The details and implications of the deal are discussed in a Canaccord Genuity report.
In an April 9 research note, Canaccord Genuity analyst Eric Zaunscherb reported that eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE) agreed to merge with Jervois Mining. "The arrangement is positive from the perspective of the eCobalt shareholder, gaining exposure to multiple cobalt projects in relatively low-risk jurisdictions, strengthened management depth and exposure to nickel."
Zaunscherb described premerger Jervois Mining. It wholly owns the Nico Young nickel-cobalt laterite project in New South Wales, Australia. It has a Joint Ore Reserves Committee compliant Inferred resource of 167.8 million tons averaging 0.06% cobalt and 0.59% nickel. A prefeasibility study for a 3 million ton per annum heap-leach facility at Nico Young is in progress, the results of which are expected by mid-year. Jervois also has a highly prospective land package in Uganda, which it gained through its merger with M2 Cobalt earlier in 2019.
Per the agreement with eCobalt Solutions, Zaunscherb explained, Jervois will acquire all of the issued and outstanding common shares of eCobalt that it does not already own. Each eCobalt share will be exchanged for 1.65 Jervois shares, at CA$0.36 per eCobalt share based on the price of Jervois' shares at the close on March 29, 2019. "Some eCobalt shareholders have expressed dismay at the lack of premium in the offer," he pointed out.
The combined entity will be owned by shareholders of Jervois, 40%; of eCobalt, 47%; and of M2 Cobalt, 11%. It will have a portfolio of cobalt and nickel-cobalt projects, in various development stages and in diverse, relatively low-risk locales, which the board and management team have the experience to advance. "At the end of the day, we are appreciative of the outlook for the new Jervois," Zaunscherb highlighted.
Canaccord Genuity has a Speculative Buy rating and a CA$0.90 target price on eCobalt Solutions, whose current share price is around CA$0.34.
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Disclosures from Canaccord Genuity, eCobalt Solutions Inc., Flash Update, April 9, 2019
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication):
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from eCobalt Solutions Inc. in the next three months.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research.
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