Mercator Minerals (TSX:ML, Stock Forum) signed a business combination agreement back in December 2013 with Intergeo that would finally pull the company out from under the thumb of an overwhelming credit facility and bring its Mineral Park Mine up to speed and into a cash positive position.
In the deal, Intergeo's controlling shareholder, Daselina Investments, would give the company a much-needed shot in the arm via a $14.0 million bridge loan as an advance until such time as the transaction completed.
Everything looked rosy for the company as the proposed deal, approved by third party advisors, the board and shareholders, would create a combined copper-focused base metal entity with a robust growth profile and strong financial backing.
All that was left was certain necessary regulatory approvals, but that was where the train to redemption began to derail. A bureaucratic back-and-forth began with the Russian Federal Anti-Monopoly Services (“FAS”) that resulted in multiple extension requests by the regulating body so that it could secure further information for examination of the deal.
Both Mercator and Intergeo waited patiently as the FAS mulled over the documentation and even extended the completion deadline to August 1, 2014 to ensure that the regulators had enough time to come to a decision. Unfortunately, at the beginning of July the FAS turned around and requested another two-month extension.
Which leads to today's fateful announcement when the company stated that Intergeo did not currently expect to request or agree to an extension of completion beyond August 1, 2014, effectively putting a halt to the proposed business combination.
The company has shifted gears and will be examining its alternatives over the coming weeks, which Intergeo has helped by assuring the company it was prepared to waive the non-solicitation provisions in the arrangement agreement so that Mercator can fully consider its alternatives.
Company president and CEO, D. Bruce McLeod, commented on the situation, “We are extremely disappointed in Intergeo's decision, especially in light of the strong operations and operational cash flows being generated by Mineral Park mine. We are considering our alternatives in this regard and will continue to provide updates as circumstances develop.”
To make matters worse, the company is still on the hook for the $13.0 million it has drawn from the bridge loan, as it was supposed to mature upon dissolution of the deal.
Will the company be able to turn the tables on this corporate kick-in-the-teeth before August? Only time will tell.
Mercator was in the news recently when the company reported Q2 2014 production results a week ago.
Shares sank 25.00% on the news to $0.06 per share.
Currently there are 315.7m outstanding shares with a market cap of $18.9 million.