In a move to gain more flexibility exploring the Detour Lake camp, Detour Gold (DGC-T) has proposed a friendly takeover of Trade Winds Ventures (TWD-V) for $84 million.
Detour, which is building a mine at its Detour Lake gold project north of Timmins, Ont., says the agreement will allow it to consolidate its holdings in the Detour Lake camp.
Detour’s president and CEO Gerald Panneton said the company had found the right time to buy Trade Winds Ventures.
“By acquiring Trade Winds, we are able to more effectively continue our exploration activities on the west side of the Detour Lake project,” he said in a press release.
Under the deal, Trade Winds shareholders would get 0.0142 of a Detour Gold share and $0.01 in cash for each share held. Detour expects to issue 2.63 million shares.
The deal values Trade Winds’ shares at 45.5¢ each, and represents a 61% premium based on both companies’ 20-day volume-weighted average price as of Sept. 23.
Trade Winds president and CEO Ian Lambert said the premium is “highly attractive,” and allows its shareholders to “participate in the upside in Detour Gold’s shares as it enters the intermediate producers’ rank through the development of Detour Lake.”
In return, Detour Gold will scoop up the Block A property, a fifty-fifty joint venture it has with Trade Winds, and the company’s wholly owned Gowest property. Both properties are in the Abitibi greenstone belt near Detour’s land holdings, and host a gold resource of at least 3 million oz., writes Haywood Securities’ analyst Kerry Smith in a research note.
Block A has an indicated gold resource of 1.92 million contained oz. from 70.8 million tonnes grading 0.85 gram gold, plus another 762,000 contained oz. from 27.3 million tonnes at 0.87 gram gold in inferred. The resource is in a constrained pit and based on a US$1,000-per-oz. gold price.
The Gowest property hosts indicated and inferred resources of 273,953 contained oz. from 6.3 million tonnes at 1.16 grams gold.
Smith, along with a handful of other analysts covering Detour Gold, views the Trade Winds transaction as a positive one. Raymond James’ analyst Brad Humphrey says in a research note that the acquisition, while not “materially significant at this time for Detour,” is a good one because it joins the Detour Lake property.
Smith adds the bid will allow Detour to “expand and prioritize its exploration activities without the additional burden of dealing with a joint-venture partner [who is also the operator at Block A], and allow optimization of the mineral potential of the [Abitibi greenstone] belt.”
The agreement still requires regulatory and shareholder approvals, and is expected to close before year-end.
Although a higher bid for the properties is unlikely, Detour has five days to match any superior offer for Trade Winds. If the agreement is called off, Trade Winds would have to pay Detour $3.15 million.
On the acquisition news, Trade Winds shares jumped 43% to 41.5¢ on 20.4 million shares traded, while Detour Gold dropped 2.6% to $31.17 apiece, with 1.56 million shares changing hands.
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