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Gold producer Mako Mining (TSXV: MKO) is expanding into South America with the proposed acquisition of Goldsource Mines (TSXV: GXS) and its flagship asset, the Eagle Mountain gold project in Guyana.
An agreement was struck on Tuesday for Mako Mining to acquire Goldsource in an all-stock deal, with Goldsource shareholders receiving 0.22 of a Mako common stock for each share held. By company calculations, this consideration equates to an upfront premium of roughly 41% based on spot prices.
At presstime (9:30 a.m. ET), Mako’s shares traded down 1.1% at C$2.53 apiece for a market capitalization of C$166.5 million. Goldsource Mines was flat at C$0.395, with a market capitalization of C$23.6 million.
Upon completion, Mako will own approximately 84% of the combined company, which will continue to be listed as a Tier 1 mining issuer on the TSX Venture Exchange. Existing Goldsource shareholders will hold the remaining 16% interest.
Both parties anticipate the deal to be completed in the second quarter of 2024.
This acquisition, says Mako, creates a “clear path to over 100,000 ounces per year of gold production with a demonstrated record of fiscal discipline.”
It currently operates the high-grade San Albino gold mine in Nicaragua, which last year recovered 34,982 ounces of the metal, including a record 11,567 ounces from the fourth quarter. The mine entered production in the second quarter of 2021.
The Eagle Mountain project adds another high-quality gold asset in a mining friendly jurisdiction to Mako’s portfolio.
A January 2024 preliminary economic assessment outlined a potential 15-year mine operation, with a phased development plan and resources of 1.18 million oz. in the indicated category. The project has an estimated after-tax net present value (discounted at 5%) of $292 million and an internal rate of return of 57%.
“The scalability of Goldsource’s Eagle Mountain is a direct analogue to that of Mako’s San Albino mine,” Mako CEO Akiba Leisman said in a news release. “Both properties have district-scale potential, with the ability to unlock that potential through cash flow.”
He also noted that the teams at Mako and Goldsource have worked together as colleagues going back nearly two decades, which makes the integration seamless.
“This team has a solid track record and many decades of experience building mines, which is a unique offering for a junior gold producer and one that we believe is a great fit for our phased development plans at Eagle Mountain,” Goldsource executive chairman Eric Fier added.
To fund near-term activities at Eagle Mountain until the closing of transaction, Wexford, Mako’s largest shareholder, has provided Goldsource with a bridge loan of C$2 million.
