Calibre Mining Corp. (TSX: CXB; OTCQX: CXBMF) is set to acquire Marathon Gold Corp. (TSX: MOZ) in an all-stock transaction worth C$345 million. The deal will create a mid-tier gold producer with an estimated annual production of 500,000 ounces per year and add a top-tier gold project to its portfolio.
On Monday, Calibre said the combined company expects a robust annual operations cash flow of US$380 million.
Marathon shareholders will receive 0.6164 Calibre common shares for each Marathon share they own, each valued at C$0.84. This is a 32 per cent rise in value based on current prices and a 61 per cent increase based on the average prices of Calibre and Marathon in the 20 days leading up to November 10.
Under the agreement, Calibre will own approximately 66 per cent and Marathon 34 per cent of the combined company. Marathon will also be entitled to nominate one member to the board of directors of Calibre.
Calibre is acquiring 66.6 million Marathon shares at a price of C$0.60 per share, generating proceeds of C$40 million. This acquisition grants Calibre a 14.2 per cent equity interest in Marathon.
The companies expect to complete the acquisition on Tuesday.
Acquired asset is expected to be the largest gold mine in Atlantic Canada
The financial stability offered by Calibre’s current mine operations in the Americas will allow for the “seamless” construction of the Valentine Gold Project in Newfoundland and Labrador.
The project’s feasibility study outlined an average gold production of 195,000 ounces of gold per year during the first 12 years of operations. The first production at Valentine’s is expected for the first quarter of 2025.
Valentine Gold is expected to be the largest gold mine in Atlantic Canada and is comprised of 20 kilometres of mineralized deposits.
End of October, Marathon said that the Newfoundland Minister of Environment and Climate Change released the proposed addition of the Berry deposit to the Valentine project from its environmental assessment (EA) process.
“I have no doubt that the union of Marathon’s experienced team and well-advanced Valentine Project based in Canada, with Calibre’s production assets, robust treasury, free cash flow, flawless track record in execution and high-impact exploration opportunities will unlock significant value for the shareholders of both companies,” Calibre’s chairman Blayne Johnson said in a statement.
“I would also like to thank Clive Johnson and B2Gold Corp. (TSX: BTO) (NYSE AMERICAN: BTG) (NSX: B2G) for not only entrusting us to progress the Nicaragua assets but for the continued support of our team including their vote supporting this transaction.”
B2Gold holds 27 per cent of the outstanding Calibre common shares.
On Monday, Calibre’s stock saw a 12.77 per cent drop to $1.20 on the Toronto Stock Exchange.
Calibre and Marathon Announce Combination to Create a High-Growth, Cash Flow Focused, Mid-Tier Gold Producer in the Americas with Expected Annual Production of 500,000 ounces. #GrowingTogether #CalibreMining #gold https://t.co/Je6ukcK3BK
— Calibre Mining Corp. (@CalibreMiningCo) November 13, 2023
Analysts at TD Securities Inc. told Calibre’s board of directors that, according to its assessment and considering certain factors, the payment in the transaction is fair for Calibre. Similarly, Maxit Capital LP and Canaccord Genuity Corp. said the compensation Marathon shareholders are set to receive is fair from a financial point of view.
“The combined company will have three high-quality, cash-flowing gold assets, a strong balance sheet, and leadership with proven credentials in value creation,” Marathon CEO Matt Manson said. “The transaction offers the ability to fully realize the potential of Valentine without the limitations of the single asset project developer,” he added.
“Shareholders will continue to participate in the success of Valentine’s development, supplemented now with a renewed focus on exploration and discovery and the considerable upside potential of Calibre’s own proven operations and cash flow growth.”