Augen Gold directors capitulate after Trelawney raises offer

Ontario-focused gold explorer Trelawney Mining and Exploration (TRR-V) has raised its all-share bid for neighbour Augen Gold (GLD-V) to 0.0862 of a Trelawney share from 0.066 of a share.

The increased offer values Augen at 42¢ per common share based on Trelawney’s closing price on July 8 2011, the last trading day prior to its initial offer, which valued Augen at 32¢ a share.

Trelawney’s share price has pulled back since then however, and based on the company’s closing price on Aug. 25, the implied amended offer is now just 34¢ a share. It increases to 38¢ a share if based on Trelawney’s 20-day volume-weighted average price.

Led by the company’s founder and CEO, David Mason, Augen’s board of directors had outspokenly rejected the initial offer last month as “opportunistic,” “financially inadequate,” “volatile” and “of uncertain value,” among other things. Today’s announcement saw the board change its mind and agree to support the amended offer, though at least one of the directors seemed unpleased by the deal.

Shortly before announcing the board’s recommendation of the improved offer, Augen announced Mason had resigned as a director and officer of the company, effective immediately. No reason was provided for his resignation.

Tim Peterson, chairman of Augen Gold, commented in a prepared statement: “After careful consideration of strategic alternatives, protracted negotiations and the receipt of two fairness opinions from our financial advisers in support of the proposed transaction, and on the recommendation of the special committee, the Augen Gold board of directors recommends that shareholders tender their shares to the amended offer from Trelawney.”

Greg Gibson, president of Trelawney, then went on to note, “This is an exciting transaction for shareholders of both companies who stand to benefit from the optimal development of the Cote Lake deposit and an expanded, contiguous land package.”

If the deal goes through, Trelawney stands to gain Augen’s contiguous land package of 23,685 hectares of staked and patented mining claims in the Southern Swayze greenstone belt of northern Ontario. This includes Augen’s past-producing Jerome gold mine, for which it recently released a National Instrument 43-101 compliant resource estimate outlining a 1.03-million-oz. inferred gold resource contained in 18.7 million tonnes grading 1.7 grams gold per tonne.

As for Trelawney, it has already outlined a sizeable resource at its nearby Côté Lake gold deposit totalling 131 million tonnes grading 1 gram gold for 4.2 million oz. inferred, doing so in little more than a year after discovery. 

Shares of Augen Gold fell 5.5¢ on the news to close at 34¢ on 1.07 million shares traded. Investors had previously been betting Trelawney would make an improved offer greater than 34¢ a share, after Augen put out a press release stating Trelawney had approached the company to propose a raise to the offer by an undisclosed amount.

Shares of Trelawney slipped 4¢ to $3.93 on 357,000 shares traded. They were trading at $4.87 immediately prior to the initial takeover announcement, and have a 52-week range of 76¢-$5.91.