Integra Resources (TSXV: ITR) has agreed to acquire Florida Canyon Gold (TSXV: FCGV), promoting it to the status of producer and providing immediate revenue to help build its pipeline of development projects.
The new company aims to produce 70,000 oz. of gold per year from the Florida Canyon gold mine, a well-established heap leach operation in Nevada.
Integra explained on Monday that the merger includes two key development projects. These include Integra’s DeLamar project in Idaho, and the Nevada North project. Both projects are within three-hour drives of Florida Canyon, located in the Great Basin, which spans most of Nevada and parts of Utah, Oregon, Idaho, and California. The merger is set to close by year-end.
Record gold prices have spurred increasing consolidation in the sector, leading companies in the Great Basin and beyond to pursue mergers to strengthen their positions. Calibre Mining (TSX: CXB) (OTCQX: CXBMF), Endeavour Mining (LSE: EDV) (TSX: EDV), and Equinox Gold (TSX: EQX) (NYSE-AM: EQX) have all transitioned from explorers to producers in the past five years through strategic acquisitions. Meanwhile, other companies have focused on expanding their asset portfolios.
“This merger fulfills our goal to become a gold producer in the western U.., specifically in the Great Basin,” said Integra executive chair George Salamis.
“The cash flows from Florida Canyon will fund future exploration and permitting initiatives, reducing the need for dilution by returning to the market for financing.”
Furthermore, Integra will issue 0.467 of a share to Florida Canyon Gold shareholders for each share they own, resulting in a 60-40 ownership split between Integra and Florida Canyon shareholders.
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Merger timely given current gold prices
Florida Canyon is an open-pit mining operation located in Nevada that’s demonstrated solid operating performance in recent years.
In 2023, it produced approximately 71,000 ounces of gold equivalent (AuEq) at net cash costs of USD$1,368 per ounce and all-in sustaining costs (AISC) of USD$1,654 per ounce. The 2024 NI 43-101 Technical Report indicates a seven-year mine life, not including three years of residual leaching.
This report also projects an after-tax Net Present Value (NPV) at a 5 per cent discount rate of USD$128 million. This calculation uses a base case gold price of USD$2,200 per ounce for 2024, USD$2,150 per ounce for 2025/2026, and USD$1,900 per ounce thereafter.
Integra will replace the surety bond guaranteed by Alamos Gold (TSX: AGI) (NYSE: AGI) as part of the merger, ensuring operational stability and regulatory compliance for Florida Canyon. Alamos acquired Argonaut Gold’s Magino mine in Ontario and spun out the rest of Argonaut’s assets to form Florida Canyon.
Furthermore, Salamis said the merger with Florida Canyon is particularly timely given the current record gold prices.
He mentioned that investors such as Wheaton Precious Metals (TSX: WPM) (NYSE: WPM) (LSE: WPM) and Beedie Capital strongly support the deal. He also suggested that analysts might re-rate the stock with a higher forecast price, potentially enhancing investor confidence.
“The merger opens up the investment pool, attracting those who only invest in producing assets with cash flow,” Salamis said. “With gold prices at record highs, this deal positions us for a potential future re-rating as we advance our development projects.”
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Exploration potential makes Florida Canyon an attractive target
Besides the operational synergies, Salamis points out the exploration potential that made Florida Canyon an attractive target, despite the main asset not having seen drilling in 20 years.
He also notes the presence of “low-hanging fruit” in “obvious” targets adjacent to the open-pit mining operation. Additionally, the company recognized that it can start exploring the historical 300,000-ounce gold resource in the area immediately since it is already permitted.
The Nevada North project, which includes the Wildcat and Mountain View deposits, offers a 13-year mine life and a projected yearly output of 80,000 ounces of gold. This project also provides significant exploration potential and synergies with Florida Canyon.
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