Here are my top news releases for this morning.
Mart Resources (MMT:TSX) -Mart is out with positive news this morning that the government of Nigeria has approved the completion of the OML 18 transaction. Mart is a member of a consortium of companies that will acquire 45% of the OML lease with the Nigerian National Petroleum Corp owning the additional 55%. The consortium of companies will be paying $1.1 billion to Shell for the 45% interest.
Mart will end up with an indirect working interest of 10% in the deal.
OML 18 covers an area of 1,035 square kilometres and includes the Alakiri, Awoba, Cawthorne Channel, Krakama and Buguma Creek fields and related facilities. The Awoba field straddles into oil mining lease 24. The acquired infrastructure includes flow stations together with associated gas infrastructure plus oil and gas pipelines within the OML 18 licence area. According to SPDC, the assigned fields produced an average of approximately 14,000 gross barrels of oil equivalent per day of oil, condensate and gas during 2014.
In October when Mart announced they deal they advanced $134 million for the 10% stake. CEO and chairman, Wade Cherwayko (currently under investigation by the board) had this to say about OML 18 when the transaction was announced: "Mart has been looking for an opportunity for several years to diversify its portfolio of assets in Nigeria and is very happy to have the opportunity to participate in a producing oil mining lease, which has become available as a result of this transaction. OML 18 is a significant asset with considerable exploration upside and production. The other consortium SPV members are Nigerian companies with considerable oil and gas exploration and development experience who are familiar with the region and who are expected to be able to work effectively with the local communities to further materialize the exploration and production potential of this asset."
I am surprised the government approved the deal ahead of the upcoming elections. Mart is still subject to a takeover bid from JV partner Midwestern for 80 cents per share in cash. The news today in my opinion increases the likelihood that the deal gets done. The market still is concerned though with Mart shares last trading at 57 cents up 2 cents on the news.
Read: Purchase of Onshore Nigerian Oil Mining Lease 18 Completed or Nigerian oil play Mart Resources has turned a corner... I hope!
Luna Gold (LGC:TSX) and Sandstorm Gold (SSL:TSX) - Luna and Sandstorm have amended the current streaming agreement and debt facility to try and make it work for both parties. The current agreement has Sandstorm holding a 17% gold stream and 20 million dollar debt facility.
The proposed new deal has the gold stream deal terminated and replace with two net smelter return (NSR) royalties and a convertible debenture. The NSR will be a sliding-scale royalty and increases at higher gold prices. Sandstorm would also receive a $30 million dollar debenture with 5% interest. The first payment of $10 million would be due on January 1, 2018.
The new deal will subject to a few conditions.
- An equity raise by Luna of at least $20 million. I think this will be hard to do and awfully dilutive to Luna shareholders at the current share price ($0.25). The current market cap of Luna is only $36.1 million.
- The approval of Luna shareholders.
- The negotiation and execution of definitive agreements.
Shareholders of Luna and Sandstorm will be hoping this is a win/win deal that will benefit both parties. Luna will be releasing Q4 and year end results on March 30. Haywood has a 10 cent price target on Luna before today's news.
Read: Sandstorm Gold Announces Restructuring with Luna Gold
Levon Resources - (LVN:TSX) - Levon is changing from the mining business into the health care business. This morning they have entered into an agreement to acquire 100% of SciVac.
"I am excited to announce this transaction with SciVac, as I believe it will generate tremendous value for Levon shareholders," stated Ron Tremblay, President and Chief Executive Officer of Levon. "In a difficult market for resource issuers, we have chosen to preserve capital while seeking to identify alternatives to create shareholder value. The acquisition of SciVac gives Levon ownership of Sci-B-Vac(TM), a commercial stage, potentially best in class hepatitis B vaccine which could address a significant market opportunity. Levon shareholders will also maintain an interest in Levon's existing business and assets by receiving shares of a newly formed company which will hold Levon's existing resource assets."
Each current shareholder will receive one new common share of Levon and 0.5 of a share of the new Spinco. Levon will hold 100% of SciVac and $27 million in cash. The Spinco will hold all the mineral interests including the Cordero project, $3 million in cash, and a $1.1M convertible debenture as well as 35,178,572 shares of Pershing Gold Corporation with current estimated value of $16M.
SciVac is currently a privately owned company, of which approximately 45% of the shares are owned by OPKO Health, Inc. (NYSE:OPK).
An interesting deal here as Levon has put its large cash balance to work. The flagship Codelo project is massive with over 488.5 million ounce of silver but is low grade (44 g/t Ag). It is clear the project needs substantially higher silver prices to even consider being built. Levon management has decided to go the health care route and spin off the mining assets. The $27 million in cash will be useful in helping move SciVac products forward.
Read: Levon Resources Ltd. Announces Definitive Agreement To Acquire SciVac Ltd.
Discuss in CEO Live
The author of this article owns shares in Mart Resources and is therefore biased. This is not investment advice.All facts are to be checked and verified by reader. As always please do your own due diligence.
Sandstorm has 19.8% of Luna shares and management 10%, so they have skin in the game and incentive not to give away shares. The short cash flow pressure on Luna has been relieved. Lack of stock reaction is strange, and I imagine the major shareholders are expecting a good recovery or a serious equity partner to emerge who will pay a fairer price.