Fronteer Gold Inc. (TSX:FRG) has inked a $280.8 million deal to buy AuEx Ventures Inc. (TSX:XAU) to consolidate its presence in a new Nevada gold trend.
In the deal announced Monday, Vancouver-based Fronteer has offered AuEx shareholders 0.645 of a Fronteer share, $0.66 cash and 0.5 of a share in a new company for each AuEx share.
The deal represents a 50.9% premium on the volume-weighted average prices of AuEx and Fronteer shares for the last 20 trading days.
The buyout means Fronteer will enjoy full ownership of the Long Canyon gold project in Nevada.
“The strategic rationale for doing this deal is pretty clear and compelling … there’s no other project out there that we like more than Long Canyon. We have a great appreciation for its attributes,” Mark O’Dea, Fronteer’s president and CEO, told BIV Monday morning.
Fronteer’s share value dropped 3.5% to $8.09 after the deal was announced, while AuEx’s shares rose 30.8% to $5.89 in midday trading.
AuEx’s board of directors unanimously approved the transaction, while president and CEO Ronald Parratt said it signalled an immediate and attractive return for shareholders interested in Long Canyon.
In a research note published Monday, RBC Capital Markets analyst Adam Schatzker said the deal was “very attractive” because it allows Fronteer to acquire the rest of Long Canyon at a “significant discount.”
RBC believes Long Canyon is worth $1.04 billion.