Canadian Gold Hunter and Sanu Resources to merge

With the proposed merger of Canadian Gold Hunter (CGH-T) and Sanu Resources (SNU-V), both part of the Lundin Mining (LUN-T) group of companies, the combined entity will have exploration properties spanning three continents and key access to financial markets.

Canadian Gold Hunter holds a large and diversified portfolio of exploration projects in Canada, Mexico, Argentina, Chile, Colombia and Peru, while Sanu Resources has a portfolio of gold and base metal exploration projects in Africa, namely several promising projects in the emerging gold-rich, volcanic-hosted massive sulfide belt of western Eritrea, greenstone-gold projects in Burkina Faso and carbonate hosted copper-zinc-lead mineralization in the Republic of Congo.

Under the proposed business combination, Sanu shareholders will receive 0.5725 shares of Canadian Gold Hunter for each Sanu share they hold. The transaction values Sanu at $0.233 per share and represents a 25% premium to its 20-day volume weighted average closing price.

Sanu’s board of directors has approved the proposed business combination with Canadian Gold Hunter, after a special committee of Sanu’s independent directors unanimously recommended the deal.

If the merger goes ahead, Sanu will become a wholly-owned subsidiary of Canadian Gold Hunter, with former shareholders of Sanu owning about 17.8% of Canadian Gold Hunter. Following the merger Canadian Gold Hunter will have an estimated 134.16 million shares outstanding.

“I think the general feeling is that bigger, more diversified groups are going to be easier and simpler to finance,” Wojtek Wodzicki, president and chief executive of both Canada Gold Hunter and Sanu Resources said in a telephone interview from his office in Vancouver. “Rather than going out and funding a bunch of small companies it’s better to put the muscle of the group behind one consolidated vehicle.”

Wodzicki added that there is going to be a shakeout in the junior market and the ones that are well placed to thrive are those with key access to financial markets.

“If we come up with good opportunities we’re in a group that is in a position to take advantage of that,” he explained. “And not everyone will be in that position. We have access to some of the biggest deal makers in the business.”

Wodzicki said the combined entity would have a strong portfolio with a bunch of drill target ready projects that “should have some pretty good news flow” over the next couple of months. It would also be represented in all the top jurisdictions in the Americas, as well as in Africa, which while a longer term play, has huge exploration potential.

Sanu Resources most advanced project, for example, the Hambok deposit, lies in Eritrea – a country where a heightened perception of political risk has kept many competitors away.

Hambok is 15 km from Nevsun Resources‘ (NSU-T, NSU-X) Bisha deposit, which lies in a VMS belt that extends from Eritrea up through eastern Sudan, across the Red Sea and into Saudi Arabia.

“It’s probably one of the best undeveloped VMS belts in the world,” Wodzicki explained, “and the government is keen to have people like us working there.”

The Hambok deposit covers the strike extensions of the belt of rocks that Bisha is in. Hambok has a National Instrument 43-101 compliant indicated resource, at a 0.75% zinc cutoff, of 10.7 million tonnes grading 0.98% copper, 2.25% zinc, 6.84 grams silver per tonne, 0.20 gram gold per tonne for 231.1 million pounds of copper, 530.7 million pounds of zinc, 2.3 million ounces of sliver and 68.8 thousand ounces of gold.

Hambok also has an inferred resource, at the same cutoff grade, of 17 million tonnes grading 0.85% copper, 1.74% zinc, 5.89 grams silver per tonne and 0.19 gram gold per tonne for a total of 318.5 million pounds of copper, 652.1 million pounds of zinc, 3.2 million ounces of sliver, and 103.8 thousand ounces of gold.

Apart from Hambok, Sanu Resources brings additional projects to the table including a carbonate-hosted copper/lead/zinc exploration project in the Republic of Congo and greenstone-hosted gold exploration project in Burkina Faso.

For its part, Canadian Gold Hunter has projects ranging from the grass roots stage all the way to advanced resource definition. Its Josemaria copper/gold porphyry project in northwestern Argentina’s San Juan province has an inferred resource of 460 million tonnes grading 0.39% copper and 0.30 gram gold per tonne at a 0.3% copper cut-off, containing 3.9 billion pounds of copper and 4.4 million ounces of gold.

The Josemaría project is a large gold-copper porphyry system that has been the focus of 21,616 metres of reverse circulation and diamond drilling from 2003 through to 2007. A National Instrument 43-101 compliant resource estimate prepared for Josemaria demonstrates an inferred resource of 460 million tonnes grading 0.39% copper and 0.30 gram gold per tonne at a 0.30% copper cutoff.

Canadian Gold Hunter’s local South American exploration team has a long track record including the Veladero gold deposit, now owned by Barrick Gold (ABX-T, ABX-N). The Veladero mine, also in the San Juan province of Argentina, lies south of the Pascua Lama property, about 320 km northwest of the city of San Juan in the Frontera district.

Last year Veladero, a conventional open-pit operation, produced 536,000 ounces of gold. Proven and probable reserves as of Dec. 31, 2008 were estimated at 12.2 million ounces of gold.

It was also Canadian Hunter that initially recognized and developed the Bajo de la Alumbrera gold mine, which is now owned by Goldcorp (G-T, GG-N), Xstrata (XTA-L, XSRAF-O) and Yamana Gold (YRI-T, AUY-N, YAU-L).

At presstime Canadian Gold Hunter was trading at about 38.5¢ per share with a 52-week trading range of 17¢-$2.19 per share and 110.34 million shares outstanding.

Sanu was trading at about 19¢ per share with a 52-week range of 6¢-98¢ per share and 54.04 million shares outstanding.