Great Panther Silver (TSX:GPR,NYSEMKT:GPL) just announced that it has entered into a binding letter agreement to acquire Cangold (TSXV:CLD). The move will expand its asset base in Mexico and give it the rights to a project in Northern Ontario.
Under the agreement, Great Panther will acquire all of Cangold’s issued and outstanding common shares for an approximate value of C$1.7 million. Cangold shareholders will receive 0.05 common shares of Great Panther for each common share of Cangold that they hold, resulting in the exchange of about 2,139,000 Great Panther shares for 42,780,600 Cangold shares. That represents approximately 3 percent of Great Panther’s current issued and outstanding shares.
Expanding bandwidth in Mexico
The transaction will give Great Panther the option to acquire more than 6,000 hectares of the Mexico-based Guadalupe de los Reyes gold-silver project, and will add Cangold’s Plomo gold project, also in Mexico, to its roster.
On that basis, Great Panther Chairman Bob Garnett believes that “Guadalupe de los Reyes is a strong fit with Great Panther’s current producing mines and projects in Mexico. Our team has proven success in developing producing mines in Mexico, and has the expertise and resources to advance Guadalupe de los Reyes. The proposed acquisition will also realize cost synergies in terms of management, administration, and overhead.”
Great Panther will also receive Cangold’s Argosy project in the Red Lake mining division of Northern Ontario. It’s comprised of 44 patented and 57 unpatented claim units for a total of 101 contiguous claims covering 1,616 hectares.
Benefits for Cangold shareholders
The companies also believe the agreement will be beneficial for Cangold shareholders as they will “not only maintain their exposure to the success of Guadalupe de los Reyes, but now also have exposure to the growth of a producing company that is leveraged to the price of silver and gold.”
Cangold’s executive chairman, Kaare G. Foy, added, “Great Panther is an experienced operator in Mexico with a strong balance sheet, no debt, and has access to capital to advance Guadalupe de los Reyes. In addition, Great Panther has a highly liquid stock and is listed on two major exchanges. Cangold’s management strongly recommends shareholder approval of the proposed transaction.”
Great Panther and Cangold expect the transaction to close at the end of May 2015. Prior to closure, Cangold will hold a shareholder meeting regarding the deal.
At close of day Thursday, shares of Cangold were sitting at $0.04. Shares of Great Panther were at flat $0.75 on the TSX and down 0.74 percent, at $0.60, on the NYSE MKT.
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.