Shares in Timberline Resources (TSXV: TBR; US-OTC: TLRS) jumped 130% to an intra-day high of 15¢ apiece Tuesday after McEwen Mining (TSX: MUX; NYSE: MUX) agreed to acquire the Nevada-focused explorer.
McEwen currently owns 6.25 million Timberline shares, or around 3.3% of the company, along with nearly 6.3 million warrants. Excluding these, McEwen expects to issue around 1.84 million shares on closing for a transaction value of US$18.8 million.
Timberline shareholders can receive 0.01 of a share of McEwen’s common stock for each share of Timberline’s, for a value of US$0.102 per Timberline share. That represents a 132% premium to Timberline’s 20-day volume-weighted average trading price of McEwen’s shares on the NYSE as of April 15.
Timberline shares, which in 2020 traded as high as 50¢ apiece in Toronto, closed at 14¢ Tuesday. The stock had languished near the bottom at 5¢ for most of the past 12 months. It has a market capitalization of $26.6 million.
“The merger with McEwen Mining, at an attractive premium to Timberline’s current trading price, provides our shareholders with continued exposure to Timberline’s assets as part of a more diverse growth-oriented platform,” Timberline President and CEO Patrick Highsmith said. “The combination should also unlock synergies between the Gold Bar mine and our Eureka project.”
A plan map view of the Eureka project, Nevada. Credit: Timberline Resources
The key projects of the copper and gold-focused Timberline include the Eureka, Paiute, and Seven Troughs properties, all located within the productive Battle Mountain-Eureka Trend, a well-known gold jurisdiction.
In recent quarters, Timberline has focused on exploration drilling at the Lookout Mountain deposit at Eureka, culminating in a mid-November resource update. The deposit holds measured and indicated resources of 25.82 million imperial tons grading 0.017 oz. gold per ton for 423,000 oz. gold.
The company said at the time that advancing the deposit to pit-constrained resources had also revealed opportunities for growth and optimization to improve the economics. The deposit remains open for expansion.
McEwen’s straight path
McEwen Mining’s finances rose into the black in 2023, with a net income of US$54.7 million, a substantial recovery from the previous year’s net loss of US$81.1 million. Strong production results and cost management drove this turnaround. The company also reduced its debt by 38%, enhancing its financial stability.
On the operational front, McEwen has continued to develop key projects, including the Fox Complex in northern Ontario and the Gold Bar mine in Nevada, which have shown promising exploration results and increased gold resources.
The company is also parent to McEwen Copper, which holds the Los Azules copper project in Argentina, considered one of the largest undeveloped copper projects globally.
Under the transaction, Timberline shareholders will receive 0.01 of a share of McEwen’s common stock for each Timberline share held, representing a value of $0.102 per Timberline share, or a premium of 132%, the companies said.
Timberline would be required to pay McEwen a termination fee of $400,000 if it walks away from the agreement.
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