Private explorer Toro Gold makes offer for Axmin

A private gold exploration company with an interest in sub-Saharan and equatorial Africa hopes to acquire Canadian junior Axmin Inc. (AXM-V, AXMIF-O), which has gold and other assets in the Central African Republic, Mali, Sierra Leone and Senegal.

The Axmin acquisition would give Toro Gold a foothold in Central and West Africa, furthering its pan-African ambitions.

The Guernsey-registered company proposes to acquire all of Axmin’s shares for 14¢ per share in an all-cash deal.

At press-time in Toronto, Axmin was trading at 12¢ a share — down from a 52-week high of 17.5¢ in September 2009 but well above its 52-week low of 3¢ per share in December 2008.

Axmin was blindsided in late August 2008 when the government of the Central African Republic suddenly restricted the company’s permits to gold from a broad suite of minerals including silver, copper, nickel, lead, zinc and iron. The junior had found promising iron ore assets (the company’s wholly owned Topa iron belt) on its Bambari permits in the country.

Axmin launched a strategic review of its options in March 2009.

“After eight arduous months of pounding the pavement and marketing the company this is the best offer we’ve come up with and it has the support of our major shareholder — the AOG Group (a wholly owned subsidiary of the Addax & Oryx Group) — which holds nearly 50% of the company,” Mario Caron, Axmin’s president and chief executive, explained in an interview.

“We’ve been extremely quiet because of the difficulty we’ve encountered in the Central African Republic so our financings have been modest and we haven’t done as much exploration as we have wanted to do. We’ve been supported by our major shareholder but there was no guarantee that this was going to continue in the future.”

The acquisition is anticipated to close in January 2010 and is conditional on the completion by Toro Gold of an equity financing. The proceeds from the financing will be used for the Axmin acquisition and for general corporate purposes.

A circular to Axmin’s shareholders will only be distributed once the equity financing has been completed, Caron said. So far there is no break-fee in place.

“There is the opportunity to consider superior proposals,” Caron said. “If anyone has a chance or thinks it wants to offer more there is a window of opportunity.”

Axmin’s most advanced asset is its Passendro project in the Central African Republic, which has a measured and indicated resource of 32 million tonnes grading 2 grams gold per tonne for 2 million oz. contained gold. Passendro’s inferred resource weighs in at 22 million tonnes grading 1.6 grams gold for 1.01 million oz. of contained gold.

In May 2008, the government said it wanted to review some of the conditions of the mining convention it had signed with Axmin on Jan. 27, 2006. Among other things the government noted that it would be willing to consider exchanging its 10% free carried interest in the company that holds the Passendro gold project, for a cash consideration and an enhanced royalty.

Passendro, about 60 km north of Bambari, would be a conventional open-pit mine with a carbon-in-leach plant. Caron said the project, which completed a bankable feasibility study in April 2008, has yet to receive a mining licence.

If the acquisition goes ahead, Toro Gold will also acquire Axmin’s Komahun gold project in the Archaean Greenstone belt of east-central Sierra Leone. Komahun has a National Instrument 43-101 indicated resource estimate of 0.4 million tonnes grading 9.1 grams gold per tonne for contained gold of 110,000 ounces, and an inferred resource of 3.1 million tonnes grading 4.3 grams gold for 435,000 ounces of gold.

In March Amxin completed a scoping study demonstrating that the Komahun project has the potential to be developed as an underground mine with production levels of about 50,000 oz. gold a year. At a gold price of US$750 per oz., the project would have a net present value (NPR) at a 5% discount rate of US$11 million and at a US$900 per oz. gold price that would climb to US$48 million.

The third project in Axmin’s pipeline is the Kofi gold project in Mali. As of Dec 2007, Kofi had a National Instrument 43-101 indicated resource of 3.6 million tonnes grading 2.5 grams gold per tonne for contained gold of 293,000 ounces and an inferred resource of 5.3 million tonnes grading 2.2 grams gold for 368,000 oz. gold.

“Mali is at the resource stage and we don’t have a plan yet and we don’t have enough resource to move to the prefeasibility study phase,” Caron noted.

For its part, Toro Gold is seeking to establish a multi-million ounce portfolio through a combination of acquisitions and organic development. Toro Gold could not be reached for comment by presstime, but on its website states that it aims to “rapidly establish a production base in addition to development assets” and “seek out and consolidate distressed companies with “high quality development ounces.”

It also plans to list  “on a recognized stock exchange within 12-18 months.”

Toro Gold’s management team includes Adonis Pouroulis as non-executive chairman. Pouroulis founded Petra Diamonds and listed it on London’s AIM market in 1997. He also successfully listed Chariot Oil & Gas, which holds offshore licences in Namibia. Chariot recently signed a farm-out agreement with Petrobras of Brazil.

Toro Gold’s chief executive officer is Martin Horgan, a mining engineer by training, who has worked in the mining sector as an engineer in South Africa for Gold Fields; for Steffen Robertson & Kirsten in the United Kingdom; Barclays Capital; and as executive director for BDI Mining Corp.  Martin was part of the team that sold BDI Mining to Gem Diamonds in 2007.