TORONTO (miningweekly.com) – The mergers and acquisitions (M&A) momentum Canada’s mining industry had built so far during 2014 continued to gather pace on Monday, after Vancouver-based New Gold announced a C$16.6-million all-scrip offer for exploration firm Bayfield Ventures that would enhance New Gold’s land holdings in the Rainy River mining camp of north-western Ontario.
Under the terms of the offer, New Gold would pay 0.0477 of a share for each Bayfield share tendered, representing a 50% premium to Bayfield's closing price on the TSX-V-listed stock on Friday and a 47% premium based on each company's 20-day volume weighted average trading price.
New Gold said it expected to issue about 3.8-milion shares in payment, representing about 0.8% of its outstanding shares.
Following a slow period for transactions, in which last year's deal volumes failed to breach the $90-billion mark, international firm Grant Thornton last week said its research and analysis suggested that a fertile environment would lead to a doubling in the value of M&A in the mining sector compared with 2013.
The firm released a report titled ‘Gathering Momentum’, which cited several factors making 2014 and next year amenable to M&A deals. Among these were lower commodity prices; pushing companies to band together to generate, scale and lower production costs to remain competitive.
Bayfield's assets included a 100% interest in three mineral properties, totaling 10 km2, located next to New Gold's Rainy River project. One of the three properties, Burns Block, between the eastern edge of the planned openpit and underground Intrepid zone at Rainy River, contained National Instrument 43-101-compliant gold and silver mineral resources. New Gold currently owned the surface rights to Burns Block and one of the other two properties where Bayfield held mineral interest.
New Gold had last year acquired Rainy River Resources for C$310-million.
Meanwhile, silver miners Scorpio Mining and US Silver & Gold also announced their merger, which was expected to create a C$65-million combined entity with a pooled portfolio of silver assets in Mexico and the US.
The combined company would continue under the name of Scorpio Mining and was positioned to have a strong operating platform with two established producing mines, a third mine in development, an advanced-stage exploration project and pro forma net working capital of about C$40-million, including about C$21-million in cash.
US Silver & Gold shareholders would receive 1.68 Scorpio common shares for each share tendered.
The new entity was expected to be able to produce between 4.5-million and 5-million silver equivalent ounces a year at declining costs, owing to certain operating synergies between the two companies. The deal would support sustainable operations at current low metals prices, with further potential profitable expansion at higher prices from earlier-stage internal projects.