Battle North Gold Corporation (TSX:BNAU) (OTCQX:BNAUF) announced that it has signed a definitive arrangement agreement for Australian firm Evolution Mining Limited (ASX:EVN) to acquire all of its issued and outstanding shares at a price of C$2.65 per common share in cash for a total consideration of approximately C$343 million.
The consideration represents a 46% premium over the closing price of Battle North common shares on the Toronto Stock Exchange on March 12, 2021, and a 54% premium based on the volume-weighted average price (VWAP) of the common shares over the last 20 trading days.
Battle North is developing the Bateman Gold Project to become the next gold producer in the renowned Red Lake Gold District in Ontario, Canada and controls the second-largest exploration ground in the district. Battle North also owns a large gold exploration land package on the Long Canyon gold trend near the Nevada-Utah border in the United States.
In a statement, George Ogilvie, Battle North's president, chief executive officer, and director, commented: "The all-cash offer is at a significant premium to market and reflects the extraordinary efforts of the Battle North team to create value at the Bateman Gold Project and ultimately deliver an outstanding outcome for Battle North's shareholders.
"We believe that there are unique and undeniable merits to combining the Red Lake assets of Battle North and Evolution and this Transaction reduces development and execution risk. Evolution is a highly regarded mining company with a demonstrated ability to successfully operate internationally. The Battle North team looks forward to working with Evolution to close the Transaction and smoothly transition operations to the new team."
Evolution Mining is a leading, growth-focused Australian gold miner. The company operates five wholly-owned mines – Cowal in New South Wales, Mt Carlton and Mt Rawdon in Queensland, Mungari in Western Australia, and Red Lake in Ontario, Canada. In addition, Evolution holds an economic interest in the Ernest Henry copper-gold mine in Queensland. Full-year 2021 group gold production is forecast to be between 670,000 -730,000 ounces at an All-in Sustaining Cost (AISC) of A$1,240 – A$1,300 per ounce.
Jake Klein, executive chairman of Evolution said: "Both Evolution and Battle North started the negotiation with a clear alignment that a consolidation of the properties would create value that would not be available if they were developed and operated separately. George and his team have done a very good job at progressing the Bateman Gold Project to this point and recognise that this is an ideal window to consolidate the properties ahead of the construction of the Bateman mine which is now in its early stages."
Klein added: "This acquisition provides Evolution with an opportunity to expand our footprint in the region and create value by leveraging the infrastructure of the two operations. The additional processing capacity from the new Bateman mill will also accelerate our ability to achieve our objective of producing in excess of 300,000 ounces of gold per annum from Red Lake.
"In the 12 months that we have been operating at Red Lake we have demonstrated that we are a committed steward of the region. This expansion of our footprint will provide us with an opportunity to build on our track record as a safe and sustainable operator for the long term benefit of a broad range of stakeholders including the local workforce, regional communities and our Wabauskang and Lac Seul First Nation Partners."
The transaction will be subject to the approval of 66.666% of the votes cast by Battle North shareholders at the annual and special meeting of shareholders and a simple majority of the votes cast by Battle North shareholders, excluding certain persons required to be excluded in accordance with Multilateral Instrument 61-101 of the Canadian Securities Administrators. The shareholder meeting is currently expected to be held in May 2021.
All the directors and officers of Battle North (representing approximately 0.60% of the currently outstanding Battle North common shares) have entered into voting support agreements with Evolution to vote their shares in favour of the transaction. The deal has the full endorsement of Evolution's board of directors and will be funded from Evolution's current cash balance and available credit facilities. No vote will be required by Evolution shareholders.
Battle North has granted Evolution a right to match any superior proposal and will pay a termination fee of C$14.8 million to Evolution if the definitive agreement is terminated in certain events, including if Battle North recommends or approves an acquisition proposal or enters into an agreement with respect to a superior proposal. Battle North has also agreed to make an expense reimbursement payment to Evolution of C$2.0 million if the definitive agreement is terminated as a result of the Battle North shareholders not approving the transaction at the shareholder meeting.
Subject to the conditions being met, the transaction is expected to close in the second calendar quarter of 2021.
The board of directors of Battle North, upon the unanimous recommendation of the independent directors and in consultation with its financial and legal advisors, has unanimously determined that the Evolution transaction is in the best interests of the company and fair to Battle North shareholders and is recommending that Battle North shareholders vote in favour at the shareholder meeting.
Canaccord Genuity and Cormark Securities have also each provided a fairness opinion to the board of directors of Battle North concluding that, as of the date of the opinions and based upon and subject to the assumptions, limitations and qualifications set out in such opinions, the consideration to be received by Battle North shareholders under the arrangement is fair, from a financial point of view, to Battle North shareholders.
Contact the author at jon.hopkins@proactiveinvestors.com