Gold Standard Ventures to acquire Battle Mountain Gold

Gold Standard Ventures (TSXV: GSV; NYSE-MKT: GSV) acquired an initial 19.9% stake in Battle Mountain Gold (TSXV: BMG) in April 2016, and two months later, raised its ownership in the company to 27.6%.

Battle Mountain Gold owns the Lewis gold project, which is next to Newmont Mining’s (NYSE: NEM) Phoenix gold mine in Nevada. Phoenix has been in production since late 2006, and has 7.5 million oz. gold.

Gold Standard Ventures now plans to buy the Battle Mountain shares it does not already own in a cash-and-share deal valuing Battle Mountain’s shares at 59¢ apiece — a 47% premium to its closing share price on April 11, a 62% premium to its five-day, volume-weighted average price (VWAP), and a 97% premium to its 20-day VWAP. Under the terms of the bid, Gold Standard will offer 0.1891 of its shares and 8¢ cash for every Battle Mountain share for a $36-million deal value.

“The premium that the deal offers to shareholders is quite significant,” Battle Mountain Gold’s president and CEO Chet Idziszek says. “The 97% premium is above the 45% mean for similar transactions in the past 12 months, so we’re pretty happy with that.”

Vehicles and equipment on the surface of the Dark Star gold deposit at Gold Standard Ventures’ Railroad-Pinion property in north-central Nevada. Credit: Gold Standard Ventures.

Idziszek, whose many career accomplishments include playing a central role in the discovery and development of Canada’s Eskay Creek gold deposit, says he’s also happy with Gold Standard Venture’s track record in Nevada and its management team.

“They are in elephant country, recently doubled their land size and people working for them have strong technical backgrounds — they’re alumni from Newmont,” he says. “They are building a strong company … They know what they’re doing and they’ll be successful.”

Gold Standard has focused on district-scale discoveries on its Railroad-Pinion gold project on Nevada’s Carlin Trend. The company has consolidated the southern end of the trend, assembling a 208 sq. km land position that contains four gold deposits, two of which are their own discoveries.

The company’s senior geologists, Mac Jackson and Steven Koehler, have a successful track record. At Newmont, Koehler managed and contributed to exploration programs on the northern Carlin Trend that led to the multimillion-ounce Leeville discovery, in addition to discoveries at Four Corners, Hardie Footwall Extension and Fence/Pete Bajo, and while at Placer Dome, contributed to the multimillion-ounce Cortez Hills discovery. Jackson contributed to the discovery of the Leeville and Turf deposits on the Carlin Trend and the Fiber Line deposit at Twin Creeks.

Idziszek notes that the two companies have been working together over the last year and have similar exploration styles.

“Their exploration technique is very similar to ours — going after structure that crosses the right stratigraphy — so there is a lot of geology and geophysics applied,” he says. “It has led to two discoveries by them, so they are very capable guys.”

The deal gives Battle Mountain’s shareholders access to Lewis through a company with deep pockets and strong shareholders that can further exploration, Idziszek says.

A drill rig on the Pinion deposit at Gold Standard Ventures’ gold property in Nevada. Credit: Gold Standard Ventures.

Gold Standard has $50 million in cash and no debt. Major shareholders include Goldcorp (TSX: GG; NYSE: GG), which has a 10.3% stake, and OceanaGold (TSX: OGC), which owns 16.6%.

“If we didn’t do this deal … we would have had to go to market to raise considerable dollars to continue exploration,” Idziszek says. “This deal gives shareholders a large premium and an opportunity to participate in future discoveries on our Lewis project, which we feel is going to happen … On the Newmont side, the mineralization continues onto our property … there’s a high probability of success.”

“We’ve been working together over the last year and exploration is expensive, and this is one way of getting the job done.”

Jonathan Awde, Gold Standard’s president and CEO, told The Northern Miner the deal fits management’s investment profile.

“For us to invest or acquire other assets it has to fulfill three criteria: It has to be Carlin, sediment-hosted; it has to be strategic; and it has to be district scale; and we strongly believe this asset possesses all three,” he says. “There’s a lot of exploration upside … It was hard for us to ignore getting exposure to another prolific trend like Cortez.”

Awde says his team will start with a program of mapping, sampling and geophysics, with drill targets identified in July or August.

Historical work on the Lewis project focused on the area that sits within a few metres of the Newmont property boundary, but Awde says that won’t be their focus.

“There are a few targets that really stand out that warrant drilling,” he says, citing a big skarn target on the southwestern side of the project that his team quite likes. “It’s going to be a combination of drilling along the Meagher fault, which is close to the property boundary, and then there are stepouts from there. But it’s a big project, and other targets are more than 1 km from the property boundary with Newmont. The key is not to focus on the property boundary area but to focus on the project. We are going to drill other targets throughout this entire land package.”

Battle Mountain’s shares rose 37%, or 15.5¢, to 57¢ on the news. The junior’s shares have traded in a 52-week range of 29¢ to 95¢.

Shares of Gold Standard closed at $2.74, down 6¢. Over the last year the company’s shares have traded in a range of $1.43 to $4.10.

Michael Gray of Macquarie has a price target on Gold Standard Ventures of $4.10 per share and an “outperform” rating on the stock.

“The Gold Standard Ventures’ ex-Newmont team, with more than 25 million oz. discoveries to their credit, has a competitive advantage in Nevada in evaluating permissive Carlin-type geology within the productive trends,” the analyst said in a research note.