Armed with an updated scoping study that puts the net present value of its undisputed interest in the promising Snap Lake kimberlite at $1.35 billion, the directors of
“We are confident that our shareholders will conclude that the De Beers offer is unacceptable,” says Winspear President Randy Turner. “Shareholders owe it to themselves to get as full and accurate a picture of the Snap Lake diamond project as possible.”
The Snap Lake property occupies a portion of the Camsell Lake project, 220 km northeast of Yellowknife, N.W.T. The Camsell Lake project is held 68% by Winspear and 32% by
Earlier this month, De Beers launched a hostile takeover bid for Winspear, offering $4.25 for each share of the junior. Winspear considered the offer low and immediately launched a “value recognition program” over Snap Lake, including a new scoping study and an aggressive drill program utilizing five rigs.
The updated scoping study, which included 35 additional drill holes, increased the resource depth to 750 metres below surface. The minable tonnage has been upped to 39.5 million tonnes grading 1.7 carats per tonne, for a total of 67 million carats of diamonds. An earlier prefeasibility study put the minable tonnage at 12.59 million tonnes averaging 1.75 carats for a total of 22 million carats.
The scoping study states that Winspear’s 68% interest in the Snap Lake project is worth $1.35 billion. The April prefeasibility study pegs the after-tax net present value at $500 million. The company’s financial advisors, BMO Nesbitt Burns and Canaccord Capital, have indicated to the Winspear board that the $260-million offer is financially inadequate.
The junior says De Beers is taking advantage of weak equity markets for junior mining companies. Although the all-cash offer of $4.25 per share marks a 77% premium over the closing price of $2.40 per share before the announcement, it represents a 9% discount on the year-ago price of $4.65 per share and a 20% discount on last year’s 52-week high of $5.30 per share.
“Moreover, the offer does not take into account the property’s full exploration potential,” says Turner. “Snap Lake lies on only a small portion of the Camsell Lake property.”
The De Beers offer has been mailed to Winspear shareholders and remains open until July 28.
The diamond giant has expressed “surprise” at the findings of the scoping study, which boosted resources by a factor of three. It also criticized the company for not disclosing the “implications” of its drilling before completing a recent financing.
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