Great Panther Silver Ltd (TSX:GPR: NYSE:GPL) announced Monday a $105 million deal to buy Beadell Resources Ltd to create a new precious metals producer focused on the Americas.
The new group would benefit from a strong balance sheet and a diverse asset portfolio including three producing mines, said Great Panther.
Exploration potential too
There would also be an advanced stage project, and significant exploration potential and "attractive" re-rating potential.
Beadell is currently the operator of the 100% owned Tucano gold mine in Amapa State, northern Brazil - part of a 2,500 square kilometre (sq km) land package in the under-explored 'Birimian age' greenstone region.
Beadell has a life of mine contract with U&M Mineracao e Construcao S/A, which is expected to deliver improved efficiencies resulting in an expected $100 million in costs savings over the life of mine.
In addition, Beadell remains on track for completion of the Tucano plant upgrade by early November, this year.
The combined company is expected to have proven and probable reserves of around 1.5mln ounces of gold and will result in a significant lift in pro forma gold and silver production.
Great Panther will contribute 4 million silver-equivalent ounces of production in 2018, and Beadell will add 130,000 gold ounces in 2018 and a further 163,000 ounces in 2019, with potential for further increase upon a positive decision to restart Coricancha in Peru.
A 'transformational' transaction
"This is a transformational transaction for the shareholders of Great Panther and Beadell," said James Bannantine, president and chief executive at Great Panther.
"Great Panther has grown and optimized its operations in Mexico, acquired and advanced its Coricancha project in Peru, and is now positioned to add a sizeable producing mine in Brazil with exceptional exploration potential.
"Great Panther brings the capital to deliver on Tucano's substantial near- and long-term resource growth potential and to continue mine optimization initiatives.
"The combination of assets, capital and management provides a unique opportunity to unlock a significant re-rating potential for the benefit of both existing shareholders and Beadell's shareholders who will gain a meaningful interest in Great Panther."
Dr Nicole Adshead-Bell, CEO and Managing Director of Beadell, added that Beadell shareholders would benefit from "Great Panther's strong balance sheet, steady cash flow, experienced management team and improved market liquidity via Great Panther's TSX and NYSE American listings".
"The combined company will pool resources to expedite the execution of Tucano's ongoing operational turnaround," she said.
Under the terms of the scheme, Beadell shareholders will receive 0.0619 common shares of Great Panther for each of their shares, resulting in the issuance of around 103.6 million Great Panther shares.
The exchange ratio implies consideration of A$0.086 3 per Beadell share with the implied equity value for Beadell around A$144 million, or $105 million, based on the closing price of a Great Panther Share on the NYSE American on September 21, 2018.
The consideration to be received by Beadell shareholders represents a 51% premium over Beadell's closing share price on the ASX on September 21, 2018.
The plant at Tucano is being upgraded to process around 3.5mln tonnes per year of oxide-sulphide ore feed in for a range of blends.
There is a pipeline of high potential in-mine and near-mine prospects, anchored by several high-grade gold drill intervals over several metres, which represent a near-term opportunity to improve the head grade and prolong the mine life.