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In another sign that it’s not just large mining companies looking at M&A deals, Calibre Mining (TSX: CXB) is buying fellow Canadian miner Fiore Gold (TSXV: F) in a deal it says will create a diversified, Americas-focused mid-tier gold producer.
Under the deal, Fiore’s shareholders will receive C$0.10 in cash and 0.994 of a Calibre common share for each Fiore share they own, for an implied price of C$1.80 per Fiore common share, and a 36% premium based on the 20-day volume-weighted average price of both companies.
If the deal is finalized, existing shareholders of Calibre would own about 78% of the combined company, and Fiore shareholders would own about 22%. B2Gold (TSX: BTO; NYSE-AM: BTG) would also have minority ownership, as it holds approximately 37% of outstanding Calibre common shares.
Fiore owns the producing Pan open-pit heap leach gold mine in Nevada, 28 km southeast of the town of Eureka, on the Battle Mountain – Eureka gold trend, and the adjacent, fully permitted Gold Rock project. Fiore also owns the past-producing Illipah gold project, also in Nevada’s Battle Mountain-Eureka trend. In addition, Fiore owns the Golden Eagle project, about 5 km north of the town of Republic in Washington state’s Republic-Eureka mining district.
The Fiore assets would be added to Calibre’s portfolio, which includes the Limon and Libertad gold mines in Nicaragua, and the Pavon gold project, also located in that country. Calibre acquired the two mines from B2Gold in 2019.
The deal would see the new combined company producing about 245,000 oz. gold per year, at an all-in sustaining cost of $1,020 per ounce. The total would include about 50,000 oz. a year from Fiore’s Pan mine.
Calibre’s chairman, Blayne Johnson, believes the deal with Fiore is just the type of diversified, value-added growth the company has planned since it acquired its Nicaraguan assets from B2Gold.
“The addition of a top-tier, low-risk mining jurisdiction in Nevada creates a lower risk profile with greater asset and country diversification,” he said in a press release. “This transaction unlocks value for both Calibre and Fiore shareholders and further demonstrates Calibre’s commitment to building a quality diversified mid-tier gold producer.”
According to Fiore’s CEO, Tim Warman, there is “a great deal of common ground” between the two companies. “In the past few years, we have both overseen the successful ramp-up of our respective assets through solid operating discipline and ESG focus.”
Warman also said that Calibre and Fiore have a “shared culture of operating and fiscal integrity that creates an excellent fit” and that the deal will give his company’s existing shareholders exposure to a considerably larger and more diverse production profile.
BMO Capital Markets precious metals analyst Brian Quast views the deal positively. In a research note, Quast says acquiring Fiore improves diversification of Calibre’s asset base, while growing the production profile and development pipeline. He expects that with the increase in gold production coming from the three operating mines, the larger combined company is expected to attract investors, which could result in the company’s valuation to expand.
With the acquisition, Calibre “expects its near-term production profile to increase to 245,000 oz. per annum at a ~$1,000 per oz. AISC,” he wrote. “This represents a 40% increase in production from the base of 2021 guidance, at a relatively flat AISC/ounce…We expect Calibre’s debt-free balance sheet ad ongoing free cash flow generation to support the development of its bolstered growth pipeline.”
The deal is subject to regulatory approvals, but the boards of both companies have already unanimously approved the acquisition, and are recommending that their shareholders vote in favour of the agreement.
(This article first appeared in The Northern Miner)
