In the midst of a squabble over the Grace property in B.C., NovaGold Resources (NG-T, NG-X) has launched a hostile takeover for the company pursuing litigation against it — Pioneer Metals (PSM-T).
NovaGold is making an all cash offer of 57 per share for all of Pioneer’s common shares an amount that is a 30% premium on the volume weighted average trading price of Pioneer’s shares since mid-May.
On June 20, Pioneer issued a press release advising its shareholders to not take any action with respect to the hostile bid until its Board and its advisors have evaluated the offer.
On June 19 Pioneer’s shares closed up roughly 37% or 16 to 59 on roughly 670,000 shares. A note from Canaccord Capital says the fact that the shares were trading above the offer price indicates that investors suspect a higher bid will be needed to close the deal.
NovaGold’s shares were off roughly 2.5% or 32 to $12.63 on roughly 67,000 shares traded.
Pioneer owns the Grace property which is under option to NovaGold, but the relationship between the two companies has been anything but harmonious.
Pioneer took legal action against NovaGold in October of 2005, arguing that NovaGold did not act in accordance with their agreement.
The crux of Pioneer’s argument is that while it expected NovaGold to perform exploration drilling, it instead drilled with an eye towards condemning the site by showing that there was no mineralization so that the area could be used as a tailings and waste disposal site for NovaGold’s neighbouring Galore Creek project.
While the settling of the legal proceedings seems an obvious driver behind the offer, NovaGold’s president and chief executive Rick Van Nieuwenhuyse cast some doubt on the hypothesis saying Pioneer’s president and chief executive, Stephen Sorensen, could continue with the lawsuit even if the takeover was successful.
It is clear, however, that NovaGold is looking to consolidate the area around Galore Creek, as the company also recently agreed to acquire Coast Mountain Power (MW-T) for $2.20 per share. The move was made to create development synergies in region.
NovaGold has a feasibility study underway at Galore and plans to start building a mine there next year.
The Grace property includes 28 sq. km. of subsurface mineral claims and directly adjoins NovaGold’s 62 sq. km. Galore Creek property.
In a press release NovaGold says its offer is good until July 25, 2006.
If NovaGold is successful the cost of all of the outstanding common shares that it does not presently hold will be roughly $34.6 million.
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