Gold M&A: Denarius scraps Emerita takeover in Spain

Denarius Metals (CBOE: DMET) dropped efforts to acquire Emerita Resources (TSXV: EMO), ending a three-week takeover effort after the Spain-focused explorer refused to hold talks over a deal.

Toronto-based Denarius “no longer intends to pursue its offer to enter into discussions with Emerita,” it said late Wednesday in a statement. It blamed Emerita’s failure to engage in “substantive discussions” regarding a potential transaction.

The announcement ends a brief pursuit that began on April 13, when Denarius unveiled an all-share offer for Emerita at a 15% premium. It comes at a time when mergers and acquisitions in the gold mining industry are heating up as prices for the yellow metal remain elevated after setting new records.

In unveiling its first bid, Denarius argued a combination would have created a scaled mining and development company with producing assets in Colombia and development-stage projects in Spain. It touted the strategic fit between Emerita’s Iberian Belt West project in southern Spain and Denarius’ nearby Aguablanca and Lomero assets.

Denarius sweetened the proposal on April 21, increasing the implied value to C$0.45 per Emerita share, or about C$134 million ($98 million), representing a 73% premium to the target company’s April 10 closing price.

Fraud allegations

The revised bid came hours after Emerita CEO David Gower and chairman Larry Guy quit amid fraud allegations.

Gower and Guy are among a group of four Emerita directors and officers accused by the Ontario Securities Commission of having diverted lithium claims in Brazil – known as the Falcon project – to a separate company they controlled, Lithium Ionic (TSXV: LTH), while misleading investors by claiming Emerita had “relinquished” the project.

Their conduct defrauded Emerita and its investors, the OSC said in an April 10 statement.

Gower and Guy “have voluntarily resigned given their presence as directors and officers has created unnecessary distractions for the company in light of the recently announced untested allegations by the Ontario Securities Commission,” Emerita said April 20.

Interim CEO

The OSC is also accusing Emerita of making “untrue or misleading statements” about its Plaza Norte zinc project in Spain between 2017 and 2023. Those included permit status details and ownership interest in the joint venture pursuing the project.

Joaquin Merino is now serving as Emerita’s interim CEO while a search for a replacement takes place. David Patterson has taken over as chairman.

Emerita formed a special committee of independent directors and hired Canaccord Genuity as financial advisor after receiving Denarius’ unsolicited offer.

The board committee “will consider and evaluate strategies to maximize shareholder value, including pursuing one or more strategic transactions and continuing to execute on the company’s existing business plan,” Emerita said in an April 24 statement.

Ramp up

Denarius now plans to keep ramping up operations at its producing Zancudo gold-silver mine in Colombia while preparing the Aguablanca nickel-copper project in Spain to re-start in the first half of 2027.

It also intends to “create scale” in its portfolio of projects in Spain — including the advancement of its strategic collaboration with Saudi-based ProGrowth, which aims to develop refining and trading opportunities for concentrates sourced from its Spanish operations.

Emerita shares rose 5.3% to C$0.398 in Canadian trading Wednesday, valuing the company at about C$118 million ($86.5 million). Denarius fell 1.2% to C$0.81 for a market capitalization of about C$158 million ($115.8 million).