Trelawney Mining and Exploration (TRR-V) is looking to consolidate its position in the Swayze gold belt in northern Ontario, by acquiring one of its largest neighbours: Augen Gold (GLD-V).
Trelawney tabled the all-share offer to Augen’s board late Friday afternoon on July 8, 2011, with a Sunday deadline to negotiate a price.
Augen released a statement saying its attempts to engage Trelawney in meaningful discussions were rebuffed by the company.
Trelawney says the announcement of its intention to make the offer came after unsuccessful efforts to engage Augen management in a negotiated transaction.
Augen says it won’t speculate on its course of action until a review of the offer is completed by a committee of independent board members.
Trelawney is offering Augen shareholders 0.066 of a Trelawney share for each Augen share. That values Augen at $55 million, or 32¢ per share. Using Augen’s 20-day volume weighted average, the deal represents a 40% premium for Augen shareholders.
Trelawney is pitching the offer as a chance for Augen shareholders to gain ownership in a larger company with better financial capability and greater trading
liquidity.
Trelawney has close to $100 million in its coffers, while Augen has $7.8 million.
Some of Augen’s largest investors already favour the deal. Libra Advisors LLC, Sprott Asset Management, Augen Capital and Mineralfields have signed lock-up agreements supporting the offer. Combined, they hold 42% of Augen shares.
On a conference call, Trelawney’s president and chief executive, Greg Gibson, said the move would consolidate the original 2003 camp around its Côté Lake deposit.
“It has always been part of our plan to consolidate or secure as much land as possible in the area,” Gibson said. “It’s just part of our business plan going forward.
“The Côté Lake project continues to grow,” he added. “From the induced polarization survey we have a good idea of the direction of the mineralization, and it only makes sense at this time to acquire additional land around the property.”
Augen controls 236.9 sq. km of mining claims in the Southern Swayze greenstone belt, including the formerly producing Jerome gold mine. The area is adjacent to Trelawney’s Côté Lake deposit.
The claims cover a 45-km-long section of the Ridout deformation zone, believed to be the western extension of the Kirkland Lake and Larder Lake breaks.
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