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Amidst increasing M&A activity in the gold space, Tarsis Resources and Estrella Gold are teaming up to create a stronger prospect generator. The companies announced on Wednesday that they will combine to form a new company named Alianza Resources.
Under the terms of the arrangement, Tarsis will acquire all of Estrella’s shares on a one-for-one basis, and will complete a share consolidation and $2-million financing along with the transaction. About 56.7 percent of the new company will be owned by former Tarsis shareholders.
That said, the companies specify in a joint press release that the business combination is “essentially a merger of companies with similar market capitalization,” and the new company will feature a board and management team comprised of members of both Tarsis and Estrella. Fittingly, Alianza is the Spanish word for “alliance.”
To be sure, the combination seems to make sense. “Both companies operate under the Prospect Generator business model in excellent jurisdictions with great potential for new discoveries,” said Tarsis CEO Mark Blythe in a statement. “Current market conditions demand that a prospect generator have a diverse portfolio of prospects and a focused Board and Management with a track record of executing the business model.”
All in all, Alianza will hold a fairly diverse portfolio — four projects in Peru, 10 in Nevada, three in Mexico and five in Canada’s Yukon. “In combining the two companies we have not only created a more dynamic group and project portfolio, but avail ourselves of new business opportunities in the sector,” said Estrella CEO Jason Weber in Wednesday’s release.
Certainly, market watchers and industry experts have been positive on the prospect generator model as of late. At the Sprott Vancouver Natural Resource Symposium back in July, Rick Rule talked about the importance of exploration and pegged the prospect generator model as “statistically the best way to succeed in exploration.” Similarly, Mercenary Geologist Mickey Fulp continues to be a fan of prospect generator Avrupa Minerals (TSXV:AVU).
That said, both companies are fairly small, and the market didn’t react as one might have expected on Wednesday — Estrella’s share price didn’t move, while Tarsis lost about 1.5 cents on nearly five times its average trading volume to trade around $0.03 by the early afternoon.
Still, the combination is an interesting move, and those looking for prospect generators to keep an eye on might just want to add one more to their list.
Securities Disclosure: I, Teresa Matich, hold no direct investment in any of the companies mentioned in this article.
Editorial Disclosure: Tarsis Resources and Estrella Gold are clients of the Investing News Network. This article is not paid-for content.