VANCOUVER — It's been a busy twelve months on the acquisition front for Agnico Eagle Mines (TSX: AEM; NYSE: AEM), and the company continued its drive on April 10 with a $32-million bid for Toronto-based explorer Soltoro (TSXV: SOL; US-OTC: SLTOF).
The deal effectively completes a regional play Agnico kick-started in early September when it paid around $205 million for Cayden Resources and its 410 sq. km El Barqueno property in the Guachinango gold district in Jalisco state, Mexico.
Under terms of the deal, Soltoro shareholders will receive 0.00793 of an Agnico share, 1¢ in cash, and one share valued at 2¢ in a spin-out company.
Agnico will pick up the El Rayo, El Tecolote, La Tortuga, San Pedro and Quila exploration projects. Meanwhile, the new Soltoro vehicle will hold the Gavilan, El Santuario and Chinipas properties outside of Jalisco, plus around $2 million in cash.
The offer represents a premium of roughly 51% based on Soltoro's 20-day, volume-weighted average price as of April 9, and a 55% premium based on the trading day prior to the transaction. Concurrently with the agreement, Agnico will make a loan to Soltoro in the amount of $925,000.
The low-hanging fruit for Agnico is El Rayo, which Soltoro acquired in 2005 and hosts the Las Bolas, Catarina-El Rayo, Highway and Soledad structures. The project's measured-and-indicated resources total around 5.6 million tonnes grading 120 grams silver per tonne and 0.4% lead for 23 million silver equivalent oz.
A small gold resource has also been defined on the northwest end of the El Rayo structure, which includes 540,000 indicated tonnes of 1.63 grams gold and 540,000 inferred tonnes of 1.4 grams gold.
Silver and gold mineralization at El Rayo — which sits next door to El Barqueno — has been has been traced in the structures over an aggregate distance of more than five km. There’s been speculation that El Rayo may be an along-strike extension of the epithermal system at El Barqueno.
In mid-January Soltoro announced it had discovered the Tierra Blanca gold target along El Rayo's western concession boundary. The company reported it had identified anomalous gold mineralization in a series of west-northwest-trending zones of argillic alteration containing varying amounts of subparallel quartz veining or silicification.
Eight chip samples were collected from exposures in the area yielding values up to around 0.16 gram gold. Soltoro indicated it believed that Tierra Blanca "represents the eastern extension of the Poncho and San Diego mineralized trends" on Agnico's property.
In addition to gold values in rock, Soltoro identified a separate weak antimony soil anomaly with gold values at either end. The anomaly is located around 400 metres north of Tierra Blanca, trends east-west, and measures 500 metres in length.
The southeastern portion of the Catarina-El Rayo structure hosts the historic Catarina deposit, where five high-grade silver ore shoots were mined by the Spaniards beginning in 1546. Mineralization at Catarina was developed on several levels over around 500 metres of strike.
“[Our] focus has been to deliver value to its shareholders by spending the majority of its funds in the ground in order to make discoveries and pursue development of its assets," noted president and CEO Andrew Thomson in a release. "The transaction secures the continued advancement of [our] main projects in Jalisco, while also facilitating shareholders’ continued participation in the balance of exploration assets through their ownership of [spin-out] shares."
The offer and premium come at a great time for Soltoro shareholders considering it had been struggling to raise capital. The company closed a $600,000 non-brokered private placement in early November, but was essentially broke at the time of the deal.
Soltoro's shares jumped 38% following the news before closing at 29¢ at the time of writing. The company maintains 75.5 million shares outstanding for a $22 million press time market capitalization.
BMO Capital Markets analyst David Haughton noted that the "acquisition helps to consolidate Agnico’s land holdings in the area, which is one of several potentially promising exploration properties currently in the development pipeline."
BMO Research maintains a stock "outperform" rating on Agnico with a US$28.79 per share price target. The company closed at US$29.34 at the time of writing, and maintains 216 million shares outstanding for a US$6.3-billion press time market capitalization.
Original Article: http://www.northernminer.com/news/agnico-to-consolidate-el-barqueno-with-soltoro-bid/1003570579/
