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With metal prices on the way down virtually across the board and mineral exploration companies scrambling to stay afloat there is a surprising amount of backroom wrangling over a handful of Manitoba properties.
After more than five years of working the four former gold mines at Lynn Lake, Carlisle Goldfields Ltd. now has two suitors keen to sink millions of dollars into the properties.
One of them — a Russian gold mining company called Nordgold — wants to buy the entire company and is willing to pay a 140 per cent premium to Carlisle shareholders right now.
The other deal Carlisle is considering — and has already closed — is a joint venture with AuRico Gold, a Toronto-based mid-tier gold producer with a producing mine called Young-Davidson 60 kilometres west of Kirkland Lake, Ont.
The question now for Carlisle’s board and its shareholders is whether to take the money and run with the Nordgold offer or work through the joint venture with AuRico. The latter deal includes a representation from AuRico it will spend up to $30 million over the course of the next three years to produce a feasibility study for the Lynn Lake property that would be the precursor to a producing gold mine.
There is a complicated private placement and earn-in component to the deal that has already included a $5-million payment. If AuRico is successful in completing the due diligence process over the course of the next three years, it will get control of 60 per cent of the project. But it will also mean Carlisle’s current shareholders will be able to participate in the upside growth that could be expected from a producing mine.
On the Nordgold deal, Abraham Drost, president and CEO of Carlisle, said, “It’s fair to say we are considering the situation. We have been presented with something we were not expecting. We’re getting some advice and all options are open.”
He said Carlisle has been talking with about a dozen potential partners over the course of the last six to eight months.
“Nordgold was one,” said Drost. “AuRico was the successful one.”
Nordgold’s offer is for 9.5 cents per share. (Carlisle’s shares were trading at four cents before the disclosure this week of the Nordgold proposal.)
It seems clear Carlisle management prefers the AuRico deal. It believes the disclosure of the Nordgold offer is in contravention of confidentiality agreement between the two parties.
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