project map Abitibi

Project map (Image: Abitibi Royalties)

Glenn Mullan and Ian Ball’s Abitibi Royalties (RZZ:TSXV) has reached a deal to sell its 30% free carried interest in the Malartic CHL project to Yamana Gold and Agnico Eagle Mines. The Malartic CHL project adjoins one of Canada’s largest producing mines, the Canadian Malartic mine. Yamana and Agnico acquired Malartic for $3.9 billion in April 2014.

In exchange for the 30% interest Abitibi will receive:

  • 3,549,695 Yamana and 459,197 Agnico Eagle shares (worth ~$35 million). These shares will generate an estimated $415,000 in dividends annually if they are not sold.
  • A 3% net smelter return (NSR) on any proceeds from the project. This is currently estimated to be worth between $20-30 million by the parties

Yamana and Agnico will be spending $3.5 millon this year drilling at Odyssey.

“When we first staked the Malartic CHL Project in 2006, as part of our Abitibi Greenstone Belt exploration program, I knew this would be a very important local strategic asset for Golden Valley and its shareholders. The transaction that Abitibi Royalties announced today, provides us with an opportunity to explore new projects and opportunities at Golden Valley and over the next several weeks, management and the Board will be looking carefully at how we can maximize value for all of our shareholders,” stated Glenn J. Mullan, Chairman of Abitibi and President of Golden Valley.

Abitibi’s President, Ian Ball, commented, “This transaction allows Abitibi Royalties shareholders to realize significant upfront value in the form of shares in two liquid gold producers, a direct interest in the Malartic CHL project through a significant 3% NSR royalty and to benefit from an aggressive exploration program by Yamana and Agnico Eagle over the next 12 months that I believe will further increase the value of the royalty. This is in addition to retaining the Company’s other assets. This transaction provides immediate per share value for our owners. The 3% NSR royalty and strong treasury will become our platform as we look to achieve our stated goal.”

Abitibi is currently well funded with $1.2 million in cash.

The share structure is very tight with only 10.5 million shares outstanding.  Golden Valley Mines (GZZ:TSV) owns ~56% of the shares and Rob McEwen owns ~9%.

Abitibi shares are currently trading at $4.45 up 12.66% on low volume of 12,000 shares traded (at press time).

Read: Abitibi Royalties Enters Into Transformational Agreement on the Malartic CHL Project to Create a Well Funded-Quebec Focused-Royalty Company

Related: Abitibi Royalties re-releases old drill results near Canada’s largest gold mine or Tiny Abitibi Royalties emerges from the bush to the boardroom

Discuss in CEO.ca live chat

This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence.