Shares of Bonterra Resources Inc. [BTR-TSXV; BONXF-OTC; 9BR1-FSE] and Metanor Resources Inc. [MTO-TSXV; MEAOF-OTC] were active Tuesday June 19 on news that the companies have agreed to create a new gold exploration and development company, focused on Quebec’s Urban Barry mining camp.
Under a June 17, 2018 agreement that was announced after the close of trading Monday, Bonterra will acquire all of the issued and outstanding shares of Metanor for 73 cents in equity consideration at an exchange ratio of 1.6039 Bonterra shares for each Metanor share.
The $78 million purchase price represents a 40% premium on the volume weighted average price of Metanor’s common shares on the TSX Venture Exchange on June 15, 2018, and a 30% premium on the closing price of the shares on the same day.
On Tuesday, Metanor shares jumped 17.8% or $0.10 to 66 cents on volume of 560,960. The 52-week range is 48 cents and 92 cents. Bonterra advanced 1.10% or $0.005 to 46 cents.
Immediately prior to the completion of the Metanor acquisition, Bonterra will spin out its Larder Lake assets in Ontario and a specified amount of cash into a new exploration company.
Also, Bay Street financier Eric Sprott, who already controls 12.1 million shares and 5.1 million warrants to acquire shares in Metanor (16% of the shares on a fully diluted basis), has agreed to back the arrangement by taking no action that would interfere with its completion.
Sprott is also a shareholder of Bonterra, recently holding 19 million shares or approximately 8.41% of the outstanding shares of that company.
Metanor Resources’ flagship assets are the Bachelor Mine and Barry Project, in addition to 15,000 hectares of exploration ground in the heart of the Urban-Barry Camp.
The key benefits to Bonterra include a clear and cost effective pathway to bringing its Gladiator deposit into production, the companies said. The deal also provides access to and control of an expandable mill/processing facility that is centrally located in the Urban Barry Camp.
Since commencing exploration on the 100%-owned Gladiator Project in 2015, Bonterra has transformed a property with a small, high-grade gold deposit (273,000 inferred ounces grading 9.37 g/t gold) into a significant high-grade gold discovery, with a clear potential for a multi-million ounce, high-grade mining operation.
That enabled the company to raise $40 million last year from a number of financings, including $5.2 million from Kinross Gold Corp. [K-TSX; KGC-NYSE] and $20 million from Sprott Capital Partners. Other key investors include VanEck and Kirkland Lake Gold Inc. [KL-TSX, NYSE], each with 7.72% and 9.42% respectively.
Expectations are high because the Gladiator Project is located in the Urban-Barry Greenstone Belt in the eastern Abitibi, a region that boasts a long history of exploration and mine development. Other active companies in the region include Osisko Mining Inc. [OSK-TSX; OBNNF-OTC], which has launched an 800,000-metre drilling program on its Windfall Lake Gold deposit, located 8 km northwest of Gladiator.
Bonterra’s property portfolio also includes the Larder Lake gold project in eastern Ontario, which contains an indicated and inferred resource of 960,000 ounces at 5.4 g/t gold. That estimate does not yet include 49 drill holes completed by Gold Fields Ltd. of South Africa at a cost of $6 million.
Bonterra acquired the project in March, 2016, from Kerr Mines Inc. [KER-TSX; KERMF-OTCQB; 7AZ1-FSE] for $4.95 million in cash and shares.
However, the company has focused most of its efforts on the Gladiator Project, which covers three properties known as West Arena, East Arena and Coliseum, part of a property package that covers 10,540 hectares.
Bonterra’s involvement in the area dates back to 2009. But it wasn’t until Osisko acquired a 19.9% stake in the company in June 2015 that investors began to sit up and take notice.