Vancouver gold junior sells for $610m, spins out new explorer
If you try to conjure up some of the world’s best gold mining jurisdictions, Nova Scotia and Bulgaria do not immediately leap to mind.
But more than 60 years after Nova Scotia’s last gold mine stopped producing, the yellow metal is once again being mined there thanks to the new Touquoy mine – and the Vancouver junior miner that built it, Atlantic Gold Corp. (TSX-V:AGB), is about to be snapped up by Australia’s St Barbara Ltd. for C$800 million.
The team that built Atlantic Gold, led by former Teck Cominco CEO Steven Dean, will then spin out a new exploration and development company, whose immediate focus will be a new gold project in Bulgaria.
Atlantic Gold shareholders will vote July 15 on St Barbara’s offer. Should shareholders approve it – and with a 40% premium being offered, there seems little reason to reject it – it will mark a hat trick for Dean.
Dean was a founding director of Normandy Mining, which was acquired by Newmont Goldcorp Corp. (TSX:NGT).
“We grew that from startup to about a C$4.5-billion-sized company, when it was acquired by Newmont,” Dean said.
He then started another gold company in Australia called PacMin Mining, which became a subsidiary of Teck-Hughes Gold Mines Ltd.
That deal brought Dean to Canada in 1998, where he served as Teck’s president. He was in that role when Teck and Cominco merged in 2000 to form Teck Cominco, now Teck Resources (TSX:TECK.B).
Dean left Teck Cominco in 2002 and took what he calls a 10-year sabbatical, although during that time he also co-founded Amerigo Resources (TSX:ARG), a Vancouver-based company with a copper mine in Chile.
“When my kids all went to university and went into the workforce, I decided I’d better get back into work,” Dean said.
With the backing of investors like Rick Rule, president of Sprott U.S. Holdings, and Vancouver real estate developer Ryan Beedie, president of Beedie, Dean reorganized a company called Spur Ventures, which was in the phosphate mining and fertilizer business.
They sold off its phosphate business in China, changed the name to Atlantic Gold and acquired and consolidated four gold properties in Nova Scotia. In less than five years, Atlantic Gold had built its first mine.
“We got it financed when there was no finance around, and that’s where Ryan Beedie’s partnership was integral to it,” Dean said.
With a 27.5% share in the company, Beedie is a major shareholder in Atlantic. While he had dabbled in junior mining companies before, Atlantic Gold was his first real foray into the mining business as a major shareholder.
He not only liked the idea of a low-cost mine being built in Canada, in a region that needs the jobs, but also has personally known Dean for 20 years and therefore knew his track record for getting mines built.
“I liked the Nova Scotia angle,” Beedie said. “I said, ‘That’s great – you’re investing in Canada.’ I love the whole model – low cost, the way he de-risked it.”
Nova Scotia was one of the first Canadian provinces to experience a gold rush. But until recently, there had been no gold production there since the mid-1950s.
Historically, gold was mined in Nova Scotia in narrow-vein deposits with high concentrations of gold. But Dean said his company determined that there is lower-grade gold around the older mines’ higher-grade veins, and that there is enough of it to make an open-pit mine economic.
“It wasn’t recognized, until recently, that those veins are surrounded by a halo of lower-grade mineralization, which is very economic, and that’s what’s being recognized in today’s gold rush, if you like, back to Nova Scotia.”
Dean took what Rule calls a typically “Australian” approach to the Atlantic Gold project.
“Rather than try and find a 2 million ounce deposit, he found a district that had numerous 300,000 or 400,000 ounce deposits, where, he believed, if you built a central processing facility, over time you could consolidate the district,” Rule said. “And he did it. He did precisely that.
“He found a district that had fractured ownership, where nobody had the capital or the assets, frankly, to build the processing facility, acquired two of the assets, built the processing facility on time, on budget, and then began the process of consolidating the district.”
Other companies, including Vancouver’s Osprey Gold Development (TSX-V:OS), are now looking to develop gold deposits in Nova Scotia.
Atlantic Gold put its Touquoy open-pit mine into production in 2018 for a capital cost of $140 million. It produces 90,000 ounces of gold per year and employs 270 miners. A second phase would boost gold production to 200,000 ounces per year.
“In a province where there is negative job growth and economic growth is really struggling, we’ve created, in the last two years, 270 direct jobs and another 150 indirect jobs in that province,” Dean said. “And that stands to increase to something like 500 to 600 direct jobs with our expansions planned in 2021 and 2022.”
Dean isn’t about to sit back and take another sabbatical, once the deal with St Barbara Ltd. concludes.
He and Atlantic Gold COO Maryse Belanger will join St Barbara’s board of directors, but they will also be starting another new gold exploration and development company. The Atlantic team is already positioned to spin out a new company, Artemus Gold.
Atlantic, through a subsidiary, recently took a 19.8% stake in another Vancouver junior exploration company, Velocity Minerals (TSX-V:VLC), with options to increase its share to 40%.
Velocity has three exploration projects in Bulgaria, which, like Nova Scotia, has been underexplored.
“We’re planning to raise $20 million to $30 million, after closing of the Atlantic sale,” Dean said. “It will therefore be well armed and in a similar position to Atlantic was in 2014 to look for unloved assets in the gold sector.”
(This article first appeared in Business in Vancouver)