Agnico Eagle Mines Ltd. (AEM, Financial) announced March 6Â that it will buy 38,100,000 ordinary shares of GoldQuest Mining Corp. (TSXV:GQC, Financial) for $22.86 million.
One ordinary share of GoldQuest is valued at 60 cents. The transaction, which is expected to close March 8, will be done privately without the mediation of a broker.
Once certain conditions have been met and the deal has been authorized by the TSX Venture Exchange, Agnico Eagle will hold 38.1 million of GoldQuest’s ordinary shares. This volume of ordinary shares, on a non-diluted basis, represents about 15% of GoldQuest’s ordinary shares, issued and outstanding.
Under the terms of the agreement, as long as Agnico Eagle owns at least a 10% interest in GoldQuest, it will have the right to participate in equity financings in order to maintain its pro rata ownership. In addition, Agnico Eagle will be allowed to appoint one or two members to GoldQuest’s board of directors.
The agreement bars Agnico Eagle from purchasing more than 19.99% of GoldQuest’s ordinary shares.
GoldQuest is a Canadian miner headquartered in Toronto. It is engaged in exploration activities in the Dominican Republic to identify and acquire mineral assets.
The most important project in which GoldQuest is engaged is the wholly-owned Romero project located in the western part of the Dominican Republic. A prefeasibility study was released during the last quarter of 2016. The study enabled the company to plan the milling of approximately 2,800 tonnes of mineral every day and ship commercial copper concentrate to offshore refineries. The plan covers less than 50% of the mineral resources at Romero, which, according to the company, “leaves significant room for potential expansion.”
Sean Boyd, the vice chairman and CEO of Agnico Eagle, said the investment in GoldQuest “is consistent with the company’s approach of positioning themselves in early-staged opportunities in districts with long-term geological potential.”
GoldQuest is waiting to obtain the necessary building permits from local authorities, which will open the door to explore further potential at Romero’s brownfields. Once a feasibility study is completed and published, information about the economic viability of the project will be known.
GoldQuest is listed on the TSXV and is trading around 54 cents (40 cents U.S.). The stock closed up seven cents higher (or 14.89%) yesterday on the TSXV from the previous trading day.
The company has approximately 8.85 million Canadian dollars ($6.6 million) in cash on hand as of the most recent quarter and 215.63 million shares outstanding, of which 167.88 million can be traded on the Toronto Stock Exchange.
Agnico Eagle Mines closed at $40.12 yesterday, down $1.11 or -2.69% since the previous trading day, with a volume of 2,210,532 shares traded on the New York Stock Exchange.
The gold stock has been downtrending since Feb. 10 and has lost 4.48% year to date. Agnico Eagle is trading with a price-sales ratio of 4.22, at 2.01 times its book value and at 11.13 times its EBITDA.
The forward price-earnings ratio is 50.78.
As of today, eight out of 18 analysts recommend holding Agnico Eagle Mines. The average target price is $51.96 per share, a 29.5% upside from the current share price.
Disclosure: I have no positions in any stock mentioned in this article.
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