Resource industry in brief
Platinum plans
Prophecy Platinum (TSX-V: NKL) has launched a friendly all-share deal to acquire Toronto’s Ursa Major Minerals (TSX:UMJ) and become a “mid-tier” resource company.
On March 2, Vancouver-based Prophecy, which is focused on developing its platinum group metals property Wellgreen in the Yukon, announced a deal that would see the company issue one of its shares in exchange for every 25 of Ursa’s.
The deal has a value of approximately $12 million, or a 130% premium to Ursa’s closing price on March 1.
The merger is expected to close June 15, giving Ursa leeway should a better offer come along.
Meantime, should the deal go through, Prophecy would graduate from being a strictly exploration-focused company into a mine operator.
Ursa generates a small revenue from its Shakespeare nickel mine near Sudbury, Ontario, though in December the Toronto company said it had slowed operations at the mine after low base-metal prices cut took a bite out of its bottom line.
Prophecy has indicated that although it’s pleased to diversify and take control of the Shakespeare mine, its primary focus will remain the development of Wellgreen.
“We believe with this production-ready mine, Prophecy would raise its profile, broaden investment appeal and gain further trading liquidity,” said Prophecy chairman John Lee.
Shareholders haven’t taken an overly positive view of the deal. After the merger was announced, Prophecy’s shares dropped 8% to $3.38.
Ursa shareholders, meantime, responded in the opposite way, forcing the company’s stock value up 92% to $0.12.
At press time, Prophecy’s shares were valued at $3.38, while Ursa’s were valued at $0.12, three cents below the premium offer for the company.
Congo bungle
Vancouver’s First Quantum Minerals (TSX:FM) has finally found peace in the Congolese jungle – by not being there.
Earlier this month, First Quantum, which has copper-gold mines in Zambia and Mauritania, left the Democratic Republic of Congo (DRC) with US$750 million in its pocket following a near two-year legal drama in the African nation.
The company said March 2 it had closed a deal to sell its Congolese assets, which included the Kolwezi tailings project and Frontier and Lanshi mines, to Eurasian Natural Resources Corp. plc (ENRC) for US$1.25 billion.
First Quantum received US$750 million in cash and a three-year promissory note valued at $500 million.
The assets, located in DRC’s Katanga province, became the subject of a nasty dispute after DRC president Joseph Kabila seized control of the Kolwezi project after the company had invested some $400 million.
The seizure threw some 700 miners out of work and caused First Quantum to enter a long legal battle to be recouped for its investment in the country.
In an interview in 2010, First Quantum president Clive Newall told Business in Vancouver his company was prepared to play the “long game” of international arbitration to win its fight against the DRC.
During court proceedings, the company launched legal action against a mysterious British Virgin Islands company, Highwinds Group, which, it turned out, was a subsidiary of ENRC.
That court battle came after it was revealed that ENRC, through Highwinds, had purchased a 70% stake in Kolwezi from the DRC government.
Media sources have reported that Highwinds’ involvement is part of a government “grab-and-flip” strategy that allows insiders to profit from the transfer of the rights to the project.
First Quantum has now settled all of its claims and divested the entirety of its assets in the DRC.
At press time, the company’s shares were valued at $21.94.
Pay dirt
North America’s largest producer of a relatively unknown metal is flying high on record earnings.
Vancouver-based North American Tungsten (TSX-V: NTC) reported earlier this month record first-quarter net income of $6.6 million, or $0.03 per share, thanks to an ongoing “enhancement” strategy at its CanTung tungsten mine in the Yukon.
The net profit compares with a $4.4 million net loss for the same period in 2010.
NTC chairman and CEO Stephen Leahy said the company now has the foundation in place to achieve its operating and financial targets for the foreseeable future.
“We will continue to invest in the CanTung mine operations, including exploration, development and tailings,” Leahy said.
NTC’s shares were up 15% after its earnings were published March 2.
Tungsten, an extremely hard metal that’s used in everything from cutting tools to jet engines, is, for the most part, mined in China, which produces 80% of global supply.
But in 2010, NTC’s decision to restart CanTung sent 190 people back to work in Canada’s North.
The company has upgraded the mine’s equipment and efficiency to jump-start profits from the low-grade ore produced at the mine.
NTC is also continuing development work at its MacTung deposit, which is also in the Yukon and considered one of the largest on the planet.
At press time, NTC’s shares were valued at $0.44.
