Nevada-focused Victoria, Gateway, agree to merger

VANCOUVER — Victoria Gold (VIT-V, VITFF-O) will acquire all of the outstanding shares of Gateway Gold (GTQ-T, GWYGF-O) in a friendly merger that will produce a Nevada-focused explorer with one advanced-stage project.

Gateway shareholders will receive one Victoria share for every pair of Gateway shares held. The two-to-one exchange represents a 20% premium over the 30-day, volume-weighted average share prices of both companies. All remaining warrants, options, or other rights to acquire Gateway shares will be considered on the same share exchange ratio basis.

When the deal is done, Victoria will have some 112.6 million shares issued and outstanding, on a fully diluted basis. Of that, Victoria shareholders will retain 83% and Gateway shareholders will hold 17%.

As part of the transaction, Victoria has agreed to advance a $500,000 loan to Gateway. The bridge loan is repayable at any time without penalty prior to maturity on March 31, 2009, and will provide Gateway with working capital until the acquisition is complete.

Victoria is a gold exploration company with interests in eight properties in north-central Nevada. Kinross Gold (K-T, KGC-N) is a major shareholder, owning 27% of the company, and Newmont Mining(NMC-T, NEM-N) has signed option agreements on five of Victoria’s properties. Of late, the company has focused on the Cove- McCoy project; the focus paid off in the discovery of a new area of gold mineralization dubbed the Helen zone. The first hole into the zone returned 10.96 grams gold per tonne over 38.4 metres.

Gateway is a very similar company, also focused on gold exploration in Nevada. Gateway has nine projects within some of the most prolific gold belts in Nevada. The company’s most advanced project is the Big Springs project, which hosts 1.2 million inferred oz. gold at an average grade of 2.67 grams gold.

News of the mergers lifted Victoria’s share price two pennies to close at 36. Gateway gained one penny to close at 18.