Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF) said that it has entered into a binding letter of intent with Anacortes Mining Corp, following which Steppe directly or through a subsidiary, will acquire all the shares of Anacortes by way of a court-approved plan of arrangement, in an all-share transaction.
Under the terms of the binding agreement, Anacortes shareholders will receive 0.4532 of a Steppe common share for each Anacortes common share, which represents C$0.48 per share, and a premium of 36% based on the closing prices of Anacortes shares on the TSX Venture Exchange, and Steppe shares on the close of trading on March 3, 2023.
Shareholders of Steppe and Anacortes will own 79% and 21% of the combined company respectively, on a basic basis, according to the agreement.
READ: Steppe Gold plans dual listing in Hong Kong
Steppe noted that the proposed transaction will create a “leading junior gold producer” with strong near-term growth. In addition to current production from Steppe’s ATO gold mine, which is expected to rise with the current Phase 2 expansion, additional growth will be supported by the development of the high-grade Tres Cruces oxide project in Peru, which is located 10 kilometers (km) from the Lagunas Norte mine.
The Anacortes board has approved the binding agreement and unanimously recommended that Anacortes shareholders vote in favor of the transaction. Anacortes officers now hold 7.6% of Anacortes common shares that will enter into lock-up agreements with Steppe, pursuant to which they will vote their respective Anacortes shares in favor of the transaction. Steppe’s board has also approved the transaction.
In a statement, Steppe Executive Chairman Matthew Wood said the transaction “transforms” Steppe into a “multi-asset, multi-jurisdiction gold company” with existing production and development projects in “two of the most exciting and still untapped gold provinces in the world in Mongolia and Peru.”
“The new combined company will have a potential development profile of over 200,000 ounces and a resource base of over 4.5 million gold equivalent ounces," added Wood.
Meanwhile, Steppe CEO Bataa Tumur-Ochir noted that the group will add one of the highest-grade undeveloped oxide gold deposits in the world to its development pipeline.
“Having recently built a heap leach gold mine in Mongolia and now in production since 2020, this next project works well in our sequence of production growth to come online in the next few years,” added Tumur-Ochir.
“Our vision is to build a 200,000 ounce (oz) gold equivalent production profile, with our ATO Phase 2 expansion project expected to come online in 2025 and the Tres Cruces Mine…The Tres Cruces project has many similarities to our ATO project, with an oxide deposit at-surface that can be quickly brought into production with significant upside.”
Anacortes CEO James A Currie said the transaction offers its shareholders an “attractive premium,” in addition to meaningful ongoing ownership in the combined company.
“We see this as an excellent opportunity for our shareholders to participate in a growing junior gold producer that will have an enhanced ability to advance and develop the Tres Cruces project.”
Transaction details
The transaction is subject to the execution of an arrangement agreement, the receipt of all regulatory, stock exchange, and court approvals, and obtaining shareholder approval of the transaction at a meeting of the Anacortes shareholders, which is likely to be held in the second quarter of 2023.
The binding agreement includes customary deal protections, including a non-solicitation covenant in favor of Steppe until April 17, 2023, and reciprocal expense reimbursement in certain circumstances.
Execution of the arrangement agreement is expected on or about April 14, 2023, and closing of the transaction is expected on or about June 5, 2023.
Steppe’s financial advisor is Maxit Capital LP and its legal counsel is Fasken Martineau DuMoulin LLP.
Investors can read more about the benefits of the transaction here.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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