Calibre Mining Corp. [TSXV-CXB, OTC-CXBMF] and Marathon Gold Corp. [TSX-MOZ, OTC-MGDPF] have announced a business combination designed to create a high-growth, cash-flow-focused, mid-tier gold producer in the Americas with expected annual production of 500,000 ounces by 2026.
Under a definitive agreement announced on Monday, Calibre will acquire all the issued and outstanding shares of Marathon Gold. Marathon shareholders will receive 0.6164 of a Calibre common share for each Marathon share held, implying a value of $0.84 per Marathon share or $345 million on a fully diluted basis.
This represents a premium of 32% based on the spot and 61% based on Calibre’s and Marathons 20-day value weighted average price as at November 10, 2023.
In connection with the transaction, Calibre has agreed to purchase 66.7 million Marathon common shares of 60 cents each via a private placement, generating gross proceeds of $40 million, representing a 14.2% equity stake in Marathon on an issued and outstanding basis. Marathon will used the proceeds to fund development at Valentine.
Closing of the concurrent private placement is expected to occur on November 14, 2023 and is not contingent on closing of the broader business combination transaction.
Marathon’s key asset is the Valentine Gold Project in Newfoundland. It consists of a series of five mineralized deposits located along a 32-kilometre system.
A December 2022, updated feasibility study for the project outlined an open pit conventional mining operation, producing 195,000 ounces of gold annually for 12 years within a 14.3-year mine-life.
The project was released from federal and provincial environmental assessments in 2022 and construction commenced in October, 2022. The project has an estimated proven mineral reserve of 1.43 million ounces (23.36 million tonnes at 1.89 g/t) and a probable reserve of 1.27 million ounces (28.22 million tonnes at 1.40 g/t). Total measured resources (including mineral reserves) stand at 2.06 million ounces.
Calibre is an Americas focused, growing mid-tier gold producer with a pipeline of development and exploration projects in Nevada, Washington in the U.S. and Nicaragua. The company recently said it is on track to produce between 250,000 and 275,000 ounces of gold this year, including between 210,000 and 230,000 from Nicaragua and 40,000 to 50,000 ounces from Nevada.
Marathon Gold shares rallied sharply on the news, rising 9.3% or $0.06 to 70 cents on volume of 6.5 million. The shares previously traded in a 52-week range of $1.25 and 49 cents.
Calibre shares eased 12.4% or 17 cens to $1.20 on volume of $2.49 million. The shares trade in a 52-week range of $1.78 and 72.5 cents.
Marathon recently announced the sale of an additional 1.5% net smelter return royalty on its Valentine Gold Project in Newfoundland to Franco Nevada Mining Corp. [TSX-FNV, NYSE] for US$45 million. As a result, Franco-Nevada will hold a 3.0% NSR on the project.