Northern Vertex, Eclipse Gold to merge and create new US gold producer

Northern Vertex Mining (TSXV: NEE; US-OTC: NHVCF) and Eclipse Gold Mining (TSXV: EGLD; US-OTC: EGLPF) have entered into a definitive arrangement agreement for an at-market merger to create a gold producer focused on the western United States. With Northern Vertex as the resulting company, the new entity would hold the Moss heap leach mine in Arizona (through Northern Vertex) as well as the Hercules exploration project in Nevada’s Walker Lane trend (through Eclipse).

In an emailed statement to The Northern Miner, Douglas Hurst, a director of Eclipse and chair of the combined company, highlighted the synergistic timing of the transaction given the recent milestones at both assets and their timing within the greater mining cycle.

“Now is a great time to complete this transaction. Operations at the Moss mine have found their stride and recent permitting is set to unlock the entire property with 538 new drill ready sites. We expect results from phase II drilling from Hercules in January and will have a strong balance sheet and good cash position to go in and follow up. We are still early in the cycle and have an opportunity to create value through expanding near mine resources, exploration drilling and acquisition focused in the Western US.”

As part of the deal, each existing common share of Eclipse would be exchanged for 1.09 shares of Northern Vertex, based on the 20-day average prices of the two companies as of Dec. 4. Once completed, 71% of the combined company would be held by Northern Vertex shareholders, Eclipse equity owners would hold 18% and new shareholders would own the remaining 11%.

The combined company would be led by Douglas Hurst from Eclipse as chair, with the management team made up of Kenneth Berry as president and CEO (Northern Vertex’s current president, CEO and director), David Splett as CFO, Michael Allen as executive VP of corporate development, and Warwick Board as VP of exploration. Five directors would be from Northern Vertex (Geoff Burns, Michael Haworth, David Farrell and James McDonald, in addition to Berry) as well as Marcel de Groot from Eclipse.

“The result of this transaction will be a combined company with a greatly strengthened balance sheet, and an enhanced team with extensive experience growing multi-asset gold companies,” Berry stated in a press release. “This represents a significant step toward our unwavering vision of building a top of the class mid-tier gold producer.” 

Michael Allen, president, CEO and a director of Eclipse,  said the combination “gives Eclipse shareholders exposure to creating value on a larger scale, supported by positive cash-flow” and “aligns all the key elements required toward building America’s next mid-tier gold growth story.”

Maverix Metals has agreed to exercise an estimated 19.5 million share purchase warrants of Northern Vertex, for gross proceeds of $7.8 million. As part of the transaction, the royalty company will then sell these shares to Eclipse for $9.8 million. Proceeds of the private placement offering will be used to buy the shares back from Maverix. Overall, the combined company will have a pro-forma cash balance estimated at $29 million.

The resulting company will have offices in the U.S. and Canada.

The transaction has been approved by the boards of both companies and is subject to approval by Eclipse shareholders and the receipt of regulatory and court approvals, among others. The Eclipse shareholder meeting is expected to be held in February. The agreement includes a $2 million termination fee payable by either party.

In its most recent operating quarter, Northern Vertex’s Moss mine generated 14,673 gold-equivalent oz., at all-in sustaining costs of US$1,317 per ounce. Eclipse holds the 85-sq.-km low sulphidation epithermal gold-silver Hercules property.

This article first appeared in the Canadian Mining Journal, part of Glacier Resource Innovation Group.