Russian billionaire Mikhail Prokhorov
Photo by: Creative Commons - A Savin
TORONTO (miningweekly.com) – Diversified Russian mineral resource company Intergeo on Thursday announced that it had agreed to acquire Vancouver-based miner Mercator Minerals, 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.
ONEXIM Group CEO Dmitry Razumov said the deal would also benefit Intergeo for its access to public capital markets to develop its attractive projects, including bringing the Ak-Sug deposit to production.
Daselina would invest $100-million (including the bridge loan principal) and an amount equal to the accrued and capitalised interest under the bridge loan through a private placement in the combined company, at a subscription price of $0.1224 a share.
Under the arrangement agreement, Intergeo shareholders would receive common shares of the combined company in exchange for all Intergeo common shares, and Mercator shareholders would receive one common share of the combined company and one transferable put right with a strike price of C$0.10 a share, in exchange for each Mercator common share.
The combined company would be renamed Intergeo Mining, and the common shares would be consolidated on a 1-for-50 basis.
Current Intergeo shareholders would own about 85% of the new company and Mercator shareholders would own about 15% of the outstanding common shares of the combined company.
An amended and restated credit agreement executed between Mercator’s subsidiary Mineral Park Inc (MPI) and the existing MPI lenders would also become effective at the closing of the transaction.
Intergeo’s Ak-Sug project currently had compliant indicated resources of 3.49-billion pounds of copper and is expected to produce the red metal at about $1.16/lb over its 25-year life.
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.
Mercator’s TSX-listed stock rose 88.89% to C$0.085 a share early on Thursday afternoon, having earlier in the morning touched highs of C$0.105 a share.