Canadian Gold Hunter And Sanu Resources To Merge

With the proposed merger of Canadian Gold Hunter (CGH-T, CGHLF-O) and Sanu Resources (SNU-V, SNULF-O), both part of the Lundin Group of Companies, the combined entity will have exploration properties spanning three continents and key access to financial markets.

Canadian Gold Hunter holds a large and diversified portfolio of exploration projects in Canada, Mexico, Argentina, Chile, Colombia and Peru, while Sanu Resources has a portfolio of gold and base metal exploration projects in Africa, namely several promising projects in the emerging gold-rich, volcanic-hosted massive sulphide belt of western Eritrea, greenstone- gold projects in Burkina Faso and carbonate-hosted copper-zinc- lead mineralization in the Republic of Congo.

Under the proposed business combination, Sanu shareholders will receive 0.5725 shares of Canadian Gold Hunter for each Sanu share they hold. The transaction values Sanu at 23.3¢ per share and represents a 25% premium to its 20- day volume-weighted average closing price.

Sanu’s board of directors approved the proposed business combination after a special committee of independent directors unanimously recommended it.

If the merger goes ahead, Sanu will become a wholly owned subsidiary of Canadian Gold Hunter, with former shareholders of Sanu owning about 17.8% of Canadian Gold Hunter. Following the merger, Canadian Gold Hunter will have an estimated 134.2 million shares outstanding.

“I think the general feeling is that bigger, more diversified groups are going to be easier and simpler to finance,” Wojtek Wodzicki, president and chief executive of both Canadian Gold Hunter and Sanu Resources said in a telephone interview from his office in Vancouver. “Rather than going out and funding a bunch of small companies, it’s better to put the muscle of the group behind one consolidated vehicle.”

Wodzicki adds that there is going to be a shakeout in the junior market and the ones that are well placed to thrive are those with key access to financial markets.

“If we come up with good opportunities, we’re in a group that is in a position to take advantage of that,” he explains. “And not everyone will be in that position. We have access to some of the biggest deal makers in the business.”

Wodzicki says the combined entity would have a strong portfolio with a bunch of drill target-ready projects that “should have some pretty good news flow” over the next couple of months. It would also be represented in all the top jurisdictions in the Americas, as well as in Africa, which, while a longer-term play, has huge exploration potential.

Sanu’s most advanced project, for example, the Hambok deposit, lies in Eritrea — a country where a heightened perception of political risk has kept many competitors away.

Hambok is 15 km from Nevsun Resources’ (NSU-T, NSU-X) Bisha deposit, which lies in a VMS belt that extends from Eritrea up through eastern Sudan, across the Red Sea and into Saudi Arabia.

“It’s probably one of the best undeveloped VMS belts in the world,” Wodzicki says, “and the government is keen to have people like us working there.”

The Hambok deposit covers the strike extensions of the belt of rocks that Bisha is in. Hambok has an indicated resource, at a 0.75% zinc cutoff, of 10.7 million tonnes grading 0.98% copper, 2.25% zinc, 6.84 grams silver per tonne and 0.2 gram gold for 231.1 million lbs. copper, 530.7 million lbs. zinc, 2.6 million oz. sliver, and 68,800 oz. gold.

Hambok also has an inferred resource, at the same cutoff grade, of 17 million tonnes grading 0.85% copper, 1.74% zinc, 5.89 grams silver and 0.19 gram gold for 318.5 million lbs. copper, 652.1 million lbs. zinc, 3.5 million oz. sliver, and 103,800 oz. gold.

Apart from Hambok, Sanu Resources brings additional projects to the table, including a carbonate-hosted copper-lead-zinc exploration project in the Republic of Congo and a greenstone-hosted gold exploration project in Burkina Faso.

For its part, Canadian Gold Hunter has projects ranging from the grassroots stage all the way to advanced resource definition. Its Josemaria copper-gold porphyry project in northwestern Argentina’s San Juan province has an inferred resource of 460 million tonnes grading 0.39% copper and 0.3 gram gold per tonne at a 0.3% copper cutoff, containing 3.9 billion lbs. copper and 4.4 million oz. gold.

The Josemaria project is a large gold-copper porphyry system that has been the focus of 21,616 metres of reverse-circulation and diamond drilling between 2003 and 2007.

Canadian Gold Hunter’s local South American exploration team has a long track record including the Veladero gold deposit, now owned by Barrick Gold (ABX-T, ABX-N). The Veladero mine, also in the San Juan province of Argentina, lies south of Barrick’s Pascua Lama project, about 320 km northwest of the city of San Juan in the Frontera district.

Last year Veladero, a conventional open-pit operation, produced 536,000 oz. gold. Proven and probable reserves at the end of 2008 were estimated at 12.2 million oz. gold.

It was also Canadian Hunter that initially recognized and developed the Bajo de la Alumbrera gold mine, now owned by Goldcorp (G-T, GG-N), Xstrata (XTA-L, XSRAF-O) and Yamana Gold (YRI-T, AUY-N).

At presstime, Canadian Gold Hunter was trading at about 38.5¢ per share with a 52-week trading range of 17¢-$2.19 per share and 110.3 million shares outstanding.

Sanu was trading at about 19¢ per share with a 52-week range of 6-98¢ per share and 54 million shares outstanding.

“When it all comes together, this should be a really interesting company,” Wodzicki says. “We’ll have a very strong technical team backed by a very strong and successful financial and business team. That should position us to take advantage of the opportunities that this market has created and to create some real value in the next up-cycle.”