Santa Fe makes second bid for Columbus Silver

Vancouver – Almost a year after an all-share takeover was first proposed, Santa Fe Gold (SFEG-O) has struck a new deal for an all-cash takeover of Columbus Silver (CSC-V).

Last September Santa Fe offered the all share deal for Columbus that valued the company at just over $10-million, but the OTC-listed Santa Fe ran into trouble with Canadian securities commissions over a cease-trade order from 2003 and filings that weren’t up to date.

The company worked to get its filings in order, including the submission of a 43-101 technical report, but the process dragged on. Columbus gave the company an extension but eventually had to call off the deal.

“We finally said we couldn’t wait for you any longer, offer cash or go away, “said Robert Giustra, president and CEO of Columbus by phone. “They offered cash so this is where we’re at.”

Santa Fe Gold is now offering 20¢ in cash per share for the roughly 36.1 million shares outstanding. Adding on the Columbus’ outstanding debt that can be converted to shares at 10¢, and the overall deal values Columbus Silver at slightly under $10-million.

Columbus’ share price jumped 6¢ or 55% to 17¢ on the news with 1.1 million shares traded, while the company has a 52-week share price range between 9¢ and 22¢.

Giustra said he had a high level of confidence the deal would go through, but it’s still dependent on Santa Fe raising the money. As part of the new deal Santa Fe will extending loans totalling $700,000 to Columbus that, if the deal falls through, are forgiven.

As a producer Santa Fe has a few options to raise money but has not specified which it will use. The company reported US$2.9-million in gold and silver sales from its Summit mine and new Lordsburg mill in the first quarter of 2011, using only 100-150 tons per day of the 400-ton capacity as it ramps up production.

When the deal was first proposed in September 2010, Giustra thought it made sense since it exposed Columbus shareholders to Santa Fe’s mill, with clear synergies to Columbus’ Mogollon project in New Mexico just 80 km away.

“The combination of a producing gold and silver company with that exploration portfolio, in a rising gold market just seemed like a no-brainer at the time,” said Giustra.

Today with junior mining stocks having a tough go, Giustra said it made sense to make the sale rather than go it alone and face dilutive financings.

The Mogollon project is a past-producing, early stage property with no compliant resource. The property previous produced roughly 15.7 million oz. silver and 327,000 oz. gold between 1905 and 1942, while work in the 1980s produced an historic, non-compliant resource of 767,000 tonnes grading 320 grams silver per tonne and 5.1 grams gold per tonne. Columbus has done no exploratory work since striking the original deal with Santa Fe.

Columbus Silver also has properties in Arizona, Nevada and Utah. Along with its producing mine and mill, Santa Fe holds substantial property in the area surrounding its mill, a second gold project in New Mexico and two properties in Arizona.  

Santa Fe has until November 30 to notify Columbus it has secured the required funding.