Western Lithium Canada (WLC-V, WLCDF-O) has withdrawn its offer to buy Rocky Mountain Resources (RKY-V, RMRCF-O) in an all-share deal valued at $8.4 million.
The two companies had signed a non-binding letter of intent whereby Rocky Mountain shareholders would receive 0.4032 of a Western Lithium share for each Rocky Mountain share. However, on Nov. 9 the parties jointly announced they were terminating the plan, though no reason was given.
The deal had been based on a Western Lithium share price of $1.24 and more than 6.7 million Western Lithium shares would have been issued. The offer gave Rocky Mountain shareholders a 43% premium from the closing price on Oct. 22, the day before the deal was offered.
If the deal had gone through, Western Lithium would have gained the Gibellini vanadium project in Eureka County, Nev.
In 2008, Rocky Mountain completed a scoping study projecting that Gibellini could be a small heap-leach operation that could process 2 million tons per year, producing 8.4 million lbs. of vanadium pentoxide. The mine life was estimated at 9.5 years, capital costs at $88 million and the after-tax internal rate of return at 27%.
Western Lithium is developing the Kings Valley lithium project, also in Nevada, which has a historical resource prepared by Chevron Resources of 11 million tonnes of lithium carbonate equivalent.
Rocky Mountain’s board had originally approved the proposed merger, but no definitive agreement had been drawn up, and the board had yet to sign lockup agreements. Nor had Western Lithium completed due diligence when the original merger offer was tabled.
When the bid was first announced, Rocky Mountain shares were up 11¢ to 46¢ apiece on little trading volume. Western Lithium shares fell 4¢ to $1.36 on a trading volume of 582,000 shares.
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