Aquiline acquiring Absolut (October 22, 2007)

Vancouver — Aquiline Resources (AQI-T, AQLNF-O) plans to take over Absolut Resources (ABS-V, ABSKF-O) in a transaction that will create a gold division for the company.

Aquiline already holds almost 2.8 million Absolut shares, about 9.7% of the company. Under a binding agreement, Absolut shareholders will receive 0.1 Aquiline share or warrant for each share or warrant in Absolut.

The deal represents a 70% premium on Absolut, based on its share value on Sept. 28, and a 47% premium over its 2-month volume-weighted average.

Aquiline will create a subsidiary to be merged with Absolut; the resulting entity would be wholly owned by Aquiline.

Looking to close the deal by year-end, Aquiline will issue about 2.6 million shares in the transaction, or less than a 5% dilution.

Both boards support the proposed deal, which still requires regulatory approvals and the vote of at least two-thirds of the disinterested shareholders of Absolut.

Once the merger is complete, Aquiline’s gold arm will hold Absolut’s advanced-stage Pico Machay project, in west-central Peru’s Huancavelica province, a high-sulphidation epithermal gold system.

Using a cutoff grade of 0.3 gram gold per tonne, an inferred resource of 15.9 million tonnes of 0.85 gram gold has been reviewed at Pico Machay for about 437,000 contained ounces gold in the oxide and mixed zone. Another 8.9 million inferred tonnes at 0.51 gram gold has been estimated in the sulphide zone, about 146,000 contained ounces.

Absolut is in the midst of completing engineering and metallurgical studies to secure project permitting at Pico Machay. The planned development would be an open-pit, heap-leach operation. Being near surface, the project is expected to have a low strip ratio.

Absolut also holds the Chaparra project, in southern Peru, hosting a series of high-grade gold-mineralized veins. Small-scale historic mining is reported to have averaged about 18.2 grams gold.

Aquiline’s Calcatreu project, in Rio Negro province, Argentina, will also go into its new gold division. Calcatreu is a gold-silver-mineralized vein system hosting an indicated resource of 6.16 million tonnes grading 3.04 grams gold and 28.1 grams silver per tonne, about one-quarter of which is classified as oxide. The project also holds another 1.9 million inferred tonnes at 2.1 grams gold and 19.4 grams silver.

An initial feasibility study completed on Calcatreu earlier this year indicated positive economics based on a 2,000-tonne-per-day open-pit operation producing about 97,000 oz. gold equivalent annually over a 4.5-year mine life. Cash costs of US$280 per oz. are projected over that period with total capital costs of $79.2 million to build the operation.

Although the study reviews the use of cyanide in the extraction of gold from Calcatreu ore, the province of Rio Grande has placed restrictions on its use in mining.

“With gold prices approaching record highs and Absolut making steady progress towards production at Pico Machay, now seemed like an excellent time for Aquiline to expand its gold interests,” explained Aquiline president and CEO Marc Henderson in a statement. “Our Calcatreu project is an attractive asset — particularly in the current price environment — but has been totally overshadowed by Navidad.”

Aquiline is also advancing its Navidad silver project, in southern Argentina’s Chubut province. Based on a 50-gram silver-equivalent cutoff grade, the deposit hosts an indicated resource of 93.4 million tonnes at 102 grams silver and 1.4% lead for about 305 million contained ounces silver. The project also holds 11 million inferred tonnes grading 65 grams silver.

Last year, a court awarded Navidad to Aquiline, in trust, following a legal battle with IMA Exploration (imr-v, imr-x). IMA, which is seeking an appeal through the Supreme Court of Canada, was found to have breached a 2002 confidentiality agreement with Newmont Mining (NMC-T, NEM-N).