Auryn Resources to acquire Eastmain in $121M all-share deal

Studying drill core at Eastmain Resources’ Clearwater gold property in Quebec, which hosts the Eau Claire deposit. Credit: Eastmain Resources.

Auryn Resources (TSX: AUG; NYSE: AUG) is acquiring Eastmain Resources (TSX: ER) in an all-share deal valued at C$121 million. The transaction will create a new firm, Fury Gold Mines, as well as two independent spin-out entities that will hold Auryn’s Peruvian projects. The deal was announced on July 29.

“Fury Gold will combine the high-grade gold projects: Committee Bay in Nunavut, Homestake Ridge in B.C. and Eau Claire in Québec, to offer investors a robust, Canadian, gold-focused exploration and development company,” Ivan Bebek, Auryn’s executive chairman and director, said in a release.

“Fury Gold will have the capability and access to capital to develop and finance Eau Claire,” added Laurie Curtis, Eastmain’s chairman.

The combined company will be led by a new president and CEO, Mike Timmins, who served as the vice-president of corporate development for Agnico Eagle (TSX, NYSE: AEM) between 2006 and 2017. The proposed board would include three of Auryn’s directors (with Bebek serving as chairman), two directors from Eastmain and Mike Timmins.

As part of the proposed acquisition, Auryn would spin out its Peruvian assets to existing shareholders just before the closing of the Eastmain transaction and complete a private-placement financing of Fury Gold subscription receipts, to raise a minimum of $15 million.

As Auryn’s assets in Peru transition to two new (unlisted) companies, Fury Gold plans to consolidate its shares on a 10:7 basis, with 110 million shares outstanding anticipated for the pro-forma company, before the proposed financing.

Upon closing, Eastmain shareholders would receive approximately 0.117 of a Fury Gold share for each Eastmain share held, or 0.165 of an Auryn share before the consolidation. Auryn shareholders would receive 0.7 share of Fury Gold and one share in each spin-out company for each Auryn share at closing.

On a prefinancing basis, 69% of Fury would be held by Auryn’s shareholders and 31% would be owned by Eastmain’s stock owners.

After closing of the transaction, Fury Gold would start a 50,000-metre drill program at the 1,130-sq.-km Eau Claire gold project in Quebec.

Shareholder meetings of both companies are expected in September – approval by a majority of shareholders is required at each. If the transaction does not close due to a third-party superior offer, the party accepting the higher deal would pay the other a 3.75% termination fee, based on the value of the higher proposal.

Boards of both companies have approved the transaction and recommend shareholders vote in favour of the deal.

Eastmain’s wholly owned Eau Claire deposit hosts open-pit and underground resources, with a total of 4.3 million measured and indicated tonnes, grading 6.18 grams per tonne gold for 853,000 oz. gold. Inferred resources add 2.4 million inferred tonnes at 6.53 grams per tonne gold for 500,000 ounces. Open-pit resources are based on a 0.5 grams per tonne gold cut-off grade, whereas underground resources are estimated using a cut-off grade of 2.5 grams per tonne gold.

A preliminary economic assessment completed at Eau Claire in 2018 outlines a 12-year open-pit and underground operation producing an average of 86,100 oz. gold annually in the first 10 years at all-in sustaining costs of US$574 per ounce. Eau Claire is 57 km away from Newmont’s (TSX: NGT; NYSE: NEM) Éléonore mine and sits within Eastmain’s wholly owned 20,068-sq.-km Clearwater land package.

Auryn’s Sombrero and Curibaya projects in Peru are in the final stages of drill permitting.

— This article first appeared in our sister publication, the Canadian Mining Journal.

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