Gowest Gold to go private in deal that includes China-based investors

Citing tough financing markets, Canadian gold explorer Gowest Gold (TSXV: GWA) has agreed with a group of existing shareholders that collectively hold 91.5% of the company’s outstanding share capital to buy back those shares and go private. The deal includes several China-based investors.

The shareholder group is comprised of Lush Land Investment Canada, based in China’s Inner Mongolia region; Greenwater Investment Hong Kong, based in Hong Kong; a numbered Ontario company (1000216244 Ontario Inc.); Debao Wang; Yun Zhao; Fortune Future Holdings; Meirong Yuan, and C. Fraser Elliott and his company CFE Financial Inc.

For each share held, the group will receive 15¢ cash, which is a 114% premium to Gowest’s last closing price of 7¢ apiece on the TSX Venture Exchange. At press time, the stock is traded at 14¢, for a daily gain of nearly 93%. The company’s market capitalization was $90.6 million.

Gowest will also merge with an Ontario-incorporated company controlled by the shareholder group to create a new company, whose shares will then be distributed to the remaining shareholders on a one-for-one basis to complete the go-private transaction. Those shares will be redeemed at a price of 15¢ each.

In a release, Gowest CEO Dan Gagnon pointed to the challenges the company has faced over the years in raising sufficient capital to develop the Bradshaw deposit in Ontario.

“This transaction will allow a small group of our committed investors, who historically have been our most substantial source of capital, to bear the significant continuing exploration, financing and other risks facing the company going-forward,” he said in a news release.

Lush Land increased its stake in Gowest to 46.5% from just under 25% on June 14. It bought the shares in separate transactions with Greenwater and Inner Mongolia Jinshengda Investment Co. 

The Bradshaw deposit is part of Gowest’s larger North Timmins gold project within the Abitibi greenstone belt. It comprises one patented mining claim, 11 mining leases and 56 unpatented mining claims for a total area of 109 sq. km.

The primary area of interest has been the Frankfield property, where gold mineralization was first discovered in 1974 before Gowest took over the project. Drilling in the 2000s led to an initial inferred resource estimate for Frankfield East, now the Bradshaw deposit, of 2.4 million tonnes at 6.5 grams per tonne gold for 510,000 oz.

The project moved to the prefeasibility study stage in 2015, with an upgraded resource of 2.1 million indicated tonnes grading 6.19 grams gold per tonne and 3.6 million inferred tonnes grading 6.47 grams gold.