Streaming company Sandstorm Gold will take over gold explorer Mariana Resources to get its hands on its share of the promising Hot Maden gold project in Turkey.
Canadian royalty and streaming firm Sandstorm already owns 7% of Mariana and will buy the remainder of the company in a cash and shares deal valuing Mariana at £166 million (US$213 million).
After the takeover, Sandstorm said it would sell off Mariana’s 30% interest in Hot Maden in return for a gold stream.
Mariana shareholders will end up with 19% of the combined entity, £0.28 per share in cash and shares in a spinoff holding Mariana’s exploration projects in Argentina, Ivory Coast and Turkey. The deal value represents an 88.3% premium over the 20-day average Mariana share price to April 25.
Effectively paying £166 million for 30% of Hot Maden, Sandstorm said the plan to sell Mariana’s interest in the joint venture with Turkish company Lidya would add “significant future cash flow growth potential to the stream and royalty portfolio”.
Sandstorm CEO Nolan Watson will run the combined companies and Mariana CEO Glen Parsons will “continue to manage the exploration properties”.
Watson said the potential Hot Maden stream would help finance the asset build at the right cost.
“By combining Mariana and Sandstorm and subsequently converting the Hot Maden joint venture interest into a gold stream, we can unlock the inherent value of Hot Maden and deliver the optimal outcome for shareholders without incurring further equity dilution to finance the interest in Hot Maden,” he said.
Earlier this year, Mariana and JV partner Lidya put out a preliminary economic assessment on a proposed 1-1.2 million tonnes per annum mine and plant producing 2.6 million ounces of gold and 142,000t of copper over nine years for an initial cost of £131.8 million.
The PEA showed the copper and gold project in eastern Turkey had an estimated post-tax internal rate of return of 153%, and a post-tax NPV (8% discount) of £1.06 billion, implying Mariana’s 30% share was worth around £320 million.
Mariana chairman John Horsburgh said the takeover was a good deal for shareholders and the company.
“The combination with a company such as Sandstorm not only de-risks Mariana’s exposure as a single development/production asset company, but provides a stronger diverse platform and ability to finance the development of the 30%-owned high-grade gold-copper discovery at Hot Maden in Turkey,” he said.
“The independent directors have also taken into account the high liquidity of Sandstorm shares in arriving at this [positive] recommendation.”
As shareholders of Mariana, Horsburgh would be paid around £247,000 in cash for his holding and Parsons £97,000, on top of the Sandstorm shares.
Shareholders Australian Investors and AngloGold Ashanti, with 3% and 3.87% respectively, have also backed the deal.
A Sprott Asset Management fund (4.5%) and Resource Capital Funds IV (2.38%) were not listed in the agreement as supporters.
The takeover needs to be supported by 75% of shareholders by person or proxy at a future court hearing on Guernsey, where Mariana is incorporated.