Argonaut Raises $150M For Friendly Merger With Castle Gold

VANCOUVER — Privately held Argonaut Gold has closed a brokered private placement meant to fund its proposed takeover of Castle Gold (CSG-V).

In an update on takeover proceedings, kick-started Oct. 28, Castle Gold said that Argonaut has raised $150 million.

The merger deal, supported by Castle Gold management and its board, would have Argonaut pay a minimum of $1.25 and a maximum of $1.50 a share for Castle Gold. For every 1% the price of gold exceeds US$1,050 per oz. relative to its average price between Dec. 18 and 24, 1¢ will be added to the minimum offer.

The minimum offer is a 39% premium over Castle Gold’s closing price the day before the deal was announced.

Castle Gold, with about 85 million shares fully diluted, will cost Argonaut at least roughly $106 million. The price ceiling for Castle Gold is just shy of $130 million.

So far, Castle Gold reports, shareholders representing 54% of fully diluted common shares have supported the takeover. All told, to succeed the offer needs two-thirds support by Dec. 24.

Castle Gold operates two gold mines, El Castillo in Durango state, Mexico, and El Sastre in Guatemala. It owns a 100% interest in the former and 50% in the latter.

The bulk of Castle Gold’s production comes from the El Castillo mine. In the third quarter, 2.6 million tonnes of ore grading 0.42 gram gold per tonne was mined at the Mexican operation, with a waste-to-ore ratio of 1.47. The company produced 7,655 oz. gold at El Castillo during the third quarter.

El Castillo’s proven and probable reserves stand at 46.8 million tonnes grading 0.5 gram gold for 752,000 contained ounces gold.

Castle Gold is also advancing its flagship exploration project, La Fortuna, in Durango state, Mexico, where so far it has delineated a measured and indicated resource of 4.8 million tonnes grading 1.98 grams gold.

At presstime, Castle Gold shares traded at $1.30.