Colorado Resources Ltd. [CXO-TSXV; CLASF-OTC] and Buckingham Copper Corp. said Wednesday May 8 that they have entered into a non-binding letter of intent that contemplates the potential acquisition by Colorado of all the issues and outstanding shares of Buckingham.
Colorado shares were active on the news, rising 25% or $0.015 to 7.5 cents on volume of 761,200. The shares are trading in a 52-week range of 4.5 cents and 18 cents.
Colorado is engaged in exploration in British Columbia’s Golden Triangle region, where it current holds roughly 1,200 km2 of mineral claims, including an option to acquire an 80% interest in the KSP property, which covers 30,504 hectares and is located 15 km southeast of the past-producing Snip gold mine. It also holds a 100% interest in the North Rok property which covers 21,179 hectares and is located 15 km northwest of Imperial Metals Ltd.’s [III-TSX] Red Chris Mine development in northwestern B.C.
North Rok hosts an inferred resource of 132.3 million tonnes, averaging 0.22% copper and 0.26 g/t gold.
Under the terms of the LOI, if the transaction proceeds, all of Buckingham shares will be exchanged for Colorado common shares on the basis of 0.50 of a Colorado share for each Buckingham share. The exchange ratio implies a value of $1.25 million for 100% of the Buckingham shares at an equivalent price of 10 cents per share. This represents a premium of 67% based on the closing price of Colorado shares on the TSX Venture Exchange on May 3, 2019.
Colorado said it is contemplating the acquisition of Buckingham for the following key reasons:
The deal would add key ground to Colorado’s Golden Triangle land package. Buckingham has an option to earn a 100% interest in the Moat property, which is strategically located between Colorado’s Kinaskan-Castle property and GT Gold’s [GTT-TSXV; GTGDF-OTC] Tatogga property. Tatogga contains high-grade epithermal gold-silver-copper vein-style mineralization at the Saddle South area and high-grade, large tonnage gold-copper porphyry mineralization at the Saddle North area.
Similar styles of mineralization have been documented at Colorado’s Castle Central and Castle East occurrences, reflected in large-scale gold-copper soil geochemistry with coincident IP geophysical anomalies, located only 4 km along a geological trend to the west of Tatogga. High-quality gold-copper targets outlined by Colorado during the 2016-2018 field seasons have yet to be drill tested.
Buckingham owns 100% of the Sofia property, which covers 9,113 hectares and is located approximately 30 km north of Centerra Gold Inc.’s [CG-TSX; CAGDF-OTC] Kemess Project. The property includes several large copper-gold porphyry targets based on coincident geophysical-geochemical anomalies, and numerous precious-metal vein prospects as well.
Other key reasons for a potential acquisition include Buckingham’s highly experienced management team, which includes Michael Cathro, Dr. Jim Oliver, Mark Rebagliati, Alex Walcott and Justin Himmelright. The team is highly familiar with the Colorado land tenure, and possesses world-class experience in the regional geology of the Golden Triangle, having worked extensively on its contained gold-copper porphyry and epithermal gold-silver-copper mineral systems.
Under the agreement, Buckingham will be bringing through concurrent financing a minimum of $2.5 million, and a $1.5 million work program being planned for exploration at Castle and Moat. Work is expected to include ground-based exploration leading to drilling in the third quarter of 2019.
As contemplated, the proposed transaction and concurrent financing will result in minimal dilution for Colorado shareholders. Existing Colorado shareholders will wind up owning approximately 76.9%, Buckingham shareholders owning 7.7% and the participants of the concurrent financing owning approximately 15.4% of the post-closing issued and outstanding Colorado shares.