TORONTO (miningweekly.com) - Canadian base-metal mine developers Trevali Resources and Kria Resources will merge their businesses, creating a platform for "a new intermediate zinc producer", the firms said on Thursday.
Trevali has projects in Peru, while Kria is developing assets in Canada's New Brunswick province.
Under a letter of agreement, Trevali will pay 0,2 of one of its own shares for its Kria share. Based on the closing price on December 15, that implies an offer price of 33,4 Canadian cents for each Kria share and values the company at about C$44-million, on a fully-diluted, in-the-money basis.
The price is a 33,6% premium to Kria's closing price on Wednesday and a 25,2% premium based on the 30-day volume-weighted average prices for for firms.
"The opportunity of combining our future production base in Peru with Kria's assets in the established New Brunswick base metal camp will provide both Kria and Trevali shareholders with significant cash-flow growth potential, lower risk with multiple production platforms and a strengthened management team," Trevali CEO Mark Cruise said in a statement.
Trevali and Kria shareholders will own approximately 74,2% and 25,8% respectively of the combined company, which will be named Trevali Mining Corporation.
The deal has the backing of both boards, and is subject to the signing of a definitive agreement by January 15. Both companies' shareholders will also need to approve the merger.
The enlarged company will have two mines in production by 2012, the firms said.
"We are very excited with the potential of combining with Trevali to form the basis of a new mid-tier base metal producer in the Americas," Kria CEO Mike Hoffman said.
"With near term cash flow potential coming from our Halfmile Mine in 2011 and from Trevali's Santander towards the end of 2011, the combined company will be positioned to strongly fund future growth."
Trevali's partner on its Santander project is commodities trader Glencore, which will provide and operate a 2 000 t/d concentrate plant and conduct mining operations on a contractor basis, in return for a long-term concentrate off-take agreement with Trevali for 100% of the Santander project's production at benchmark terms.
Kria is optioning its Halfmile Lake and Stratmat properties in New Brunswick from Xstrata, which is also the firm's biggest shareholder.