Mega Precious Metals Inc. (TSX: V.MGP, Stock Forum) Chief Executive Officer Glen Kuntz said a takeover offer from Yamana Gold Inc. (TSX: T.YRI, Stock Forum) is a validation of the company and its flagship Monument Bay gold-tungsten project in Manitoba.
Kuntz said the agreement is a win not only for shareholders of Mega Precious Metals, but also for the Manitoba provincial government and local First Nations.
Already holding operations in Brazil, Argentina, Chile, Mexico and Canada, Yamana is expanding its presence in Canada through the proposed acquisition of Mega Precious Metals.
Kuntz said Yamana has a good track record for corporate social responsibility and the company can bring all of its mine development, operations and financial expertise to the Monument Bay project.
“This is a deal that ticks all of the boxes,’’ he said, during an interview with Stockhouse.
Under an agreement announced on April 24, 2015, Yamana is acquiring all of the outstanding shares of Mega in exchange for 0.02092 of a Yamana share and $0.001 in cash for each Mega share. Based on the closing price of Mega shares on April 23, the offer is equivalent to 10 cents per share.
Since terms of the agreement were announced, Mega shares have more than doubled in value to 9.5 cents from 4.5 cents, leaving the junior exploration firm with a market cap of $16.4 million, based on 173.2 million shares outstanding. The 52-week range is 12 cents and 2.5 cents.
Mega’s board of director has unanimously approved the transaction and recommends that Mega shareholders vote in favour of the arrangement.
All of the directors and officers of Mega, including certain shareholders, who collectively own 22% of Mega’s issued and outstanding shares, have agreed to vote in favour of the deal.
“In this market, being able to find a miner that is willing to come in and bring its financial and technical expertise to this project is a fantastic win for many shareholders as well as the stakeholders in the project,’’ Kuntz said.
“It’s a good opportunity, considering that the markets are quite difficult,” he said.
“We were interacting with a number of companies and this is the best opportunity that we found at this time.”
Kuntz said the deal fits with Yamana’s strategy because the company wants to continue to grow in North America following the acquisition in June 2014 of Osisko Mining Corp. and its Canadian Malartic mine in Quebec.
In Monument Bay, he said Yamana is getting a foothold in a district-size gold camp, with multi-million ounces of gold already defined. The gold comes with a tungsten kicker and a high grade starter pit. Over the past six months, exploration crews have discovered multiple parallel (geological) structures that can host gold mineralization.
“The Monument Bay Project has grown into what we consider to be one of the best development assets in the industry and we are proud to be part of this story,’’ said Mega Chairman Mario Stifano.
“Our team has assembled a 338 square kilometre camp-sized land position, advanced the project to its current multi-million ounce resource, formulated a regional geological and targeting model, including the realization of a potential tungsten by-product and importantly, we have developed a positive and respectful relationship with the Red Sucker Lake First Nation,’’ Stifano said.
Subject to due diligence by Yamana, and a subsequent shareholder vote, Kuntz said he expects the deal to close in either late June or early July.
Assuming the plan of arrangement is completed, Yamana will be the one to decide how to proceed at Monument Bay.
However, Kuntz said Mega envisions a scenario where the project will be comprised of a central processing facility, one that will be fed by ore from a number of deposits on the property.
Production could eventually be anywhere from 100,000 ounces to 500,000 ounces annually, he said.
FULL DISCLOSURE: Mega Precious Metals is a client of Stockhouse Publishing.