AKG/PMV – Asanko and PMI Gold Gain Overwhelming Support from Shareholders for Merger

POSTED ON January 31, 2014 BY Travis McPherson
CATEGORY Asanko Gold, Companies, Gold, Goldcorp, PMI Gold, Resource Stocks,

Asanko expects to start producing gold from Esaase in the second half of 2015 (Photo: Duncan Chard/Bloomberg)

Asanko Gold (AKG:TSX) and PMI Gold (PMV:TSX) announced in mid-December that they intended to merge the two to take advantage of the synergies between their two assets in Ghana. The two attempted to merge in late 2012, but was later terminated as PMI shareholders' couldn't agree. Asanko has since significantly de-risked their project and is now fully-financed through to production.

Fast forward one year, and it seems PMI shareholders have had a change of mind and now believe the two companies are more valuable as one instead of as two separate entities. This morning, the two announced that their shareholders had voted, overwhelmingly, in favor of the transaction. Both have significant late-stage gold development projects nearby to each other in Ghana. Asanko management believes the two will be able to save upwards of $100 million by merging.

Of the votes cast, 99.5% of PMI shareholders and 99.6% of Asanko shareholders voted in favor of the merger. Under the terms of the arrangement, each PMI shareholder will receive 0.21 shares of Asanko valuing PMI at roughly $0.44 per share representing a 79% premium to the 20-day VWAP at announcement. The total deal is valued at roughly $183 million which equates to Asanko paying roughly $40 per reserve ounce (net of PMI's $90 million cash). Both companies' shareholders will hold 50% of the combined Asanko.

Asanko's Esaase and PMI's Obotan are both expected to produce 200,000 ounces/year from an open-pit operation (Photo: Carla Gottgens/Bloomberg)

The companies have determined that Asanko's Esaase project should be developed first which will then be followed up by PMI's Obotan. Esaase hosts 2.4 million ounces in 2P reserves at an average grade of 1.4g/t gold. The project is expected to produce 200,000 ounces annually for an 11 year mine-life with $843 per ounce all-in costs. Esasse is a low capital intensity project with an estimated capex of just over $280 million.

Asanko expects to release an updated feasibility study over the next few months which could show a later phase of capex if the company determines it is ideal to truck ore from Obotan to an increased processing facility at Esaase. PMI's Obotan project is slated to also produce 200,000 ounces annually over a 10 year mine-life.

The combined Asanko will have approximately $280 million in cash and an additional $150 million in a project facility from Red Kite. The Asanko management team is well-equipped to lead the combined company. The combined Asanko will produce 200,000 ounces per year within the next two years and could double that within then next five (or sooner).

PMI is seeking a final order of the Supreme Court of British Columbia to approve the arrangement, which is expected to be granted on February 4th. Once the final order is received, the arrangement is expected to be completed on or about February 6th.

Read: Asanko And PMI Shareholders Approve Acquisition Of PMI By Asanko

Also read: Second Time’s a Charm: Asanko Tries Again to Acquire PMI Gold

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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