Buyout proposal appears 'premature' – Sierra Minerals
miningweekly.com
By: Liezel Hill
Published on 3rd February 2009
TORONTO (miningweekly.com) – TSX-listed exploration firm Treasury Metals has submitted a nonbinding proposal to miner Sierra Minerals, the firm said on Tuesday.
Sierra said its board would review the takeover proposal and was open to discussions with Treasury, but commented that its initial impression was that the conditional proposal was “premature”.
Treasury proposes that Sierra shareholders would receive 0,8 common shares of Treasury for every Sierra share, which, based on closing prices on January 27, when the proposal is dated, implies a Sierra share price of C$0,22 apiece, the firm said.
Despite the fact that it is has a producing mine, Sierra has not traded above C$0,20 for more than three months.
Treasury currently owns shares representing approximately 9%, of the issued and outstanding shares of Sierra, and also holds a 2,5% net smelter royalty on the firm's Cerro Colorado gold mine, in Mexico.
"Treasury's proposed business combination offers all shareholders immediate and sustainable value creation and represents a very attractive investment opportunity, providing increased liquidity from Treasury's diverse base of retail shareholders as well as fresh branding for what we perceive as a gold-hungry market," said Treasury president and CEO Scott Jobin-Bevans.
Treasury's flagship and most advanced asset is the Goliath project, in Ontario. It also has an exploration property in British Columbia.
Commenting on the proposal, Sierra noted that the document places a number of conditions on the planned transaction, including Treasury coming up with an additional $6-million to $10-million in debt financing to meet the combined entity's working capital needs.
"The Treasury proposal is a validation of the efforts of the new management team and of the value Sierra is to exploration and development stage companies looking to reinvent themselves in this current economic climate,” said Sierra president and CEO Michael Farrant.
“In my opinion, I can certainly see why our company and its positive operating cash flow would be very attractive to them.”
Sierra's Cerro Colorado mine produced 19 669 oz of gold in 2008, and the firm plans to increase output to as much as 30 000 oz this year. |
