Mineweb article regarding same...
Canadian diamond explorers to merge
By: Nicole Mordant
Posted: 2003/05/20 Tue 17:53 PDT | © Mineweb 1997-2003
VANCOUVER – A titter of excitement rippled through Canada’s diamond exploration industry today when two juniors, both whose share prices have been in an upward trajectory this year, announced that they would merge. The planned tie-up between Northern Empire Minerals [TSX-V: NEM] and Stornoway Ventures [TSX-V: SWV] got the thumbs up from analysts, most of whom had been expecting the already cosy ties between the two companies to be firmed up at some point. The only potential bone of contention was the deal ratio, which attributes more value to Northern than to Stornoway.
”In our opinion, the combination makes enormous sense in the creation of the penultimate diamond exploration vehicle in Canada with exposure to over 11 million acres in all the key play areas,” said Eric Zaunscherb of Raymond James in Vancouver.
Stornoway and Northern, together with Hunter Exploration, last year joined hands to explore for diamonds in Canada’s remote far north territory of Nunavut. Still in its very early stages of exploration on the Melville Peninsula, the Aviat joint venture, as it’s called, announced earlier this year that it had discovered a significantly diamondiferous kimberlite, the first to be discovered in eastern Nunavut. Stornoway and project operator Northern Empire each have a 35% stake in the 7-million acre Aviat Project, which will now be consolidated under one roof.
“The critical mass will reduce the cost of capital and concentrate the talents of a highly effective management,” Zaunscherb said.
Other close ties already exist between the two companies, not least the fact that Bruce McLeod, a well-known personality in Canadian mining circles, is a core executive of both: Chief Operating Officer of Stornoway and Chief Financial Officer of Northern Empire. The management of the new company reads like a who’s who of Canadian mining. Stornoway CEO Eira Thomas, who is famous for leading the exploration team that discovered the Diaviak diamond pipes, now Canada’s newest diamond producer, will become CEO of the combined company. Stornoway President Catherine McLeod-Seltzer, who will be co-chairman with Northern Empire President John Robins, co-founded Arequipa Resources, a gold exploration company operating in Peru, which was sold to Barrick for $1.1 billion in 1996.
Looking at the transaction details, each Stornoway shareholder will receive 0.8734 shares in Northern Empire for each Stornoway share they hold. Stornoway shareholders would have been happier with a one-to-one ratio, but their slightly reduced holding in the combined entity takes cognisance of the greater exposure outside Aviat that Northern Empire has in its quiver. Second only to De Beers in its land holdings in Canada, Northern Empire has approximately 10 million acres of mineral rights currently under exploration for diamonds. Its other prospective areas are the Otish Mountains of Quebec, Victoria Island and the Churchill district.
Despite the general applause for the transaction, both companies share prices came under pressure today, possibly at the mercy of a ‘buy on rumour, sell on fact’ scenario. Northern Empire’s share price ended down 3.8% at C$1.52, still a whopping distance from the 30 Canadian cents at which it began the year. Stornoway lost 4.2% to C$1.36; it has had an equally spectacular run from the mid-20 cent range at the start of 2003. Retail investors have also liked both speculative because of their high liquidity. |
