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Dundee expands into Ecuador with IVN Metals buy

The Loma Larga gold-silver-copper project is located in southern Ecuador. (Image courtesy of IVN Metals | Instagram.)

Canada’s Dundee Precious Metals (TSX: DPM) will add its first project in the Americas to its portfolio by acquiring all the shares it doesn’t already own in junior miner INV Metals (TSX: INV), which owns the advanced-stage Loma Larga gold project in southern Ecuador.

As part of the deal, Dundee will buy each of the issued and outstanding common shares of INV Metals it does not currently hold for 0.0910 of a DPM common share, or about C$0.80 a piece. This represents a 63% premium to the closing price of INV Metals stock on the Toronto Exchange on May 28.

Dundee, which owns about 23.5% of INV’s common shares, noted the transaction had strong shareholder support. It also said that IAMGOLD (TSX:IMG) (NYSE:IAG), which is IVN’s largest shareholder, is supporting the deal.

The implied equity value of the transaction, on a 100% basis, is about C$132 million, or C$104 million for the portion not owned by DPM, the parties said.

Dundee will buy each of the issued and outstanding common shares of INV Metals it does not currently hold for 0.0910 of a DPM common share, or about C$0.80 a piece

According to equity research firm Raymond James, IAMGOLD holds about 53.3 million shares of INV (~35.5% of shares outstanding), which will be converted to ~4.85M DPM shares (~2.5% of DPM shares outstanding; RJL calculation) on closing of the transaction expected after the INV shareholder meeting in July.

“We believe the DPM offer, which will convert IAG’s INV shares into DPM shares, provides IAG with a more liquid asset that should be easier to monetize than its significant block of INV,” the analyst said in a note.

Dundee’s current asset portfolio includes two mines in Bulgaria and a copper smelter in Namibia. The acquisition of IVN, will hand DPM the Loma Larga gold-silver-copper underground project.

IVN submitted in April an environmental impact study (EIS) for the project – the first major step in the well-defined permitting process for large scale mining projects in Ecuador. 

“We believe DPM is uniquely positioned to move Loma Larga forward, and as such, this transaction is not only an excellent outcome for our shareholders, but also one with the potential to offer tremendous benefits for both the project’s national and local stakeholders in the coming years,” Candace MacGibbon, chief executive officer of INV Metals, said in a separate statement.

Four concessions

DPM will also receive four concessions INV has in Ecuador — Carolina, La Rebuscada, Las Peñas and Tierras Coloradas.

Based on Loma Largat’s feasibility study, the underground mine would produce 3,000 tonnes of ore a day in the early years, reaching 3,400 tonnes a day in year five. This would translate into an average yearly gold recovered production of 203,000 gold-equivalent ounces over an initial projected life-of-mine of 12 years.

Ecuador has gained ground as a mining investment destination over the past two years, but opposition to the extraction of the country’s resources could thwart the government’s plan to attract $3.7 billion in mining investments by 2022.

Last year, mining in Ecuador generated $810 million in exports, $430 million in taxes and $374 million in foreign direct investment.