Intrepid a 48% and 52% respective interest in the merged entity.

The exchange ratio implied a premium of 4% to Blackthorn’s last closing price and a premium of 50% on the three-month volume weighted average price of company shares.

Intrepid chairperson Ian McMaster told shareholders on Thursday that the transaction followed an intensive review process by Intrepid to identify an undervalued asset, into which the company’s cash could be deployed to create more value for shareholders than simply returning all of the cash.

The ASX-listed miner had been left cash-flush after receiving an $80-million cash payment after settling an ownership and control dispute around the Tujuh Bukit copper/gold project, in Indonesia.

“Following an extended process of review and due diligence on numerous assets, our team has determined that the Kitumba copper project offers a lot more value than is currently recognised by the market, and we are confident that our cash resources can both add value and unlock this discount over time,” McMaster said.

Blackthorn has been hunting for a project partner for the Kitumba project since May this year.

An optimised feasibility study for the project had more than tripled Kitumba’s expected value, estimating that the project would have an internal rate of return of 21% and a net present value of $461-million.

The merged entity is expected to have a cash balance of about A$80-million, which will be sufficient to complete the definitive feasibility study on the Kitumba project, and to explore near-mine targets and the wider Mumbwa project licence area.

Blackthorn chairperson Mike Oppenheimer told the company’s shareholders that the merger represented a compelling opportunity for the company to move its business forward aggressively.

“The valuation of the Mumbwa asset implicit in the merger transaction represents an attractive return on funds risked by Blackthorn shareholders on these assets to date. The cash resource of the merged group provide a stable platform from which to pursue value accretive growth, principally from our existing assets in Zambia, but will also allow us to take advantage of business development opportunities.”

He pointed out that Blackthorn shareholders would also be exposed to greater share trading liquidity and enhanced price stability, given the strong cash position of the merged group.

“In an extremely difficult capital market environment for small-cap mining stocks, this transaction will enable Blackthorn to access a significant tranche of capital at a premium to its share price.”

The merger would be conditional upon Intrepid undertaking an equal-access share buy-back of some A$110-million, prior to the merger implementation date. The buy-back price would be fixed at 30c a share, and would be offered to all Intrepid shareholders.

In the event of over-subscription, shareholders would be scaled back proportionally.

McMaster said on Thursday that the unique transaction structure provided a flexible mechanism for the company’s shareholders to exit the majority of their investment at a premium to the current share price, as well as get exposure to an exciting copper development asset.

“Shareholders can ultimately decide on their type and level of exposure, within limits, according to their current investment criteria.”