Gold miner IAMGOLD Corp (TSX:IMG) is continuing to add ground in the highly prospective Chibougamau gold camp of Quebec with its recent acquisition of Vanstar Mining Resources Inc (TSX-V:VSR, OTCQX:VMNGF) for a cool $31.1 million.
The two companies entered into a definitive arrangement agreement that sees IAMGOLD buying Vanstar to consolidate its interests in the Nelligan project.
Vanstar, a gold exploration firm, possesses a 25% interest in the Nelligan project, which was named Discovery of the Year by the Quebec Mineral Exploration Association in 2019.
Renaud Adams, CEO of IAMGOLD, told investors that the company sees potential for further resource expansion at Nelligan.
Under the terms, Vanstar's shareholders will receive 0.2008 of an IAMGOLD common share for each Vanstar share.
The deal values Vanstar shares at around $0.69, a 130% premium to where it was trading two months ago. What’s more, Vanstar's share of the resource is estimated to be around 1 to 1.25 million ounces, and the purchase price equates to approximately $45 per ounce of gold in the ground.
That has positive implications for Northern Superior Resources Inc. (TSX-V:SUP, OTCQX:NSUPF), a key player in the region with a portfolio of projects including Philibert, situated just nine kilometers from Nelligan.
A key player in the Canadian mining sector, Northern Superior has approximately 3.7 million ounces of gold resources.
Philibert in particular holds promise with its high-grade nature, favourable metallurgical recovery results, and untapped potential.
“With a higher grade and great metallurgy, Northern Superior has the potential to lower the payback period of a conceptual combined operation, let alone providing size and further growth potential,” CEO Simon Marcotte commented following news of the acquisition.
IAMGOLD's purchase of Vanstar's 25% interest in the Nelligan project, at a notable 130% premium, sets a robust valuation precedent.
Northern Superior currently has a market value of $65 million. Considering they possess about 3.7 million ounces of gold, there is a substantial difference compared to the Vanstar deal. IAMGOLD paid a premium to acquire Vanstar, which translates to about $45 per ounce of gold they acquired. Northern Superior, with its 3.7 million ounces, has an implied value per ounce around $12 Canadian.
Additionally, Northern Superior holds $16 million worth of shares in an Ontario spin-out, which, when factored in, brings the total value to around $45 million. This creates a notable contrast between Northern Superior's current market valuation and the premium IAMGOLD paid for Vanstar.
IAMGOLD’s acquisition of Vanstar not only underscores the positive outlook for Northern Superior's own valuation, but it also signals IAMGOLD's serious commitment to consolidating the mining landscape in the region.
Northern Superior's strategic position, coupled with IAMGOLD's consolidation efforts, aligns with the broader objective of creating value through increased scale and controlled resources in the prolific mining jurisdiction of Quebec.