O3 Mining shares surge on $144m Agnico Eagle takeover offer
O3 Mining (TSXV: OIII) shares soared 55% Thursday morning after it signed an agreement for Agnico Eagle Mines (TSX: AEM; NYSE: AEM) to acquire it for about C$204 million ($144m).
The cash deal values O3’s shares at C$1.67 apiece. The company’s main asset is its prefeasibility-stage Marban Alliance project near Val-d’Or, Quebec, about 520 km northwest of Montreal, and 12 km east of Agnico’s Canadian Malartic open-pit mine. Capital costs are pegged at C$435 million for the project to produce 161,000 oz. of gold per year over a 10-year life, according to a 2022 study.
“Consistent with our regional strategy, this transaction is a tuck-in of the Marban deposit to our Canadian Malartic complex,” Agnico president and CEO Ammar Al-Joundi said in a release on Thursday. “The Marban deposit is expected to be complementary to other ‘Fill-the-Mill’ opportunities at Canadian Malartic, further improving the production profile at a long-life world class asset.”
José Vizquerra, president and CEO of O3, said the 57% premium in the cash offer for O3 validates the company’s efforts.
“Having diligently advanced the Marban Alliance project over the past five years, the timing is right for O3 Mining to sell to a more experienced operator that can efficiently navigate the project through permitting and construction,” he said. “Agnico Eagle is the gold standard in the precious metals space – it not only has the financial strength and the mining expertise to advance the Marban Alliance project, but shares our commitment to work in partnership with stakeholders in a socially responsible manner.”
‘Good outcome’
In a research note on Thursday, SCP Resource Finance analyst Brandon Gaspar wrote that he thinks the deal is a good outcome for both O3 and Agnico.
“(There are) clear synergies to be realized given (O3’s) proximity to (Agnico’s) mine, mill, and tailings,” he said, adding that “Agnico just acquired one of the largest land holdings in Val d’Or,” and that the cost of capital to advance Marban towards production is much cheaper for Agnico than it would be for O3.
Gaspar revised his price to C$1.65 per share from C$2.85 and his recommendation to “tender” from “buy.”
O3 shares traded for C$1.65 apiece on Thursday morning in Toronto, almost touching a 52-week high of C$1.70. It has a market cap of C$178.4 million ($125.8m).
Golden neighbourhood
The Toronto-based explorer and developer has planned to publish an updated preliminary economic assessment for the project in this year’s fourth quarter, and a feasibility study early next year.
Marban’s five targets are on sites of past-producing mines dating back to 1959, and all within several kilometres of Wesdome Gold Mines’ (TSX: WDO) Kiena mine, Eldorado Gold’s (TSX: ELD) Lamaque mine, and Agnico’s Goldex and Canadian Malartic.
O3 also holds the Horizon, Alpha and Regcourt properties in the Val-d’Or region, and the Launay, Peacock, Kinebik and Nelligan sites further north.
The company’s board has received a unanimous recommendation from a special committee of independent O3 directors to accept Agnico’s offer.
O3 has until Jan. 23, 2025 to accept the offer.
Marban hosts open pit and underground resources of 67.6 million indicated tonnes grading 1.09 grams gold for 2.3 million oz., and 3.1 million inferred tonnes at 2.21 grams gold for 223,000 oz., according to the 2022 prefeasibility study.
In a base case scenario of gold prices at $1,700 per oz., the post-tax net present value (at a 5% discount rate) comes to C$463 million and the internal rate of return is 23.2% with a 3.5-year payback period.