UPDATE: Argonaut raises $150M for Castle Gold takeover

Vancouver – A private firm, Argonaut Gold, has closed a brokered private placement meant to fund its proposed takeover of Castle Gold (CSG-V).

Castle Gold says in an update on takeover proceedings, kick started Oct. 28, that Argonaut has raised $150 million.

The agreement, supported by Castle Gold management and its board of directors, would have Argonaut pay a minimum of $1.25 and a maximum of $1.50 a share for Castle Gold. For every 1% the price of gold exceeds US$1,050 relative to its average price between December 18 and 24, 1¢ will be added to the minimum offer.

The minimum offer is a 39% premium over Castle Gold’s closing shareprice the day before the announcement of Argonaut’s bid.

Castle Gold, with about 85 million shares fully diluted, would minimally cost Argonaut around $106 million. The price ceiling for Castle Gold is just shy of $130 million.

So far, Castle Gold reports, shareholders representing 54% of fully diluted common shares have supported the takeover. All told to succeed the offer needs two thirds support by Dec. 24.

Castle Gold operates two gold mines, El Castillo in Durango state, Mexico, and El Sastre in Guatemala. It owns a 100% interest in the former and a 50% interest in the latter.

By and large the bulk of Castle Gold’s production stems from the El Castillo mine where in the third quarter, 2009, it mined 2.6 million tonnes ore, with a waste to ore ratio of 1.47, and a gold grade of 0.42 grams gold per tonne. It produced 7,655 oz. gold at El Castillo during the third quarter.

El Castillo’s proven and probable reserves stand at 46.8 million tonnes grading 0.5 grams gold 752,000 oz. contained gold.

Castle Gold is also advancing its flagship exploration project, La Fortuna, in Durango state, Mexico, where so far it has pegged a measured and indicated resource at 4.8 million tonnes grading 1.98 grams gold.

On news of Argonaut’s progress, at presstime Castle Gold’s share price was trading up 1¢ at $1.30.