Canadian gold and silver producer McEwen Mining has announced a definitive merger agreement to acquire Timberline Resources, a move that is set to bolster its Nevada project portfolio.
The transaction will see Timberline shareholders receive 0.01 of a McEwen common stock share for each Timberline share, valued at $0.102.
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This exchange rate marks a 132% premium over Timberline’s 20-day volume-weighted average price on the OTCQB (over-the-counter quotation bureau).
McEwen, which currently holds aound 3.3% of Timberline’s basic common shares and an equal number of warrants, will issue around 1.84 million new shares, valuing the deal at $18.8m (C$25.95m), excluding McEwen’s pre-existing stake.
The completion of the transaction is contingent upon standard conditions including necessary regulatory and stock exchange approvals, as well as consent from Timberline’s shareholders.
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Timberline’s board has unanimously advised its shareholders to approve the merger.
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By GlobalDataKey Timberline stakeholders including directors officers, and two principal shareholders, who collectively own around 40% of the outstanding shares, have committed to supporting the acquisition through voting and support agreements with McEwen.
The agreement includes standard deal-protection clauses, with Timberline agreeing to refrain from seeking or initiating discussions about alternative business combinations.
Should Timberline terminate the agreement for a superior proposal, it will owe McEwen a termination fee of $400,000.
Upon closing, all existing Timberline warrants will be converted into warrants for McEwen shares, adhering to the exchange ratio.
In-the-money stock options will vest immediately and be exchanged for McEwen shares at the exchange ratio minus the exercise price, while all other stock options will be cancelled.
In November last year, McEwen Mining announced flow-through financing of $16.1m to advance its Fox Complex in northern Ontario, Canada.
