Perseus Mining Ltd (ASX:PRU, TSX:PRU, OTC:PMNXF) has entered into a definitive agreement to acquire the remaining 85% stake in Orca Gold Inc (TSX-V:ORG) under a statutory plan of arrangement for C$198 million in Perseus shares.
This will take the total consideration paid for a 100% stake in Orca to C$215 million, which includes the C$17 million cash paid previously for an initial 15% stake in the company.
Orca’s board of directors has unanimously recommended that its shareholders vote in favour of the acquisition.
Exceed targeted production level
Perseus managing director and CEO Jeff Quartermaine said: “The potential acquisition of Orca represents a very exciting growth opportunity for Perseus that aligns with our strategy of upgrading the size, quality and geographic distribution of our asset portfolio.
“We have the financial capacity, technical expertise and in-country relationships, in combination with Orca’s existing management team, to bring Orca’s Block 14 Project into production and in the process, create material benefits for all stakeholders including the government and citizens of Sudan.
“When the transaction is completed, Perseus will have three operating mines currently producing gold at a rate of approximately 500,000 ounces per year and a high-quality development project that if brought on stream, as intended, should ensure that Perseus can maintain or exceed its targeted production level well into the next decade.
“With the objective of operating four mines, Perseus will be well advanced towards fulfilling its aim of becoming a highly profitable, well managed, pan-African gold company that consistently creates benefits for all stakeholders.”
Details of deal
Under the deal, all of the issued and outstanding Orca shares that Perseus does not already own will be acquired by Perseus in exchange for Perseus common shares on the basis of 0.56 of a Perseus share for every 1 Orca share.
Based on the Canadian dollar equivalent of the closing price of Perseus shares on the ASX, this implies consideration of around C$0.896 per Orca share for an implied total equity value of approximately C$233 million.
The implied consideration represents a premium of 62.9% to the closing Orca share price of C$0.55 on February 25, 2022.
If the deal goes through, the acquisition would result in Orca shareholders owning around 9.1% of the proforma Perseus shares then outstanding.
Benefits of the deal
The acquisition will deliver material benefits to both Perseus and Orca shareholders.
For Perseus shareholders, the acquisition:
➢ Aligns with Perseus’ strategy of upgrading the size, quality and geographic distribution of its African focused gold asset portfolio;
➢ Maintains Perseus’ strong balance sheet while also limiting dilution with Orca shareholders owning around 9.1% of the pro-forma Perseus common shares outstanding;
➢ Expected to be net asset value per share accretive;
➢ Orca’s 70% interest in the Block 14 Project provides Perseus with a large and scalable development gold project that is fully licensed, at an advanced stage of readiness for development and has further exploration and resource growth potential;
➢ Perseus has the financial capacity, technical expertise and in-country relationships to advance the Block 14 Project and is well-supported by local shareholders, who collectively own 30% of the project;
➢ Perseus also gains an indirect interest in the very large, undeveloped Koné Gold Project in northern Cote d’Ivoire around 150 kilometres due south of Perseus’ Sissingué Gold Mine, through Orca’s 31.4% interest in TSX-V listed Montage Gold Corp; and
➢ Shareholders of Perseus and Orca will benefit from the strength of the combined entity through a share-based transaction.
Acquisition timeline
The acquisition, which is not subject to a financing condition, will be implemented by way of a court-approved plan of arrangement under the Canada Business Corporations Act and will require the approval of:
➢ 66.67% of the votes cast by the holders of Orca shares;
➢ 66.67% of the votes cast by holders of Orca shares, restricted share units, deferred share units and options, voting together as a single class, and;
➢ Approval of a simple majority of the votes cast by holders of Orca shares, excluding votes from certain shareholders, including Perseus, in accordance with Multilateral Instrument 61-101, at a special meeting of Orca security holders to be held to consider the acquisition.
In addition to approval by Orca security holders, the acquisition is also subject to the receipt of court approval, regulatory approvals and other customary closing conditions for transactions of this nature.
Orca intends to call a meeting of security holders in May 2022 to seek approval for the arrangement with the closing of the acquisition expected to occur in early June 2022.
Perseus shareholders’ approval is not required.
The arrangement provides for customary deal-protection provisions, including a non-solicitation covenant on the part of Orca and a right for Perseus to match any superior proposal.
It also includes a termination fee of C$7.5 million, payable by Orca to Perseus, under certain circumstances, including if it is terminated in connection with Orca pursuing a superior proposal.
The directors and senior officers of Orca, in addition to certain security holders of Orca, owning an aggregate of 37% of Orca's voting securities have entered into voting support agreements in which they have agreed to vote in favour of the acquisition.
Approval process
A special committee of independent directors of Orca has unanimously recommended the acquisition to the board of directors of Orca.
The Orca board has evaluated the agreement with Orca's management and legal and financial advisors and, following the receipt and review of the recommendation from the special committee, the board has unanimously approved the arrangement and determined that the arrangement is in the best interest of Orca.
BMO Capital Markets (NYSE:BMO), in its opinion to the Orca special committee, said the consideration to be received by the Orca security holders (other than Perseus and its affiliates) pursuant to the agreement was fair, from a financial point of view to such holders.
The agreement has also been unanimously approved by the board of directors of Perseus.
About Orca
Orca is a TSX-V listed gold developer focused on the acquisition, exploration and development of mineral properties in Africa.
Its main asset is a 70% interest in the Block 14 Project in northern Sudan near the border with Egypt.
The Block 14 Project is a large and scalable resource with a mineral resource estimate of an indicated resource of 79.9 million tonnes grading 1.3 g/t gold for 3.3 million ounces gold and an inferred resource of 18.5 million tonnes grading 1.2 g/t gold for 700,000 ounces.
The Block 14 Project has a probable mineral reserve estimate of 79.9 million tonnes grading 1.1 g/t gold for 2.9 million ounces.
Orca also owns a 31.4% interest in TSX-V listed Montage, which announced the completion of a feasibility study at its cornerstone Koné Gold Project, in Côte d’Ivoire, on February 14, 2022 in accordance with NI 43-101.