One year back Augen Gold, a gold exploration company active in Northern Ontario with a market cap of $34-million, was the hunted as dissident shareholders mounted a campaign to oust the board and create their version of shareholder value.
By some means, the word miracle comes to mind, Augen survived due to a combination of luck, decisions of the court, the determination of David Mason, its chief executive, and a sudden proxy battle at Augen Capital, its main shareholder, which ultimately supported Augen Gold.
Now Augen is back in the news again. Trelawney Mining and Exploration Inc., a company with a market cap of $689-million, plans to make a share-exchange offer for Augen at an implied price of
.32 a share. Trelawney will offer 0.066 of its own shares for each Augen share and will offer what it regards as a 40% premium. Trelawney’s share price is up by more by almost seven fold over the past year: on July 9 2010, its shares traded at
.71.
Trelawney is off to a good start with its offer: it has the support of a group of Augen shareholders which between them own 42% of the outstanding shares. Libra Advisors LLC, Sprott Asset Management LP, Augen Capital Corp., Mineralfields 2010-V Inc. and Pathway Multiseries Fund LP are all part of that group. (Some of those shareholders wanted a new board last year. As well, at least two of the shareholders who have agreed to tender supported Augen Gold last time.)
In a sense Trelwaney is the logical buyer: its Chester Cote Lake property sits adjacent to Augen Gold’s South Swayze property. In fact Trelawney’s property is an island within Augen’s much larger property. Indeed the two properties used to be one – the owner was then known as Osprey Gold – but were separated in 2004. Now the plan is remake Humpty Dumpty.
As part of the presentation it made Monday, Trelawney said that the “logical combination, creates a large, contiguous gold camp in a prospective region…. [the] acquisition will allow for a single, centralized exploration program targeting the most prospective areas in the region.”
Accordingly, Trelawney said the transaction is “consistent with Trelawney’s strategy, which creates a large, contiguous gold camp in a prospective region.”
As well Trelawney has had an interest in Augen for at least a year. In the spring of 2010, as well as a few occasions this year, the two parties talked but couldn’t come to an agreement. Last Friday it launched its hostile offer.
As expected Augen’s share price shot up to the projected offer price as volume was twice as high as normal. Shares of Trelawney (TRR-TSX Venture), which hit an all time high of $5.30 a share – were also up.
David Mason, Augen’s chief executive, was unavailable for comment.