Trelawney wants Augen Gold’s land

Trelawney Mining and Exploration (TRR-V) wants to consolidate its position on the Swayze gold belt by acquiring one of its largest neighbors: Augen Gold (GLD-V)

Trelawney tabled the all-share offer to Augen’s board late on Friday afternoon, with a deadline to negotiate a price of Sunday evening.

Early indications are that this will not be taken as a friendly offer as Augen released a statement saying its attempts to engage Trelawney in meaningful discussions were rebuffed by the company.

For its part, Trelawney says the announcement of its intention to make the offer came after its repeated efforts to engage Augen management in a negotiated transaction were unsuccessful.

Augen says it won’t speculate on the course of action it may or may not take until a review of the offer is completed by a committee of independent board members.

As for the specifics Trelawney is offering Augen shareholders 0.066 Trelawney shares for each Augen share. That values Augen at roughly $55 million or 32¢ per share. Using Augen’s 20-day volume weighted average the deal would make for a 40% premium to 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 currently has close to $100 million in its coffers while Augen has $7.8 million.

The deal is already being favored by some of Augen’s largest investors which combined hold 42% of Augen shares and consist of such names as Libra Advisors LLC, Sprott Asset Management LP, Augen Capital Corp. and Mineralfields have signed lock-up agreements supporting the offer.

On a conference call, Trelawney’s president and chief executive Greg Gibson, says the move is part of the company’s plan to 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.”

“We’ve now drilled to over 1,000 metres at Côté Lake and the project continues to grow,” he went on to say, “from the induced polarization survey we have a good idea of direction of the mineralization and it only makes sense at this time to acquire additional land around the property.”

Augen controls 236.85 sq km of mining claims in the Southern Swayze Greenstone Belt, including the formerly producing Jerome Gold Mine. The area is immediately 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 Break.