Mountain Province Diamonds announced plans to acquire Kennady Diamonds in an all-share deal that values Kennady at C$176 million.
Mountain Province Diamonds (TSX:MPVD,NASDAQ:MPVD) is set to acquire all of the issued and outstanding common shares of Kennady Diamonds (TSXV:KDI) in a court-approved plan of arrangement.
In a deal announced Monday (January 29), Kennady shareholders will receive 0.975 of a Mountain Province common share for each Kennady common share that they possess (the equivalent of C$3.46 per Kennady share). These calculations are based on the closing price of Mountain Province shares last Friday (January 26).
The implied equity value for Kennady based on the exchange ratio is approximately C$176 million. When the transaction is complete, the combined company will be owned approximately 76 percent by Mountain Province shareholders and 24 percent by Kennady shareholders.
Commenting on the deal, David E. Whittle, interim president and CEO of Mountain Province, stated, “[t]he Kennady assets are a strong complement to Mountain Province’s interest in the Gahcho Kué project, significantly adding to our attributed resource base. Kennady’s exploration efforts have been very successful and we have high confidence in our ability to continue that success, not only through expanding the existing resources at Kelvin and Faraday but through the potential for further discoveries.”
Mountain Province will inherit the following benefits from Kennady:
- Kennady’s 100-percent-owned-diamondiferous bodies, which contain indicated resources of 13.62 million carats and inferred resources of 5.02 million carats
- The Kelvin kimberlite, which holds indicated resources of 13.62 million carats at an average grade of 1.6 carats per tonne and an average value of US$63 per carat
- The Faraday kimberlite cluster, which has inferred resources of 5.02 million carats at an average grade of 1.54 carats per tonne and an average value of US$98 per carat
- Potential to grow resources at both Kelvin and Faraday and develop potential resources at the Doyle and MZ kimberlites
- 67,164 hectares of highly prospective and 100-percent-owned exploration ground strategically surrounding the Gahcho Kué mine
The deal is also beneficial to Kennady and its shareholders. The transaction allows the company’s current shareholders to retain ongoing exposure to Kennady’s assets, as well as gain exposure to Mountain Province’s 49-percent interest in the operating Gahcho Kué mine.
Dr. Rory O. Moore, president and CEO of Kennady, stated, “[w]e are excited that our shareholders have the opportunity to benefit from the near-term cash flow of the world-class Gahcho Kué mine while retaining exposure to the significant exploration upside on the current Kennady assets.”
Kennady shareholders will also benefit from access to free cashflow from Mountain Province to fund exploration at Kennady’s assets; additionally, they will obtain an immediate premium on their shares, and will see enhanced liquidity and an improved capital markets profile. There is also the potential for dividend payments from Mountain Province’s 49-percent interest in Gahcho Kué.
Following the announcement, Kennady’s share price rose approximately 15 percent. As of open on Tuesday (January 30), Kennady was trading at $3.20.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.