First Mining Finance Combines with Two Gold Juniors

There’s been plenty of mining M&A in 2015, and it doesn’t look as if it’s set to slow down yet. 
First Mining Finance (TSXV:FF) on Tuesday announced plans to acquire all of the issued and outstanding shares of PC Gold (TSX:PKL) and Gold Canyon Resources (TSXV:GCU) for shares of First Mining Finance.
The takeover transactions have an implied value of C$0.35 per Gold Canyon share and C$0.09 per PC Gold share. That represents premiums of 204 and 255 percent, respectively, to the 30-day volume-weighted average share prices for both companies. Gold Canyon’s share price jumped 52 percent on the news, to C$0.175, while PC Gold’s share price was up 66 percent, at C$0.05.
However, the market appeared less pleased with what the deal could mean for First Mining Finance. The company’s share price dropped 20 percent, to $0.28, on nearly five times its average daily trading volume.
Under the terms of the deal, Gold Canyon shareholders will get one First Mining Finance share for each Gold Canyon share held, plus shares in a new spin company. Meanwhile, PC Gold shareholders will receive 0.2571 First Mining Finance shares per PC Gold share.

Shares for assets?

When all is said and done, Gold Canyon shareholders will own 55.4 percent of First Mining Finance shares, with PC Gold shareholders owning 9.6 percent and existing First Mining Finance shareholders owning 35 percent.
In a recent interview with the Northern Miner (subscription), Alisha Hiyate asked First Mining Finance President Patrick Donnelly if he was worried about diluting shareholders by using shares to secure assets. Donnelly argued that since the company is only targeting assets with significant upside potential, investors will more than make up for such dilution with increased value.
“We believe that the current market climate for junior exploration companies remains very challenging and thus requires consolidation and that only companies with attractive assets and supportive shareholder bases will survive this market cycle which still may last for years,” said Keith Neumeyer, chairman of First Mining Finance, in a statement.
“We believe this transaction provides an excellent opportunity for the shareholders of all three companies to be part of a leading exploration and development company with a dedicated, focused and experienced management team,” he added.
Neumeyer certainly has a fair amount of experience in the resource sector, having founded First Majestic Silver (TSXV:FR,NYSE:AG) in 2002 and having acted as founding president of First Quantum Minerals (TSX:FM). His latest venture, First Mining Finance, describes itself as a “mineral bank” or “advanced asset incubator” aimed at acquiring assets trading at low valuations and holding them until the market improves.
Gold Canyon Resources holds the Springpole gold project near Red Lake, Ontario, while PC Gold holds the Pickle Crow project in Northwestern Ontario. First Mining Finance also acquired Coastal Gold Mining earlier this year, adding that company’s Hope Brook gold project to its portfolio.

Mining M&A continues

In any case, consolidation has been going strong in the mining space this year. According to the latest market snapshot from SNL Metals and Mining, the number of mergers and acquisitions registered in its database increased from 23 in the March quarter to 35 in the June quarter.
The value of those deals amounted to US$6.59 billion, more than double the value of transactions in the previous quarter (US$2.93 billion), but down from the June 2014 quarter (US$11.11 billion).
Other recent M&A activity includes Skeena Resources’ (TSXV:SKE) offer to buy Dolly Varden Silver (TSXV:DV), and an ongoing battle between Red Eagle Mining (TSXV:RD) and Batero Gold (TSXV:BAT) for fellow Colombian mining company CB Gold (TSXV:CBJ).
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.