Three-way Canada gold junior merger falls short
Shares in Gold Canyon Resources (CVE:GCU) and PC Gold (CVE:PKL) shot up on Tuesday massive trading volumes, after announcing that First Mining Finance Corp. (CVE:FF) will be acquiring all the shares of both explorers.
Vancouver-based Gold Canyon was last trading at $0.175, up 52.2%, drifting lower as the day wore on after the counter doubled at the start of trade on the TSX Venture Exchange. Gold Canyon, which owns gold projects in Canada and a rare earth prospecting licence in Tanzania is now worth $29 million in Toronto. More than 7.7 million shares changed hands (some 30 times usual volumes) making it the most active stock on the venture board.
PC Gold, based in Toronto, jumped 66% by the close affording the Ontario old mine explorer a $5.4 million market valuation after roughly 2 million shares were traded. Both counters ended well below the implied premium offered by First Mining over their 30-day average price which was 204% for Gold Canyon and 255% above PC Gold's share price.
First Mining Finance shareholders were on the losing end of the deal – the Vancouver company which calls itself a mineral bank gave up a fifth of its value on the TSX-V by the close for a $28.2 million market cap. First Mining owns 19 mineral assets in Canada, Mexico and the United States.
At the end of the day's trading the juniors' combined capitalization fell well short of the the $100 million envisaged by the companies in a transaction designed to "increase analyst coverage and trading liquidity allowing for broader access to capital markets including institutional support," according to the statement.
Under the deal First Mining has agreed to acquire all of the issued and outstanding common shares of both Gold Canyon and PC Gold. Shareholders of Gold Canyon will receive one common share of First Mining for each Gold Canyon share held in addition to shares in a newly formed spin-out company which will hold Gold Canyon's non-gold assets. PC Gold shareholders will receive 0.2571 common shares of First Mining for each PC Gold share.
Following the transaction former shareholders of Gold Canyon will hold some 55.4% of the shares of the combined company, former shareholders of PC Gold will hold approximately 9.6% while First Mining will hold roughly 35% of the new entity. First Mining said the transactions are not conditional on each other.
Keith Neumeyer, Chairman of First Mining, said: “We believe that the current market climate for junior exploration companies remains very challenging and thus requires consolidation and that only companies with attractive assets and supportive shareholder bases will survive this market cycle which still may last for years. We believe this transaction provides an excellent opportunity for the shareholders of all three companies to be part of a leading exploration and development company with a dedicated, focused and experienced management team.”
Akiko Levinson, President and CEO of Gold Canyon, stated: “This transaction puts our Springpole gold deposit in the position of forming the foundation for this new, consolidated gold company and we are pleased this transaction reflects this value. Our shareholders receive significant exposure to this new mining company which is run by a proven mining team with a track record of building high valued mining companies”.
Peter Hooper, President and CEO of PC Gold, commented: “We have been exploring a number of strategic options for PC Gold and the Pickle Crow project for some time given ongoing market conditions. We believe this transaction will be beneficial to PC Gold shareholders by enabling them to obtain a premium to current market price while continuing on with their interest in the Pickle Crow project but in a larger, more diversified company with sound management and other promising projects that will be better positioned for these challenging conditions.”