AUSTRALIAN and Canadian listed Chalice Gold Mines will soon be in a position to develop its Cameron gold deposit in north-western Ontario, following a merger with Coventry Resources.
The two companies entered a binding term sheet for the proposed merger, which would combine Chalice’s cash position of $55 million with Coventry’s 100 per cent interest in the Cameron Gold Camp project. The deal comprises one Chalice share for every 1.78 Coventry shares, and values the latter at 23 per cent higher than its closing share price on Friday 27 September.
The merger is the first step in Chalice’s strategy of acquiring quality resource assets capable of generating cash flow, and the nature of the agreement was designed to preserve its cash position.
The Cameron gold deposit has an NI 43-101 and JORC compliant measured and indicated resource of 567,000oz of gold grading 2.45 grams per tonne and an inferred resource of 830,100oz of gold grading 2.11g/t. Two satellite deposits within the project have compliant resources of 59,000oz of gold grading 2.28g/t indicated and 18,200oz of gold grading 1.44g/t inferred (the Dubenski deposit) and 24,000oz of gold grading 3.02g/t indicated and 4600oz of gold grading 2.27g/t inferred (the Dogpaw deposit).
A preliminary economic assessment completed in January indicated annual production of 61,000oz of gold for an initial 10 year mine life, at an average cash cost of US$852/oz. The study estimated initial development and capital expenditure costs of US$110 million.
“The Cameron gold project is a quality asset in a low-risk, favourable mining jurisdiction,” Chalice managing director Bill Bent said.
“What particularly attracted us to this project were the good grades, excellent upside potential and access to good infrastructure, with a local labour force with strong mining experience.
“This project sits right in our sweet spot in terms of our current technical capability and I am very confident we can add significant value to this project with our current team and a focussed exploration budget.”
The merger required approval by two thirds of eligible Coventry shareholders, as well as the ASX, Toronto Stock Exchange and Vancouver Stock Exchange, but was not conditional on approval from Chalice shareholders.
Coventry president Steven Chadwick said the merger represented an excellent opportunity to fund ongoing exploration development of the Cameron project.
“Existing Coventry shareholders will hold approximately 17 per cent of the merged entity and will continue to have exposure to the project through their shareholding in Chalice, while also benefitting from Chalice’s strong balance sheet, experienced technical team and the future growth of the company,” he said.