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.
Moneta Gold (TSX: ME) and Nighthawk Gold (TSX: NHK), two juniors with gold development projects in Canada, are planning an at-market, all-share merger.
Moneta will contribute the Tower gold project, near Timmins, Ontario, while Nighthawk holds the Colomac gold project in the Northwest Territories. Recent preliminary economic studies have been published for both projects.
The companies are also planning a concurrent C$12.5 million bought deal financing to advance their flagship properties. A syndicate of underwriters led by SCP Resource Finance have agreed to buy roughly 36.8 million Nighthawk subscription receipts at a price of C$0.34 each.
Nighthawk shareholders will receive 0.42 of a Moneta share for each common share held. Post financing, existing Nighthawk and Moneta shareholders will own about 34% and 66%, respectively, of the combined company.
In a joint statement, Keyvan Salehi, president and CEO of Nighthawk, and Josef Vejvoda, interim CEO & chairman of Moneta, highlighted the deal will bring together two “cornerstone” assets in Canada, and affords the opportunity to create a leading gold development company.
“The combined company will benefit from a strong balance sheet, led by a skilled leadership team, and a high-quality portfolio anchored by two robust, large-scale assets in established and emerging mining camps. We believe that MergeCo offers a truly unique value proposition, and we look forward to working towards unlocking significant value for shareholders of the MergeCo.”
The deal is expected to close in the first quarter of 2024.
Nighthawk shares ended the trading day down 8.9% at C$0.36 apiece for a market cap of C$44 million, while Moneta shares lost C$0.034 to C$0.86, giving it a C$105 million market cap.
A preliminary economic assessment (PEA) completed in September 2022 for Tower outlined a combined open pit and underground mining operation with a 24-year mine life. Roughly 4.6 million oz. of gold would be recovered, generating an after-tax net present value (NPV) at a 5% discount of C$1.1 billion, an internal rate of return (IRR) of 31.7%, and a 2.6-year payback at a gold price $1,600 per oz.
Nighthawk’s properties are district-scale north of Yellowknife. An August 2023 PEA demonstrated the project’s potential for a 290,000-oz.-per-year operation over an 11.2-year mine life. The project could generate a C$1.2 billion NPV with a 5% discount and an after-tax IRR of 35% based on a $1,600 per oz. gold price.
The combined board will consist of seven directors, four from Moneta and three from Nighthawk. The new company will be led by non-executive chair Vejvoda and president and Salehi.
Tower contains a total of 12.8 million oz. of gold, including 149.8 million indicated tonnes grading 0.9 gram gold per tonne (4.3 million contained oz.) recoverable by open pit methods. Another 802,000 indicated tonnes grading 4.67 grams gold (122,000 contained oz.) are recoverable from underground. Inferred resources (95% open pit) come to 235.6 million tonnes at 1.09 gram gold (8.3 million contained oz.).
Several deposits at Colomac suitable for either open pit or underground mining methods have been identified, and they contain a total of nearly 5.1 million oz. of gold. The deposits total 70,432 indicated tonnes grading 1.5 grams gold per tonne (3.4 million contained oz.) and 24,434 inferred tonnes at 2.17 grams gold (1.7 million contained oz.)
