Yamana buys $50 million worth of work and 3 million ounces of gold for $17.5 million

POSTED ON April 24, 2015 BY Tommy Humphreys
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The Monument Bay Project, Mega Precious Metals Inc.'s, most advanced project, is located 570 km northeast of Winnipeg and 340 km east southeast of Thompson, Manitoba. The nearest communities are Red Sucker Lake First Nation, 52km to the southwest, and God's Lake Narrows First Nation, 100 km to the west. Hydro power lines currently run as far as Red Sucker Lake First Nation. Mega Precious Metals photo

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Mid-tier gold producer Yamana Gold (YRI) has entered into a definitive agreement to acquire all of the outstanding shares of Canadian junior company Mega Precious Metals (MPG) under a plan of arrangement for consideration of 0.02092 of a Yamana share and cash of 0.1 cent per Mega share, equivalent to 10 cents per Mega share, based on the closing price of Yamana shares on the TSX on April 23, 2015.

Yamana says the deal represents a good premium for Mega shareholders "in the context of the market". Mega's shares have been trading for less than five cents in recent months and will get increased liquidity and capital resources to develop the Monument Bay project in Manitoba which has seen about $50 million in exploration work by Mega since 2011, CEO Glen Kuntz told CEO.CA last month. Monument Bay had about 3 million ounces of 1.5 grams per ton gold (and tungsten credits) in a camp with district scale potential. Mega had other exploration assets in the high Arctic and Ontario.

The total consideration to Mega shareholders is approximately $17.5 million, based on the Company's issued current and outstanding shares. Yamana has also agreed to purchase the outstanding convertible debentures held by Pacific Road Capital Resources Funds.

Mega's board has unanimously approved the transaction and shareholders representing 22% of Mega's shares have agreed to support the deal.

Here's a section from today's news release:

The acquisition represents a material progression in the advancement of Monument Bay from a grass roots exploration project when Mega began to explore the project in early 2011. Mega's Chairman, Mario Stifano summarizes the board's view as follows, "We are very proud of the work that the entire Mega team has done on Monument Bay over the past 4 years. The Monument Bay Project has grown into what we consider to be one of the best development assets in the industry and we are proud to be part of this story. Our team has assembled a 338km2 camp-sized land position, advanced the project to its current multi-million ounce resource, formulated a regional geological and targeting model, including the realization of a potential tungsten by-product and importantly, we have developed a positive and respectful relationship with the Red Sucker Lake First Nation. The acquisition by Yamana allows the work done on Monument Bay to continue unabated to the benefit of all stakeholders."

Glen Kuntz, Mega's CEO is keen for Yamana to continue the work on the project, stating, "My experience in dealing with Yamana's management and technical team is that they are world-class and committed to growing the Monument Bay Project along with the rest of their portfolio in Canada. This acquisition not only validates the project and its value, but also the opportunity to our shareholders to participate in the future success with one of the industry's most respected gold producers. The work Mega's team has done on Monument Bay has been remarkable, we have not only grown the initial small underground resource into a multi-million ounce resource, but also discovered multiple new deposits and structures. We believe this transaction is an excellent outcome for Mega shareholders as it provides a significant premium recognizing the value embedded in our projects. We look forward to joining their team and continuing the work we have successfully started."

"The acquisition of Mega Precious Metals advances Yamana's strategy to expand our presence in Canada, which we established last year with the joint acquisition of Canadian Malartic and a portfolio of exploration properties in Quebec and Ontario", said William Wulftange, Senior Vice President, Exploration for Yamana Gold. Yamana's exploration program has contributed to unlocking value within our portfolio through consistently finding high quality ounces at our properties and we are looking forward to applying our experience and expertise at Monument Bay. The significant existing mineral resource base at Mega's Monument Bay and North Madsen Projects in particular provide an opportunity for further exploration to meaningfully increase the potential of these assets. "With the addition of Monument Bay in particular, we look forward to continuing the positive relations that have been established with the First Nations population and other stakeholders in the region, including the Government of Manitoba."

Transaction Details:

Full details of the transaction will be set out in Mega's information circular that it will prepare in respect of the meeting of shareholders to approve the transaction. Mega intends to mail the information circular in mid-to-late May 2015. The transaction is expected to close in late June of 2015, subject to the satisfaction of certain conditions, including court and shareholder approval, and Yamana's satisfactory completion of its title, environmental, tax and litigation due diligence on or prior to May 15, 2015.

Pursuant to the arrangement, Mega is subject to customary non-solicitation covenants. In the event a superior proposal is made to Mega, Yamana has a 5 business-day right to match such a proposal. Under certain circumstances where the transaction is not completed, Mega has agreed to pay a termination fee of C$700,000 to Yamana. Yamana has agreed to a C$500,000 placement in Mega if the transaction is terminated in certain circumstances. The transaction is subject to approval by Mega shareholders, court approval and other customary conditions. Mega has engaged Paradigm Capital Inc. as its financial advisor and Bennett Jones LLP as its legal advisor in connection with the transaction. Copies of the transaction agreement, support agreements, management information circular and certain related documents will be filed with securities regulators and will be available on SEDAR at www.sedar.com.

More info: Mega Precious to be Acquired by Yamana Gold

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Tommy Humphreys

Tommy Humphreys, 30, is an entrepreneur, investor and writer from Vancouver, Canada. He founded CEO.CA, a popular junior mining and Canadian finance blog, in 2012. He has been the president of Pacific Website Company Inc., a private marketing and web development company, since 2007. Tommy has authored articles for Globe and Mail, Financial Post and others. He speaks at select conferences. Reach him by email: tommy@ceo.ca. Follow him on Twitter: @TommyHump More →

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Tommy Humphreys

Twitter: @tommyhump

tommyhump@gmail.com

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