Viva Gold shall be acquired by Golden Predator; The advantages of the merger seem modest

In a transfer that appears unlikely to learn shareholders of both firm, Golden Predator Mining Corp. (TSXV: GPY) and Viva Gold Corp. (TSXV: VAU) agreed to a pleasant merger through a inventory trade on March 3. Golden Predator would be the surviving firm, and Viva shareholders will obtain 1.6 Golden Predator shares for every Viva Gold share they personal.

Based mostly on the March 2 shut of the 2 corporations, this trade ratio implied a redemption value of Viva Gold of $ 0.32 per share. Viva Gold has traded within the mid 40 cent vary as lately as August 2020.

The synergies of the merger in all probability seem modest. Golden Predator is within the strategy of growing the previous Brewery Creek gold mine within the Yukon for doable resumption of manufacturing. Brewery Creek was final mined in 2002. Two thousand kilometers away, Viva Gold is growing the Tonapah gold mission in Nevada. The mixture of those tasks is unlikely to lead to any considerable value financial savings, and neither mission is predicted to generate money stream for a while.

Golden Predator’s Brewery Creek Property
Viva Gold’s Tonapah Gold Challenge

From Viva Gold’s perspective, it’s troublesome to know the rationale for the merger in these phrases. In his February 2021 investor presentation, he detailed that his valuation was considerably decrease than different equally positioned junior miners. Agreeing to be acquired for a small premium at this level implies that if that worth hole exists, will probably be captured sooner or later primarily by Golden shareholders, as they may personal 73% of the mixed firm.

Slide 4 of the February 2021 Viva Gold Investor Presentation

One facet of the deal is resolutely in favor of Golden Predator and doesn’t profit present Viva shareholders, even when Viva had been the goal of the merger. Golden owns 8.62 million shares of C2C Gold Corp. (CSE: CTOC), a miner targeted on tasks in Newfoundland. This stake is value roughly $ 1.55 million. As a part of the merger settlement, Golden will distribute these shares alone to present Golden shareholders as a return of capital instantly previous to the closing of the Golden Predator – Viva Gold merger.

Golden Predator Monetary Standing

As of September 30, 2020, Golden Predator had practically $ 9 million in money and marketable securities (see remark above on its stake in C2C Gold) and nearly no debt. As of July 31, 2020, Viva Gold had roughly $ 2 million in money and negligible debt.

Golden Predator’s working money deficit has averaged roughly $ 2.4 million per quarter over the past 5 quarters reported. Viva Gold’s working money deficit has been smaller, averaging roughly $ 400,000 per quarter over the previous three quarters.

(in 1000’s of US {dollars}, apart from excellent shares) 3 quarter 2020 2 quarter 2020 1 quarter 2020 4th quarter 2019 third quarter 2019
Working revenue ($ 2,090) ($ 1,443) ($ 1,930) ($ 3,951) ($ 3,879)
Working money stream ($ 1,576) ($ 2,237) ($ 1,071) ($ 3,835) ($ 3,368)
Money and negotiable devices $ 8,921 $ 8,155 $ 885 $ 1,322 $ 5,243
Debt – Finish of interval $ 95 $ 113 $ 131 $ 181 $ 248
Shares excellent (hundreds of thousands) 172.3 168.1 156.9 156.9 156.9
Golden Predator’s monetary state of affairs.

The merger of two growing corporations whose tasks are 1000’s of kilometers aside in two totally different nations doesn’t seem to create worth. The ensuing value financial savings in all probability seem minimal. From Viva Gold’s perspective, the corporate has agreed to be acquired at a value nicely beneath its value of about six months in the past. A lot of the profit seems to be for the shareholders of Golden Predator, who will now have a mission that may have year-round actions, which aren’t restricted by winter circumstances.

The shares of Golden Predator Mining Corp. and Viva Gold Corp. commerce at $ 0.19 and $ 0.26 respectively on the TSX Enterprise Change.

Data for this briefing was discovered via Sedar and the businesses talked about. The creator has no title or affiliation associated to this group. Not a purchase or promote advice. At all times do extra analysis and seek the advice of knowledgeable earlier than buying a title. The creator doesn’t maintain any license.

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