Falco snaps up cash-rich Golden Queen
Falco Resources Ltd. [FPC-TSXV; FPRGF-OTC] said Tuesday it has agreed to acquire Golden Queen Mining Consolidated Ltd. [GQM.H-NEX; GQMND-OTCQB] in a share exchange deal worth 36 cents per Golden Queen share.
Under the terms of the arrangement deal, Golden Queen shareholders are entitled to receive 1.18 Falco shares in exchange for each of their Golden Queen shares.
Falco said its offer amounts to a 44% premium based on the closing price of Golden Queen and Falco shares on February 10, 2020.
By acquiring Golden Queen, Falco said it will secure $4.2 million in cash resources, money that can be invested in Falco’s Horne 5 Project which contains 6.0 million ounces of Proven and Probable gold equivalent reserves and is located near Rouyn-Noranda, Quebec.
With a 100% interest in 74,000 hectares of land in the historic Rouyn-Noranda camp, Falco controls 70% of the entire camp, including the Horne Mine and 13 other gold and base metal mines. The Horne Project area includes the former Horne and Quemont mines as well as the Horne 5 deposit. Located 600 metres north of Horne, the Quemont Mine produced approximately two million ounces of gold and 400 million pounds of copper from 1949 to 1971.
The Horne 5 deposit is located immediately below the former Horne Mine, which was operated by the company previously known as Noranda from 1926 to 1976. Those operations produced approximately 2.5 billion pounds of copper and 11.6 million ounces of gold.
Results of a feasibility study announced in October, 2017 envisages a 15-year mine life for Horne 5, producing an average of 219,000 ounces of gold annually at an all-in-sustaining cost of US$399/oz, net of by-product credits, including royalties over the life of the mine. Pre-production construction costs have been estimated at $801.7 million. The feasibility study foresees full mine production by the first half of 2022.
“We are pleased to reach this agreement with Golden Queen as it will provide Falco with a stronger balance sheet and a broader shareholder base which will benefit from the development of the Horne 5 Project,” said Falco President and CEO Luc Lessard. “In addition, we believe that Falco has acquired cash at a reasonable price, in the context of the challenging equity market,” he said. “With this transaction, Falco will secure approximately $4.2 million in cash resources, which can be invested in the Horne 5 Project.”
Golden Queen rallied on the news, rising 18% or $0.045 to 29.5 cents on volume of 451,021. The shares are currently trading in a 52-week range of 17 cents and 35 cents.
Falco eased 6.45% or $0.02 to 29 cents and trade in a 52-week range of 19 cents and 37 cents.
“The board of directors mandated that we focus the search for an advanced gold project within North America while balancing potential risks and return on behalf of the Golden Queen shareholders,” said Guy Le Bel, Golden Queen’s CEO and chief financial officer.
“We are confident in this project’s execution ability with the Falco Resources team,” he said. “Further our shareholders receive an immediate premium to the cash and value of the company in providing this project, creating a positive transaction for both sides.”