Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Auryn Resources is acquiring Eastmain Resources in an all-share deal valued at C$121 million to create Fury Gold Mines.
“Fury Gold will combine the high-grade gold projects: Committee Bay in Nunavut, Homestake Ridge in B.C. and Eau Claire in Quebec, to offer investors a robust, Canadian, gold-focused exploration and development company,” Ivan Bebek, Auryn’s executive chairman and director, said in a release.
“Fury Gold will have the capability and access to capital to develop and finance Eau Claire,” added Laurie Curtis, Eastmain’s chairman.
After closing of the transaction, Fury Gold would start a 50,000-metre drill program at the 1,130-sq.-km Eau Claire gold project in Quebec
The combined company would be led by a new president and CEO, Mike Timmins, who served as the VP of corporate development for Agnico Eagle between 2006 and 2017.
The proposed board would include three of Auryn’s current directors (with Bebek serving as chairman), two directors from Eastmain and Mike Timmins.
As part of the proposed acquisition, Auryn would spin out its Peruvian assets to existing shareholders just before the closing of the Eastmain transaction and complete a private-placement financing of Fury Gold subscription receipts, to raise a minimum of C$15 million.
Upon closing, Eastmain shareholders would receive approximately 0.117 of a Fury Gold share for each Eastmain share held, or 0.165 of an Auryn share before the consolidation.
As Auryn’s assets in Peru transition to two new (unlisted) companies, Fury Gold plans to consolidate its shares on a 10:7 basis, with 110 million shares outstanding anticipated for the pro-forma company, before the proposed financing.
Upon closing, Eastmain shareholders would receive approximately 0.117 of a Fury Gold share for each Eastmain share held, or 0.165 of an Auryn share before the consolidation. Auryn shareholders would receive 0.7 shares of Fury Gold and one share in each spin-out company for each Auryn share at closing.
On a pre-financing basis, 69% of Fury would be held by Auryn’s shareholders and 31% would be owned by Eastmain’s current stock owners.
After closing of the transaction, Fury Gold would start a 50,000-metre drill program at the 1,130-sq.-km Eau Claire gold project in Quebec.
Shareholder meetings of both companies are expected in September – approval by a majority of shareholders is required at each. If the transaction does not close due to a third-party superior offer, the party accepting the higher deal would pay the other a 3.75% termination fee, based on the value of the higher proposal.
Boards of both companies have approved the transaction and recommend shareholders vote in favour of the deal.
Eastmain’s wholly owned Eau Claire deposit hosts open-pit and underground resources, with a total of 4.3 million measured and indicated tonnes, grading 6.18 g/t gold for 853,000 gold oz. Inferred resources add 2.4 million inferred tonnes at 6.53 g/t gold for 500,000 oz. Open pit resources are based on a 0.5 g/t gold cut-off grade whereas underground resources are estimated using a cut-off grade of 2.5 g/t gold.
A preliminary economic assessment completed at Eau Claire in 2018 outlined a 12-year open-pit and underground operation producing an average of 86,100 oz. gold annually in the first 10 years at all-in sustaining costs of $574 per oz.
Eau Claire is 57 km away from Newmont’s Éléonore mine and sits within Eastmain’s wholly-owned 20,068-sq.-km Clearwater land package.
Auryn’s Sombrero and Curibaya projects in Peru are in the final stages of drill permitting.
(This article first appeared in the Canadian Mining Journal)
