Three junior companies active in Mexico are merging to form a mid-tier gold producer with two mines and four advanced projects, all below the Rio Grande River.
The merger involves Manhattan Minerals (MAN-T), Great Lakes Minerals (GKM-T) and Santa Cruz Gold (SCG-T). The new company will be based in Vancouver, B.C., and retain the name Manhattan Minerals.
The deal is subject to a formal agreement, due diligence, fairness opinions, and regulatory and shareholder approvals. The projected closing date is late August.
“We view it as a win-win for all shareholders,” said Santa Cruz Chairman John McBride. “We are creating a better piece of paper and so far the market appears to be giving it a resounding `yes’ vote.”
Following the merger, Manhattan will become a “pure play in Mexico”, with more than $18 million in working capital, as well as cash flow of $8-10 million from existing operations.
The two, low-cost mines — Manhattan’s Moris and Great Lakes’ Lluvia de Oro — are on track to produce 65,000 oz. gold this year from a total resource base of 2.7 million oz.
Once the merger is completed, Manhattan would own 100% of both mines, plus two advanced projects near the feasibility stage: Magistral and Quitova. It would also own the Escobal and Palmarito exploration projects, as well as several early-stage gold projects.
Manhattan President Robert Willis says plans are being made to bring two new projects (Magistral and Quitovac) into production within 18 months. By 1998, production from all operations is expected to reach 180,000 oz. at an average cash cost of US$215 per oz.
Under the agreement, each Manhattan shareholder will be entitled to one share of the new company, while holders of Great Lakes shares will receive one share of the new company for every 6.5 shares. Concurrently, Santa Cruz shares will be exchanged on the basis of 1.9 shares for each share of the new company.
Manhattan will remain headed by Robert Willis and Peter Tegart. Gerry Gauthier, vice-president of operations for Great Lakes, will join the management team, along with Santa Cruz President Douglas Martin and Thomas Pladsen, chief financial officer of both Great Lakes and Santa Cruz.
McBride and Great Lakes President Nicholas Tintor will join the Manhattan board and play a role in its development. But the partners and founders of Great Lakes and Santa
Cruz hinted that they may also be looking at a new venture. “We have no plans to retire,” Tintor said.
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