Gold Royalty (NYSE-AM: GROY) is acquiring Abitibi Royalties (TSXV: RZZ; US-OTC: ATBYF) and Golden Valley Mines and Royalties (TSXV: GZZ; US-OTC: GLVMF) in a deal that will create a larger company with 191 royalties and a balance sheet with about US$47 million in cash and on debt.
The business combination will have a significant presence in two of the world's top-tier mining jurisdictions, Nevada and Quebec, with about 150 of the 191 royalties situated in those locations, and includes four royalties on portions of the Canadian Malartic mine now owned by Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Yamana Gold (TSX: YRI; NYSE: AUY; LSE: AUY). These include a 3% net smelter return (NSR) royalty on the producing Canadian Malartic open pit mine and a 3% NSR on the Canadian Malartic underground development asset.
Other royalties in the expanded portfolio will include a 2.5%-4.0% net smelter return royalty on Sirios Resources' (TSXV: SOI) Cheechoo project in Quebec, about 15 km from Newmont's (TSX: NEM; NYSE: NEM) Eleonore gold mine, which went into production in 2015.
If the proposed transaction is completed, Gold Royalty, Abitibi Royalties and Golden Valley shareholders will own about 54%, 23% and 23% respectively, of the new proforma Gold Royalty.
On a conference call, David Garofalo, Gold Royalty's president and CEO, said the consolidation will establish the company as the leading growth and Americas-focused precious metals royalty company.
"We're quite thrilled to announce this transaction as it continues the rapid development of Gold Royalty," the mining executive said. "We only just IPOed in March, we just completed a merger with Ely Gold a couple of weeks ago, and we're adding on strength upon strength with the completion of this transaction over the course of the next couple of weeks."
The combined company "will have a peer leading royalty portfolio of cash flowing, development and exploration assets, and in particular it will have a cornerstone royalty on a portion of the Canadian Malartic mine, which is Canada's largest gold mine," he noted.
"With our portfolio of royalties, GRC expects to have substantial cash flow growth and also expects to organically increase our number of royalties through the application of our royalty generator model. ... Not only will we have the largest number of royalties in our peer group, but we have aligned ourselves with some of the best operating partners in the sector ... [and] we think there are compelling reasons to expect the share price to re-rate."
Under the deal, shareholders of Abitibi Royalties will receive 4.6119 common shares of Gold Royalty for each common share they own of Abitibi Royalties, a premium of 22% based on the 20-day volume weighted average price of the Gold Royalty and Abitibi Royalties shares as of Sept. 3.
Golden Valley shareholders will receive 2.1417 Gold Royalty common shares for each common share they own of Golden Valley, an 86% premium based on the 20-day VWAP of the two companies' shares ended on Sept. 3.
The transaction implies a consideration of $11.76 per share for Golden Valley shareholders and $25.33 per share for Abitibi Royalties shareholders.
The diverse portfolio of royalties is far too large to list here, but are on a mixture of producing assets (six); development assets (7); feasibility and preliminary economic stage assets (14); resource development assets (15); key exploration stage assets (12), and early stage exploration assets (137); and features some of the biggest names in the mining industry. The companies include assets owned by Barrick Gold (TSX: ABX; NYSE: GOLD), Newmont, Coeur Mining (NYSE: CDE), First Majestic Silver (TSX: FR; NYSE: AG), Iamgold (TSX: IMG; NYSE: IAG), and Alamos Gold (TSX: AGI; NYSE: AGI).
Others include SSR Mining (TSX: SSRM; NASDAQ: SSRM; ASX: SSR); Monarch Mining (TSX: GBAR; US-OTC: GBARF; Fiore Gold (TSXV:F; US-OTC: FIOGF); Gold Standard Ventures (TSX: GSV; NYSE-AM: GSV); Wallbridge Mining (TSX: WM); GoldMining (TSX: GOLD; NYSE-AM: GLDG); Radisson Mining (TSXV: RDS; US-OTC: RMRDF); i-80 Gold (TSX: IAU; US-OTC: IAUCF); and Integra Resources (TSXV: ITR; NYSE: ITRG).
Glenn Mullan, president, chairman and CEO of Golden Valley, said on the call that he was excited that his company's shareholders were going to be part of the combined company. "I believe GRC will be uniquely positioned among its peer group of companies," he said. "Right deal, right company, at the right moment."
Ian Ball, president and CEO of Abitibi Royalties, said the business combination represented "a great deal for Abitibi Royalties' shareholders."
"When we look at the combined company and the portfolio, the mix, the balance, and the team that is running Gold Royalty, we are of the belief, both Glenn and myself, that this is the right decision for Abitibi at this time. And we do think that the growth we've inherited in both portfolios is going to continue to reward Abitibi shareholders as we proceed with Gold Royalty."