American Pacific Mining Corp. [USGD-CSE, USGDF-OTCQX, 1QC] has agreed to acquire Constantine Metal Resources Ltd. [CEM-TSXV] in an all-share transaction that will combine advanced projects in Alaska and the western United States.
They include Constantine’s preliminary economic assessment (PEA)-stage Palmer zinc-copper-gold-silver massive sulfide project in Southeast Alaska. Constantine’s partner is Dowa Metals & Mining Co. Ltd. of Japan.
Palmer hosts two NI-43-101-compliant resources, the Palmer Deposit and AG Zone Deposit, with a combined resource of 4.68 million tonnes of 10.2% zinc equivalent in the indicated category and 9.59 million tonnes of 8.9% zinc equivalent in the inferred category.
A PEA, which was amended in March, 2022, envisages a low capex, low operating cost, high margin underground mining operation with an 11-year mine life at 3,500 tonnes per day and a pre-production capital cost of US$278 million.
Another key asset will be Madison, a past-producing high-grade copper-gold skarn and porphyry system located in Montana. The project is being advanced under an earn-in joint venture deal that allows Kennecott Exploration, a unit of the Rio Tinto Plc [RIO-NYSE] to earn a 70% interest by spending US$30 million.
The combined company will be well funded with a cash balance exceeding $10 million, allowing American Pacific to aggressively progress projects while leveraging spending commitments of partners.
American Pacific shares advanced on the news, rising 16% or $0.08 to 58 cents. The shares are currently trading in a 52-week range of $1.40 and 33 cents.
Constantine Metal shares rose 38% or 11 cents to 40 cents on volume of 264,270. The shares were trading in a 52-week range of 77 cents and 24 cents.
“This is a transformational step for American Pacific as the Palmer project gives us an established PEA-stage asset with a tremendous amount of exploration upside,’’ said American Pacific CEO Warwick Smith. “We are very impressed with the quality of technical work completed by Constantine and Dowa to date and look forward to collaborating with our new partners and stakeholders to expand resources and realize the full potential of this high-grade VMS system while continuing to deliver exposure to progress and new discoveries across our existing portfolio of highly prospective past-producing exploration projects.’
Under the transaction, Constantine shareholders can receive 0.881 of a common share of American Pacific for each Constantine share held. All outstanding Constantine stock options will be exchanged for options of American Pacific. All of Constantine’s outstanding warrants can be exercised to acquire common shares of American Pacific, in amounts and at exercise prices adjusted according to the exchange rate.
The consideration values Constantine at approximately 43 cents per share, representing a premium of approximately 48.6% to Constantine shareholders, based on the 20-day volume weighted average price of each company at the close of trading on August 12, 2022.
When the transaction closes, Constantine shareholders will hold approximately 31.4% of American Pacific shares.
The arrangement has been unanimously approved by the boards of both companies. Directors and senior officers of Constantine, along with certain Constantine shareholders, including Michael Gentile and John Tognetti, holding 27% of the outstanding Constantine shares, have agreed to back the deal.