Agnico to consolidate El Barqueno with Soltoro bid

VANCOUVER — It’s been a busy twelve months on the acquisition front for Agnico Eagle Mines (TSX: AEM; NYSE: AEM), and the company continued its drive on April 10 with a $32-million bid for Toronto-based explorer Soltoro (TSXV: SOL; US-OTC: SLTOF).

The deal completes a regional play Agnico began in September when it forked over $205 million for Cayden Resources (TSXV: CYD)and its 410 sq. km El Barqueno property in the Guachinango gold district in Jalisco state, Mexico.

Under the deal, Soltoro shareholders will receive 0.00793 of an Agnico share, 1¢ in cash and one share valued at 2¢ in a spin-out company.

Agnico will pick up the El Rayo, El Tecolote, La Tortuga, San Pedro and Quila exploration projects. Meanwhile, the new Soltoro vehicle will hold the Gavilan, El Santuario and Chinipas properties outside of Jalisco, plus $2 million in cash.

The offer represents a 51% premium based on Soltoro’s 20-day, volume-weighted average price as of April 9, and a 55% premium based on the trading day before the transaction. Along with the agreement, Agnico will make a loan to Soltoro in the amount of $925,000.

The low-hanging fruit for Agnico is El Rayo, which Soltoro acquired in 2005. The project hosts the Las Bolas, Catarina-El Rayo, Highway and La Soledad structures. The project’s measured and indicated resources total 5.6 million tonnes grading 120 grams silver per tonne and 0.4% lead for 23 million equivalent oz. silver.

A small gold resource has also been defined on the northwest end of the El Rayo structure, and includes 540,000 indicated tonnes of 1.63 grams gold and 540,000 inferred tonnes of 1.4 grams gold.

Silver and gold mineralization at El Rayo — which sits next door to El Barqueno — has been has been traced in the structures over an aggregate distance of more than 5 km. There’s been speculation that El Rayo could be an along-strike extension of the epithermal system at El Barqueno.

In January Soltoro announced it had discovered the Tierra Blanca gold target along El Rayo’s western concession boundary. The company identified anomalous gold mineralization in a series of west- to northwest-trending zones of argillic alteration with varying amounts of subparallel quartz veining and silicification.

Eight chip samples were collected from exposures in the area yielding values of up to 0.16 gram gold. Soltoro said Tierra Blanca “represents the eastern extension of the Poncho and San Diego mineralized trends” on Agnico’s property.

In addition to gold values in rock, Soltoro identified a weak antimony soil anomaly with gold values at either end. The anomaly is located 400 metres north of Tierra Blanca, and trends east–west over 500 metres.

The southeastern part of the Catarina-El Rayo structure hosts the historic Catarina deposit, where five high-grade silver ore shoots were mined by the Spaniards beginning in 1546. Mineralization at Catarina was developed on several levels over 500 metres of strike.

“[Our] focus has been to deliver value to its shareholders by spending the majority of its funds in the ground in order to make discoveries and pursue development of its assets,” president and CEO Andrew Thomson noted in a release. “The transaction secures the continued advancement of [our] main projects in Jalisco, while also facilitating shareholders’ continued participation in the balance of exploration assets through their ownership of [spin-out] shares.”

The offer and premium come at a great time for Soltoro shareholders, considering it struggled to raise capital. The company closed a $600,000 non-brokered private placement in early November, but was essentially out of funds at the time of the deal.

Soltoro’s shares jumped 38% after the news before closing at 29¢ at press time. The company has 75.5 million shares outstanding for a $22-million market capitalization.

BMO Capital Markets analyst David Haughton notes that the “acquisition helps consolidate Agnico’s land holdings in the area, which is one of several potentially promising exploration properties currently in the development pipeline.”

BMO Research has a stock “outperform” rating on Agnico with a US$28.79-per-share price target. The company closed at US$29.34, and has 216 million shares outstanding for a US$6.3-billion market capitalization.