Transition Metals to acquire HTX Minerals

Geologist Scott McLean and geophysicist Keven Stevens set-up privately held HTX Minerals in late 2007 and started raising capital for the start-up exploration company in January 2008.

But they realized their timing was off when the financial crisis started to bite. 

So the pair — former members of a four-man team at Falconbridge that in 2001 discovered the high-grade Nickel Rim South deposit in Sudbury, Ont. — chose project generation and finding strategic partners as their most promising business model, and success eventually followed.

In July 2008, HTX completed a strategic alliance with Impala Platinum Holdings (IPLA-L) to look for platinum group metal deposits in the mid-continental rift region north of Lake Superior. Impala has committed $1.3 million a year to create fifty-fifty joint ventures within northwestern Ontario.

A second strategic alliance followed last year with Inuit-owned Nunavut Resources (NRC) to explore Nunavut’s Kitikmeot region. NRC is investing $18 million over five years for HTX to identify gold, base metal and diamond targets in Kitikmeot, a 450,000 sq. km region in Nunavut.

Since then HTX has generated a number of other projects, including Dessert Lake, a uranium project in the Northwest Territories; Timberwolf, a nickel-copper-platinum group metals (PGM) project in Minnesota; Owen, a nickel-copper-PGM project near Sudbury; and the AER Kidd project, about 20 km southwest of Sudbury, that it has optioned from CaNickel Mining (CML-T).

AER Kidd is adjacent to Vale’s (VALE-N) huge Totten deposit, and to the east is the underground Victoria project, which is being developed by Poland’s KGHM Polska Miedz. (Quadra FNX held the property until its acquisition in February 2012 by KGHM.)

McLean and Stevens spun out another project-generation company in late 2009 that they named Transition Metals (XTM-V). The company was seeded with $1 million from private investors in May 2010, and taken public in August 2011.

Transition’s flagship project is the Haultain gold property in the southern Abitibi, 1 km outside of Gowganda, in the heart of the old Gowganda silver camp. (Kirkland Lake is about 75 km northeast.) Transition’s other key project is Janice Lake, which is 190 km north of La Ronge in north-central Saskatchewan and 55 km southeast of Key Lake. Janice Lake has over 20 copper showings at surface, and the company believes the 68 sq. km property has the potential for large-tonnage, near-surface, sediment-hosted copper deposits.

But about a year ago, McLean and Stevens started to think that the two companies they founded would be better off together than apart, and earlier this week announced that Transition Metals would acquire HTX under a plan of arrangement. Not only will the combined geological teams and properties — 30 in all — bring more heft to Transition, but the combination will also create more operational efficiencies and a broader shareholder base to get more liquidity into Transition, McLean explains in an interview.

“Bringing them together also gives us the same size and potential market capitalization as some of the other project generators in the industry such as Azimut, Miranda, Millrock, Midland and Riverside,” he notes.

And with the current state of the markets, their decision seemed to make even more sense. 

“We mitigate our risk by bringing in joint-venture partners with multiple projects, and that keeps dilution low,” Mclean says. “We end up with lots of irons in the fire that give our shareholders greater exposure to being involved in a discovery. It’s a great place to be in during the down cycle.”

After the acquisition of HTX, Transition Metals will have $2 million in cash and no debt, and plans to spend a total of $4.3 million on exploration this year. Of that amount, Transition will be on the hook for about $500,000.

McLean says that the priority this year will be moving ahead with HTX’s Itchen gold project in Nunavut, and with Transition’s Janice Lake and Haultain projects.

Under the proposed plan of arrangement, all common shares of Transition will be consolidated on a 2-to-1 basis. HTX shareholders will receive shares of Transition at an exchange ratio of 0.8 post-consolidation Transition shares for each HTX share they hold. All shares of Transition held by HTX will be cancelled.

At press time in Toronto, Transition was trading at 12.5¢ per share within a 52-week range of 7¢ to 25¢.