Whoa, that was unexpected! Matt Manson's Marathon Gold Corp. (MOZ) added seven cents to 71 cents on 46.43 million shares on word of a planned merger with Blayne Johnson and Darren Hall's Calibre Mining Corp. (CXB). Marathon's shareholders will get 0.6164 of a Calibre share for each of their Marathon shares, a ratio that works out to a 32-per-cent premium. (Or at least it would, had Calibre's stock not fallen 20 cents to $1.17 on 11.54 million shares today.) Calibre is also buying 66.67 million new shares at 60 cents each in a $40-million financing not dependent upon closing the takeover.
Mr. Manson, Marathon's president and chief executive officer, cheered the deal as offering Marathon shareholders the opportunity to participate in the growth of an important new mid-tier gold company that is on track to produce 500,000 ounces of gold per year. Marathon's energetic plan to mine Valentine Lake in central Newfoundland will now be fully financed to production without additional debt, royalties or shareholder equity, Mr. Manson cheers, noting that his backers will become shareholders of an enlarged entity holding "three high-quality, cash-flowing gold assets."
Calibre's two key insiders also piped up, reflecting their shareholders' two-to-one domination of the enlarged company. Mr. Johnson, chairman, enthused that the combination "perfectly aligns with Calibre's commitment to building a diversified mid-tier gold producer." He also cheered the projected 500,000 ounces of gold production, saying it offers his shareholders additional "diversification and exposure to high-quality, long-life production in a tier-1 jurisdiction."
Mr. Johnson's promotionally overwound spring eventually ticked to a conclusion with a reminder that he created a similarly sized company when his Newmarket Gold Inc. merged with Tony Makuch's Kirkland Lake Gold Ltd. in 2016. He did not tell you that in 2021, the similarly sized Kirkland Lake was absorbed by Agnico Eagle Mines Ltd. (AEM: $64.40). (There are always bigger fish looking for a solid meal.)
Mr. Hall, Calibre's president and CEO, was beaming with self-congratulation, noting that he and his crew have delivered on their commitment to "create significant value for ... shareholders through a disciplined approach to operations and exploration." Mr. Hall, who will carry on as Calibre's head disciplinarian, concluded his enthusiasm by expressing confidence that with Calibre's "strong operational expertise and robust cash flow," he, his crew and the Marathon team "will continue to meet or beat expectations."
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My opinion is this merger of these two minnows will eventually be eaten by bigger sharks with the trophy catch being V. Lake and the other cut up for bait.
Bigger players won't heitate to buy completed projects vs explore and build and this will happen when the tide turns. So regardless of what happens now the longer term looks good for aquisitions.