Dundee announces acquisition of INV Metals

Dundee Precious Metals (TSX: DPM) will add its first project in the Americas to its portfolio by acquiring all the shares it doesn’t already own in junior miner  INV Metals (TSX: INV), which owns the advanced-stage Loma Larga gold project in southern Ecuador.

As part of the deal, Dundee will buy each of the issued and outstanding common shares of INV Metals it does not currently own for 0.0910 of a DPM common share, or about $0.80 a piece. This represents a 63% premium to the closing price of INV Metals stock on the Toronto Exchange on May 28. (Over the last year INV has traded in a range of $0.34 and $1.11 per share.)

Dundee, which owns about 23.5% of INV’s common shares, noted the transaction had strong shareholder support. It also said that Iamgold (TSE: IMG; NYSE: IAG), which is INV’s largest shareholder, is supporting the deal.

The implied equity value of the transaction, on a 100% basis, is about $132 million, or $104 million for the portion not owned by DPM, the parties said.

Dundee’s current portfolio of assets includes two mines in Bulgaria and a copper smelter in Namibia. The acquisition of INV, will hand DPM the Loma Larga gold-silver-copper underground project.

In April, INV submitted an environmental impact study (EIS) for the project. That is the first major step miners need to take in the well-defined permitting process for large-scale mining projects in Ecuador. 

“We believe DPM is uniquely positioned to move Loma Larga forward, and as such, this transaction is not only an excellent outcome for our shareholders, but also one with the potential to offer tremendous benefits for both the project’s national and local stakeholders in the coming years,” Candace MacGibbon, chief executive officer of INV Metals, said in a separate statement.

DPM will also receive four concessions INV has in Ecuador — Carolina, La Rebuscada, Las Peñas and Tierras Coloradas.

Based on Loma Larga’s feasibility study, the underground mine would produce 3,000 tonnes of mineralized material a day in the early years, reaching 3,400 tonnes a day in year five. This would translate into an average yearly gold recovered production of 203,000 gold-equivalent ounces over an initial projected mine life of 12 years.

Ecuador has gained ground as a mining investment destination over the past two years, but opposition to the extraction of the country’s resources could thwart the government’s plan to attract US$3.7 billion in mining investments by 2022.

Last year, mining in Ecuador generated US$810 million in exports, US$430 million in taxes and US$374 million in foreign direct investment.

The INV shareholder vote is expected to be held in July.

“DPM owns the Chelopech gold and copper underground mine in Bulgaria [which] has similar characteristics to Loma Larga with respect to geology, planned mining method and processing flow sheet, and high arsenic concentrates,” Craig Stanley, a mining analyst at Raymond James, commented in a research note. “As well, DPM owns the Tsumeb smelter in Namibia that could process Loma Larga’s high arsenic copper concentrate.”

Stanley also noted that DPM acquired its initial stake in INV in October 2019.

“There had been some local opposition to the development of Loma Larga,” Stanley added. “INV updated its 2018 feasibility study in 2020 because a local community had voted against having any of the mine’s infrastructure within their border (canton): though the mine and deposit are located in a different area, these locals did not want the processing and tailings facilities in their canton. Though the vote was not legally binding (and was disputed by the federal government), INV decided to relocate the processing and tailings facilities to a different canton.”