Juniors jump, First Mining dips on takeover news

First Mining Finance Corp (TSXV:FF) made another deposit into its "mineral bank" on Tuesday, causing shares in the Vancouver-based acquirer of resource properties to swoon and its takeover targets to soar.

The company said in a press release it has agreed to acquire all the issued and outstanding shares of Gold Canyon Resources (TSXV:GCU) and PC Gold (TSXV:PKL), both of which are focused in Ontario, Canada. Under the transactions, together valued at $65.9 million, Gold Canyon shareholders will receive one common share of First Mining for each Gold Canyon share, in addition to shares in a newly-formed company, New Gold Canyon. PC Gold shareholders will receive 0.2571 common shares of First Mining for each PC Gold share. First Mining will issue about 160,629,993 common shares to the former Gold Canyon shareholders, valuing Gold Canyon’s equity at approximately C$56.2 million. Former PC Gold shareholders will be issued about 27,804,508 common shares of First Mining, valuing PC Gold’s equity at around C$9.7 million.

After the trading session finished on the Toronto junior board, PC Gold's stock price had gained by 66.6 percent; its acquisition counterpart, Gold Canyon, leapt 52.1 percent on 34 times regular trading volumes. Shareholders in First Mining Finance were unimpressed by the takeover, however, with shares dropping 20 percent on what was another horrific day on the Canadian markets, with the Toronto main board down 377 points at the close.

 

The value to First Mining Finance Corp, which operates under a slightly different model than a streaming or royalty company, is in the properties of Gold Canyon and PC Gold. PC Gold's prized asset is the Pickle Crow past-producing gold mine located in northwestern Ontario, which it acquired in 2008. Exploration efforts since then have shown the presence of 1.26 million gold ounces, with a high-grade underground component of 1.1 million ounces averaging 5.4 grams per tonne, the company states on its website.

Gold Canyon owns the Springpole Gold Project located about 110 kilometres northeast of Red Lake, Ontario, which has been explored off and on from the 1920s up to present day. Its latest (2012) resource estimate shows 4.41 million indicated ounces of gold and 23.8 million ounces of silver, with gold grades of 1.07 grams per tonne and silver grades of 5.7 g/t.

Listed on the TSX Venture in 2012 through a reverse takeover, First Mining Finance Corp acquires companies by using its shares, then puts those companies' assets in a "mineral bank" from which to draw upon later.

"The long-term strategy for when things turn around — which they will, but I think we’ve got a couple of years at least before that happens — is that we would enter agreements with other parties and they would take the assets forward. We would hold onto a residual interest, so a royalty or a stream, a minority interest in a joint venture or perhaps we might just spin out these assets into new companies," president Patrick Donnelly explained in a 2012 interview with the Northern Miner.

Not counting its newly-acquired Ontario gold properties, First Mining Finance currently holds a portfolio of 19 resource assets, including its flagship Hope Brook Gold Project in Newfoundland, Canada. Hope Brook hosts a historic high-grade gold resource of nearly one million ounces of gold. First Mining also owns exploration-stage gold, silver, copper, lead, and zinc projects in Mexico and one gold project in Nevada.

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