The Ntotoroso property is in the middle of the 2-km-long Yamfo-Sefwi belt, most of which is now controlled by Newmont as a result of its 2002 takeover of Australia’s Normandy Mining.
When the Ntotoroso deal closes, Moydow will receive up to US$2 million in cash, with the balance paid out in Newmont shares, the deemed price of which will be determined three business days before closing but which will not exceed US$25.50 or be less than US$24.50. (Newmont was trading at US$25.07 at presstime.)
Thus, Newmont is buying Moydow’s Ntotoroso interest at a cost of US$33 per reserve ounce.
As for the 1.3 million Moydow shares Newmont owns, they will be cancelled, reducing Moydow’s number of outstanding shares to 26.4 million from 27.7 million.
Michael Power, Moydow’s vice-president of corporate development, says that in structuring the deal, Moydow was keen to obtain mostly shares, rather than cash, in order to minimize taxes.
He says the company is still evaluating the deal’s tax implications and that several options are still on the table: “Either we sell the shares slowly to fund our acquisitions, or dividend some of it out to shareholders and keep enough of it to fund a fairly aggressive exploration program.”
Moydow will also receive from Newmont a 2% net smelter return royalty on all gold and silver production from the Ntotoroso property in excess of the currently defined reserve of 1.2 million oz. gold.
This reserve is contained in 14.8 million tonnes grading 2.4 grams gold and was calculated using a gold price of US$275 per oz. It has not been updated using today’s gold prices.
“We’re optimistic the NSR is going to kick in sooner rather than later,” says Power. “There’s no question there are more than 1.2 million ounces there, and it’s going to be a valuable NSR.”
With Ntotoroso sold off, Moydow will need to act this year to acquire a new property of merit (most likely gold-related) in order to retain its senior TSX listing.
“We need to act aggressively to acquire a property we can add ounces to,” says Power. “We’re already looking around for opportunities, and the phone is bouncing off the hook here with people who are already looking for us.”
Moydow retains its portfolio of grassroots properties in Ghana, Newfoundland and Nevada.
Of note, Moydow’s Hwidiem gold property in Ghana is immediately southeast of Ntotoroso, off the main Yamfo-Sefwi belt but on strike from the Gyata gold prospect, where
“At Hwidiem, there are some geochem anomalies we still need to chase up, but we’d been minding our pennies while waiting for something to happen at Ntotoroso.”
The market reaction to the Ntotoroso deal was negative for Moydow, with shares tumbling to 75 at presstime from 88. Indeed, the US$20-million Ntotoroso price tag exceeds Moydow’s current market capitalization of C$22 million.
Says Power: “I’m a bit surprised at where the stock is now. I thought it would be at $1.10, since this transaction is at $1 per share, plus we have the listing, these other properties, and an experienced management team. Maybe the reason the stock has dropped is that people think we’re getting out of the business, but that is absolutely not true. We’re going to go out and discover another deposit and sell it to a major — because that’s what we do.”
The Ntotoroso acquisition is one more indication that Newmont Mining is getting serious about developing the Yamfo-Sefwi belt, a move that would require a capital investment on the order of hundreds of millions of dollars.
The major has indicated it could be making a production decision this year, as that would allow the first gold to be poured in 2006.
Not counting Moydow’s stake in Ntotoroso, Newmont’s equity ounces from a string of 11 deposits along the Yamfo-Sefwi belt total 3.3 million oz. contained in 56.2 million tonnes grading 1.9 grams gold per tonne (60 million tons at 0.056 oz. per ton).
Newmont also owns the Akyem, or Akim, gold property in Ghana, where resources total 51 million tonnes grading 1.9 grams gold per tonne (56.6 million tons at 0.061 oz. gold).
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