Junior Canadian nickel producer First Nickel (FNI-T) and failed Guatemalan nickel explorer Jaguar Nickel (JNI-T) have struck a friendly deal to merge under the First Nickel banner.
Under the terms of the proposal, First Nickel will issue to Jaguar shareholders one share for every 3.5 Jaguar shares. There are currently 63.1 million First Nickel shares and 108.1 million Jaguar shares issued and outstanding.
The new company will be run by First Nickel’s existing management team, led by Beth Kirkwood. The board of directors will initially consist of the five current First Nickel directors and two nominees of the former Jaguar shareholders.
The combined company will have a market capitalization of about $115 million and liquidity exceeding $31 million in working capital.
First Nickel went public in June 2004 and reopened the small but high-grade Lockerby nickel-copper mine, a former producer acquired from Falconbridge in Ontario’s Sudbury basin.
Jaguar Nickel had substantial nickel laterite assets in Guatemala’s Lake Izabal region, but the commercial failure of an innovative atmospheric acid-choride leaching method for nickel extraction prompted the junior to sell its Guatemalan properties to Australia’s BHP Billiton for $19 million — leaving the junior mostly a cash-rich shell.
First Nickel says the infusion of cash from Jaguar will enable it to undertake several projects at Lockerby designed to increase nickel production, reduce costs and extend the mine life. The funds will also be used step up exploration at the neighbouring West Graham property, which is under option from Landore Resources (LDO-V), and be more aggressive in exploring the eastern portion of the feasibility stage Premiere Ridge property, situated on the Sudbury basin’s north range.
In the merger negotiations, Paradigm Capital is advising First Nickel while Sprott Securities is Jaguar’s advisor.
The deal is expected to close before August 2006.