MAG Silver to acquire Gatling Exploration in all-share deal

MAG Silver (TSX: MAG; NYSE-A: MAG) is acquiring Canadian junior Gatling Exploration (TSXV: GTR) in an all-share deal.

Gatling shareholders would receive 0.017 of a MAG common share for each Gatling share held,  valuing Gatling at approximately $0.40 per share. The share consideration reflects a 49.1% premium relative to the company’s closing price on the TSX Venture Exchange on March 10 and a 47.4%  premium relative to the company’s five-day volume weighted average trading price.

In addition, MAG has agreed to provide Gatling with a bridge loan of up to $3 million to finance the company’s accounts payable and operating expenses. The loan is convertible into 19.9% of Gatling’s issued and outstanding shares.

Shares in Gatling shot up 37% to $0.37 per share following the news, giving the Ontario-focused gold explorer a market capitalization of $16.8 million. Over the last year Gatling has traded in a range of $0.20 and $0.52 per share.

A drill crew at Gatling Exploration’s Larder gold project. Credit: Gatling Exploration.

Gatling’s prized asset is the Larder gold project 35 km east of Kirkland Lake in the Abitibi greenstone belt of northern Ontario. The property hosts three high-grade gold deposits along the Cadillac-Larder Lake Break. The three deposits have a combined in-pit and underground resource of 5.13 million indicated tonnes grading 2.39 grams gold per tonne for 388,000 oz. of contained gold and 6.89 million inferred tonnes grading 4.21 grams gold per tonne for 933,000 ounces. 

The 3,370 hectare Larder project area is about 7 km west of the Kerr Addison mine, which produced 11 million ounces of gold.

“Gatling’s Larder property gives us a substantial toe hold along this regionally productive gold-bearing structure where we believe more gold should be findable,” George Paspalas, MAG Silver’s president and CEO, commented in a news release.

MAG is primarily focused on silver-gold projects in the Americas. Its project portfolio is anchored by the Juanicipio silver project (44% owned) in Mexico, being developed with Fresnillo Plc (56%), the operator.

“In our view, this seems like a small, low-risk transaction for MAG given it represents <1% equity dilution,” Ryan Thompson of BMO Capital Markets commented in a research note to clients. “Upon closing of the Gatling deal, MAG will have a second exploration-stage property (Deer Trail being the other) in a favourable mining jurisdiction.”