Exall, Southern Star to combine (October 16, 2006)

Exall Resources (EXL-T, EXALF-O) and Southern Star Resources (SSR-T, SNSRF-O) have announced plans to merge, a deal that would bring the Gold Eagle project in Red Lake, Ont., under one corporate roof.

The deal, which would create a company with about $400 million in market capitalization, sees Exall shares traded for 0.5428 of a share of the new company, to be named Gold Eagle Mines. Southern Star shareholders get a share-for-share trade, and 3.4 million Southern Star shares held by Exall would be cancelled. Exall shareholders would own about 53% of the new company.

The merger needs approval from shareholders of both companies, and meetings are scheduled for November. Both votes need a two-thirds majority to pass. There are also regulatory and court approvals required. Each company has agreed to a break fee of $7.5 million and has a right to match a competing offer.

The company’s main asset would be at Gold Eagle near Red Lake, where four years of drilling has outlined a resource on McKenzie Island and discovered new mineralization under Bruce Channel.

Exall plans to spin off its oil and gas assets into a new company, called Exall Energy, which would also get about $1 million in cash for operating capital. Shares in the oil and gas company would go to Exall shareholders as a dividend.