VANCOUVER — Brazil’s metals and energy tycoon Eike Batista has had his sights set on Colombia’s red-hot California gold district for well over a year. Batista's EBX Group — through Canadian subsidiaries AUX Acquisition — started it off in February 2011, when it paid roughly US$1.5 billion for Ventana Gold and its flagship La Bodega-La Mascota deposit 400 km northeast of Bogota.
On Oct. 19, the Brazilian group looked to further consolidate its regional play through bids for Toronto-based explorers Galway Resources (GWY-V) and Calvista Gold (CVZ-T).
There had been speculation this summer about Batista's interest in Galway's California concessions, which lie along strike and contiguous to the La Bodega-La Mascota deposit. In mid-September, Galway released its maiden resource estimate on the deposit, which encompassed 2.4 million indicated tonnes grading 5.53 grams gold per tonne for 424,000 contained oz. at a 2 gram gold cut-off. The project holds an additional 3.9 million inferred tonnes averaging 5.38 grams gold for 666,000 contained oz.
Under terms of AUX's offer, Galway shareholders will receive $2.05 in cash per share, 0.9 of a share in a new company that will hold Galway's Vetas gold project, and a share in a new company that will hold the Victorio tungsten-molybdenum project.
The newly-formed companies will be capitalized to the tune of US$18 million and US$12 million respectively, with existing shareholders accounting for 90% ownership in the Vetas spin-out and 100% in the Victorio spin-out. The price per share represents a 47% premium over the 20-day, volume-weighted average for Galway's shares.
"We are extremely pleased with this transaction as we believe it represents great value for shareholders," commented Galway president and CEO Robert Hinchcliffe, who mentioned further upside in the Vetas and Victorio projects. "Both projects have excellent infrastructure and tremendous geological upside."
In an interesting twist, Batista negotiated himself a 10% stake in the Vetas spin-out, as well as the right to name a representative to the new company’s board of directors. Galway's wholly-owned Vetas project consists of the Reina de Oro and Coloro properties, which lie roughly 8km southeast of the California concessions in Colombia's Vetas gold mining district.
Galway announced results from 28-holes at Vetas on Oct. 11. The program is focused on expanding mineralization at the historic El Volcan mine, as well as testing six newly-identified surface anomalies.
Galway made a new discovery from surface in hole 61 when it cut 26 grams gold over 4.2 metres at roughly 280 metres depth. That discovery lies 150 metres northeast of high-grade results released by CB Gold (CBJ-V) in early September. Ross Beaty’s Lumina Capital holds around a 10% stake in CB Gold, and, coincidentally, had amassed the second-largest position in Ventana during Batista’s takeover in 2011.
Not surprisingly Galway's shares have popped around 41% or 63¢ since the news of the takeover hit the market on Oct. 19. The company has 126 million shares outstanding and a $274 million press-time market capitalization.
Calvista holds a 1.5-sq.km slice of the California district in its Buenavista and Callejon Blanco prospects. The acquisition makes sense considering this specific slice of land lies in the middle of Galway's California project and Batista's La Bodega-La Mascota deposit.
On Sept. 26, Calvista announced a resource update on its Buenavista and Callejon Blanco deposits that totalled 4 million indicated tonnes grading 3.49 grams gold and 15.77 grams silver for 452,218 oz. contained gold and 2.04 million oz. contained silver at a 2 gram gold cut-off.
AUX's offer for Calvista includes $1.10 in cash per share, as well as monetary considerations for all outstanding options. The price represents a 62% premium on Calvista's Oct. 18 closing price of 68¢ per share, and a 100% premium on its ten-day, volume-weighted average of 55¢ per share. To date 26% of Calvista's shareholders have entered into lock-up agreements and agreed to vote in favor of the deal.
“[The arrangement] is a result of a compelling proposal received by the Board of Directors,” stated Calvista CEO Mark Haywood, outlining that the offer recognizes the growth potential in the company's assets and allows shareholders to realize immediate cash.
Calvista's shares have leapt 55% or 38¢ since the offer was tendered on Oct. 19. The company had actually been on a run after reporting its maiden resource estimate and receiving its environmental permits in May, but the AUX offer premium was obviously too much to resist for management. Calvista is a single-asset company with 54 million shares outstanding and a $57 million press-time market capitalization.
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