JOHANNESBURG (miningweekly.com) – Australian gold company Chalice Gold Mines on Monday announced a merger with Canadian gold developer Coventry Resources, which would provide the combined group the financial capacity to progress the Cameron gold project, in Ontario, while continuing a global search for other assets.

ASX- and TSX-listed Chalice said the proposed merger with Coventry, which trades on the ASX and TSX-V, was the first step in its strategy of acquiring quality assets, while preserving its cash balance at about A$55-million.

Coventry’s Cameron gold deposit has measured and indicated resources of 567 000 oz at 2.45 g/t and an inferred resource of 829 000 oz at 2.11 g/t.

Chalice MD Bill Bent commented that the project’s good grades and exploration upside potential attracted its attention. “The Cameron gold project is a quality asset in a low-risk, favourable mining jurisdiction.”

A January 2013 preliminary economic assessment (PEA) determined a mine could produce 61 000 oz/y at an average cash cost of $852/oz over ten years. It estimated initial development and capital expenditure of $110-million. Chalice cautioned, however, that the PEA included inferred resources that were geologically too speculative to categorise them as mineral reserves. “There is no certainty that the PEA will be realised,” it stated.

The companies have executed a binding term sheet for the proposed merger, under which the Canadian developer’s shareholders will receive one Chalice share for every 1.78 Coventry shares.

Coventry president Steven Chadwick said that existing Coventry shareholders would hold approximately 17% of the merged entity and would continue to have exposure to the project through their shareholding in Chalice, while also benefiting from Chalice’s strong balance sheet, experienced technical team and the future growth of the company.

“Shareholders will also have exposure to any future transactions that Chalice undertakes as it seeks further quality resource assets globally,” he commented.

The merger is subject to a 14-day due diligence and will require approval by two-thirds of Coventry security holders voting at a special meeting, as well as approval from the Supreme Court of British Columbia and the various stock exchanges involved. The merger is not subject to approval by Chalice shareholders.

Chalice said in a statement that the deal had the support of both boards of directors. Coventry’s corporate office in Perth would transfer to the Chalice corporate office and Chadwick would continue to support the handover and future development of the Cameron project in his existing role as technical manager for Chalice, with in-country operations expected to remain unchanged. The Chalice board, as the surviving entity following the merger, was expected to remain unchanged.

The merger is expected to be wrapped up by mid-December.