Western Lithium offers to buy Rocky Mountain Resources

Western Lithium Canada (WLC-V) is looking to buy Rocky Mountain Resources (RKY-V) in an all-share deal valued at $8.4 million.

The two companies have 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.

The deal is based on a Western Lithium share price of $1.24 – the 20-day weighted average share price. More than 6.7 million Western Lithium shares would be issued. The offer gives Rocky Mountain shareholders a 43% premium from the closing price on Oct. 22, the day before the offer was made.

If the deal goes through, Western Lithium will gain the Gibellini vanadium project in Eureka County, Nevada.

In 2008, Rocky Mountain completed a scoping study that projected 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 projected at 9.5 years, capital costs were estimated at $88 million and the after tax internal rate of return was 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.

The Rocky Mountain board of directors has approved the proposed merger. Once a definitive agreement is made, the board will sign lock-up agreements.

The deal is expected to go through in January. Western Lithium has yet to complete due diligence.

Rocky Mountain shares were up 31% (11¢) today on the news to 46¢ apiece, on a trading volume of less than 18,000 shares.

Western Lithium shares fell 3.5% (4¢) to 1.36 per share on a trading volume of 582,000 shares.