VANCOUVER (miningweekly.com) – The acquisition by gold junior Anaconda Mining of Orex Exploration represents the “last piece of the puzzle” that Anaconda has been missing, adding a third compliant resource and geographically diversifying the portfolio.
The all-scrip deal, valued at about C$13-million, is part of Anaconda’s two-pronged approach to create investor value by growing resources organically and through mergers and acquisitions, president and CEO Dustin Angelo tells Mining Weekly Online.
Combining the two companies will create a single enterprise with expanded mineral resources, most of which are high grade. The main driver for the deal is that Anaconda will gain access to Orex’s Goldboro project, in Nova Scotia, which has 457 400 oz of gold in the measured and indicated categories and 372 900 oz in the inferred category.
The strategy is to leverage the port, mill and tailings infrastructure at Point Rousse, in Newfoundland and Labrador, and bring the Goldboro project to development in the near term.
VP for exploration Paul McNeill notes that, as soon as the deal has closed, the immediate next steps comprise optimising the resource model to the development plan; starting the environmental assessment process this spring; determining drilling needs for prefeasibility and start drilling; characterisation of ore/waste (geotech, geochemistry, milling characteristics, metallurgical work, etcetera); infrastructure assessment (Goldboro dock, barges); costing and mine planning; and government and community consultations.
Anaconda is offering Orex shareholders 0.85 of an Anaconda share for each Orex share held. Following completion of the arrangement, Orex will be a wholly owned subsidiary of Anaconda. Existing Anaconda and Orex shareholders will own about 54.9% and 45.1% of the combined company, respectively, on a nondiluted basis.
Angelo says Anaconda has been on the lookout for potential deals over the past two years, noting that despite there being about ten contenders of interest, it is hard to find people willing to part with their prospective projects on reasonable terms.
Anaconda’s portfolio comprises the Point Rousse project, where it has established gold resources of 107 230 oz in the indicated category and 37 030 oz inferred; and the Viking project, also in Newfoundland and Labrador, which holds 83 000 oz gold in the indicated category and 31 000 oz inferred. The company is exploring three gold trends on the Ming’s Bight Peninsula of Newfoundland, mining the Pine Cove openpit and integrating its new location, the Viking project, into its exploration and mining plans.
Anaconda is currently mining the Pine Cove pit, which has sustained operations for seven years. Stog’er Tight is part of the mine plan over the next few years. Through exploration around the Point Rousse project and the Viking project, there is potential to extend the gold production out of Newfoundland for several more years.
Angelo said that at this point, Anaconda has mine plans for the next two-and-a-half years and then production beyond that is contingent on successful exploration and development. Management believes it can extend the production from the Newfoundland operations, but it is not in a technical report yet. The Goldboro deposit will expand Anaconda’s production profile, but it is too early to say for sure just by how much, Angelo advises. He notes that there is plenty of exploration potential at the project, which the company will investigate in the coming months and years.
Anaconda believes that with its flagship Point Rousse project, which has been producing gold for nearly seven years, and having incrementally improved its operating infrastructure during that time, which includes building a 1 300 t/d mill, tailings capacity for about 15 years (based on the current mill throughput rate) and a port facility, it will be able to accelerate the development of the Goldboro project at a lower capital cost than if it were a standalone project.
"We are acquiring mineral resources at an attractive price. Combined with our record of success, developing and operating gold mining projects, the Goldboro project provides the mineral resources to extend the longevity of Anaconda and potentially increase annual production to much higher levels,” he said.
Anaconda has built a scalable platform with its Point Rousse mine and mill for growth with an “ever-improving” mill facility, plenty of tailings capacity and a new port facility. Anaconda produced just over 16 000 oz of gold in 2016, with output set to increase once Goldboro comes on line in an optimistic time line of about two years.
Both Anaconda and Orex's boards have unanimously approved the deal. Pending shareholder voting and regulatory approvals, the arrangement is expected to close in May.
While the company is focused on closing the Orex transaction and integrating Goldboro into the portfolio, Angelo said the deal is expected to position Anaconda to become a regional player, able to consolidate individual projects scattered about Maritime Canada, and just maybe grooming the company to be bought out someday by a major.