Copper Canyon ‘very pleased’ with sweetened NovaGold bid (March 21, 2011)

Just one month after dismissing the Dec. 20, 2010, takeover bid of joint venture partner NovaGold Resources (NG-T, NG-X) as “inadequate,” and only one week after suing it for allegedly failing to honour certain terms of the JV contract, the board of Copper Canyon Resources (CPY-V) has decided to support a superior all-stock bid by NovaGold valuing the company at $1.05 a share, or about $62 million.

Under the arrangement, Copper Canyon shareholders will receive 0.0735 of a NovaGold share for each Copper Canyon share held, as well as one share of a new spin-out company for every four shares held. The spin-out will retain all of Copper Canyon’s properties other than its 40% joint venture interest in the Copper Canyon copper-gold-silver property in northern British Columbia, including its Severance and Kiwi gold projects in Alaska, and its Abo gold project in southern B.C. Prior to completing the takeover, NovaGold will fund the new company with $2.5 million. 

“We are very pleased with the outcome of our negotiations with NovaGold,” commented Tim Termuende, Copper Canyon’s president and CEO, in a press release. The revised deal offers shareholders a 150% premium over the closing price of Copper Canyon shares the day before NovaGold’s initial takeover announcement, and a 75% premium over the initial offer (at about 60¢ a share). Besides squeezing out a higher price from NovaGold for his shareholders and getting to keep his job by spinning out a new company, Termuende has 1.31 million other reasons to be pleased. His 1.31 million Copper Canyon shares are worth roughly $1.37 million under the new offer, or $584,000 more than they were under the original offer. 

As part of the agreement, Copper Canyon will dismiss its lawsuit against NovaGold upon completion of the takeover, as well as withdraw its application to the British Columbia Securities Commission to halt the takeover, in which it had claimed NovaGold failed to disclose material information to shareholders. Copper Canyon alleged NovaGold improperly transferred its 60% interest in the Copper Canyon property to the Galore Creek Partnership, a 50/50 joint venture with Teck Resources (TCK-T, TCK-N), without first honouring Copper Canyon’s right of first refusal to buy back NovaGold’s JV interest. (NovaGold denies the claim.)

The Copper Canyon project sits adjacent to the large Galore Creek copper-gold-silver project, for which Teck and NovaGold expect to release a prefeasibility study in mid-2011. As reported in an updated resource estimate from June 2010, the Copper Canyon project hosts an inferred resource potentially amenable to underground bulk-tonnage mining of 53.7 million tonnes grading 0.5% copper, 0.73 gram gold per tonne and 10.6 grams silver per tonne. This is equivalent to 592 million lbs. copper, 1.3 million oz. gold and 18.4 million oz. silver.

Copper Canyon’s share price jumped 19¢ to $1.03 on the day it agreed to the takeover, while NovaGold’s share price fell 32¢ to $13.49.