Photo by: Mercator Minerals
TORONTO (miningweekly.com) – Vancouver-based base metals miner Mercator Minerals is in danger of failing as a going concern after this week reporting that diversified Russian mineral resources company Intergeo did not expect to further extend a business combination deal deadline, sending its shares free-falling.
Mercator’s TSX-listed stock tumbled 25% to close at C$0.06 a share on Tuesday.
The struggling firm said, owing to Intergeo’s unwillingness to extend the deal deadline beyond August 1, it intended to investigate alternatives over the coming weeks. Intergeo had advised Mercator that it was prepared to waive the nonsolicitation provisions under the December arrangement agreement.
Closing the deal was delayed after the Russian Federal Anti-Monopoly Services (FAS) requested more information. The deal would terminate unless the FAS completed its review before the cutoff date.
“We are extremely disappointed in Intergeo’s decision, especially in light of the strong operations and operational cash flows being generated by the Mineral Park mine. We are considering our alternatives in this regard and will continue to provide updates as circumstances develop,” Mercator president and CEO Bruce McLeod said in a statement on Tuesday.
“Given that the company was already in payment default as early as September 30, 2013, we believe Mercator’s ability to remain a going concern could be in serious question,” said Laurentian Bank Securities metals and mining analyst Christopher Chang in a note to clients.
Intergeo in December announced that it had agreed to acquire Mercator, to create a new copper-focused base metals company with a strong growth profile and strong financial backing.
Mercator would receive up to $14-million from Intergeo’s controlling shareholder, Daselina, a part of ONEXIM Group, which is controlled by Russian billionaire Mikhail Prokhorov, through a bridge loan to stabilise its operations.
Mercator had in September announced that it had started a strategic review that would consider an outright sale of the company, a business combination, or a sale of all or a portion of its assets.
The combined assets include an attractive portfolio of producing and short- and medium-term development properties. These included Intergeo’s Ak-Sug copper porphyry deposit, in Russia, and Mercator Minerals’ Mineral Park copper/molybdenum/silver mine, in the US, and the El Pilar copper project, in Mexico.
Mercator’s Mineral Park mine has proven and probable reserves of 948-million pounds of copper and 1.6-billion pounds of copper in the measured and indicated categories. In 2012, it produced copper at $2.51/lb. The mine has a remaining life of about 20 years.
The El Pilar project currently has a compliant proven and probable reserve of 1.73-billion pounds of copper and 2.23-billion pounds in the measured and indicated categories. It is expected to produce copper at $1.34/lb over its 13-year life.