Photo by: M&A
TORONTO (miningweekly.com) – TSX-V-listed juniors Goldsource Mines and Eagle Mountain Gold Corp on Tuesday announced that they had struck an accord to merge.
Under the terms of the business combination, the companies would merge in an all-scrip deal that would see each company hold half of the newly combined entity at closing. Eagle Mountain would merge with a wholly owned subsidiary of Goldsource.
The proposed transaction would, in both companies’ opinions, provide the combined firm with several key advantages to rapidly advance the Eagle Mountain gold project, in Guyana, with the potential for a “fast-tracked” phased production start-up with low capital and operating costs.
Based on the number of common shares of Goldsource and Eagle Mountain currently outstanding, the exchange ratio would be 0.536 Goldsource shares for each Eagle Mountain share tendered.
Further, both Goldsource and Eagle Mountain were required to launch a private placement financing to raise $250 000 before December 15.
Goldsource must also complete an equity financing, effective upon closing, for a minimum of $1.5-million, leaving it with about $2-million in cash and equivalents once the deal had closed.
The new combined company would operate under the banner of Goldsource Mines.
The new board would be made up of three Goldsource directors, one Eagle Mountain director and one independent nominee of Eagle Mountain.
According to the agreement, both companies would have to pay a $250 000 break fee if either terminated the arrangement to accept a superior proposal.
The companies said they now needed to execute a definitive agreement, and get regulatory and shareholder approvals. The deal was expected to close before January 31.
“The proposed transaction with Eagle is the opportunity that Goldsource has been seeking for some time. It matches our management skill sets with a gold deposit that can be brought into initial production in a short period of time with minimal capital and low production costs per ounce,” Goldsource president Scott Drever said.
“This proposed ‘merger of equals’ is the most important milestone in our corporate history to date. In such difficult economic times for the mining industry, this transaction is proof of the inherent value of the Eagle Mountain gold deposit.
“With such an asset base and a recommended board and management team with such financial and mining expertise, we are confident that we will serve the new company very well in its future development activities,” Eagle Mountain president and CEO Ioannis Tsitos added.
Eagle Mountain is working to advance its Eagle Mountain gold project, in South America.
This project has an existing National Instrument 43-101-compliant resource of 188 000 oz of gold in the indicated category, and 792 000 oz in the inferred category, located on 250 ha of the 5 050 ha prospecting licence.
The property was believed to hold “excellent” exploration upside and was near to initial infrastructure for development.
An estimated 40% of the gold resource was considered mineralised saprolite, which would be the initial focus of development, with the remaining 60% considered to be fresh rock. The saprolite and fresh rock both remained open laterally and to depth, showing strong mineralisation along defined edges.
Outcropping mineralised saprolite was potentially suitable for initial low-cost, low-strip ratio openpit mining and gravity processing.
Goldsource is engaged in the exploration and development of its new coal field in Saskatchewan. It had aggressively drilled only a portion of this new thermal coal field and had discovered 17 coal deposits of various sizes with coal zone thicknesses up to 126 m within the permit area of the Border coal project.
This project has a compliant indicated resource of 117-million tonnes of coal and an inferred resource of 33-million tonnes of coal.
On Tuesday afternoon, shares of Goldsource were flat at C$0.13 apiece, and Eagle Mountain stock rose 6.7% to C$0.08 apiece.