Sector News... Recent M&A Unmasks the Predatory, and the Vulnerable
Sensing blood in the H2O, resource-hungry predators - Producers' looking to bulk up their project pipelines to ensure their long-term survival - are circling asset-rich juniors that have fallen out of favor with investors.
Case in point: HECLA ACQUIRES ALEXCO RESOURCE
After successfully consolidating the historic Keno Hill Silver District in Canada's Yukon Territory earlier this century, it's been an uphill climb for Alexco in its attempts to join the Producer ranks.
Keno Hills was hailed as THE highest-grade silver district on the planet back in the day, boasting over 200 million ounces of production at an average grade of 1,373 g/t (48.4 oz/t) Ag. Today, even with the rich low-hanging fruit exploited, Alexco’s Keno Hills asset is regarded as “one of the highest-grade silver mines in the world.”
In a major setback, Alexco revealed in a June 22 press release that “underground development remains insufficient to achieve the necessary number of production headings to sustain 400 tpd feed to the mill before the end of 2022.” As a result, milling operations were suspended “to focus all efforts on advancing underground development.”
Today, only two weeks after warning shareholders of its operational challenges, Alexco has thrown in the towel. Alexco common will be swapped for a paltry 0.116 worth of Hecla paper, implying a value of US$0.47 per share - a premium of 23% based on the companies' 5-day volume-weighted average price on the NYSE on July 1, 2022. In addition, Hecla will provide sufficient funds to push Keno Hill further along the development curve.
If pressed to characterize this deal in one word? "opportunistic."
One look at the Alexco chart tells you all you need to know about how assets are currently being valued in this current environment.
When Alexco shareholders awoke to the M&A news, the headline itself offered only a fleeting measure of excitement. Per the Alexco channel over on CEO.CA, the deal's finer details generated a decidedly harsh reaction... nary a wisp of relief from the stock's recent trouncing.
A takeover scenario in the mining arena typically generates a fat return for long-term shareholders of the acquiree. Sadly, that didn't happen here.
Mexican Mine Workers Make Bank
The friction between mining behemoth Newmont and the National Union of Mining, Metallurgical, Iron and Steel of the Mexican Republic over the Company’s Peasquito Mine has been ongoing for several years. Take this May 2019 headline, for example - Stoppage at Newmont Goldcorp mine costs Mexico millions daily: minister.
But earlier this week, Newmont dropped a headline that should lay all outstanding issues to rest: Newmont Reaches Profit Sharing Agreement with Peasquito Union.
From this point forward, Newmont will pay its (unionized) workforce an uncapped profit-sharing bonus of up to 10%, with an immediate injection of $70 million (derived from 2021 production numbers).
Tom Palmer, Newmont President and CEO:
"We are pleased to have reached this agreement with the National Union of Mining, Metallurgical, Iron and Steel and Similar Workers of the Mexican Republic. Through a respectful dialogue and the active participation of union leadership including Senator Napolon Gmez Urrutia, we reached this agreement without interruption to the operation, ensuring a lasting relationship for the future of Peasquito."
Peasquito, the fifth-largest open-pit in the world, is forecast to produce 475,000 ounces of gold in 2022. Mine production is expected to extend beyond 2040.
Still on Mining (Briefly)
Barrick Gold gets all Litigious on a Sub-$1M exploreco
Red Lake Gold reports that Barrick Gold has named the Company as a party in a Statement of Claim in the Toronto Superior Court of Justice on June 30, 2022 - Red Lake Gold Inc. Receives $120 Million Statement of Claim Over 70% Earn-In Option at Whirlwind Jack Project.
The Claim alleges, among other things, that Red Lake Gold has breached certain obligations in Earn-In and Joint Venture Agreement to pursue more lucrative commercial arrangements concerning the Corporation’s mining claims.
$120M is a big number for a Company with a market cap south of $1M. | |