Brigus Gold Shareholders Approve the Primero Mining Buyout
In December we learned that Primero Mining (NYSE:PPP) made an offer to acquire Brigus Gold (NYSEMKT:BRD) for about $220 million worth of stock. On Tuesday, we learned that proxy advisory firms Institutional Glass Lewis & Co. and Institutional Shareholder Services Inc. made a recommendation to Brigus Gold shareholders to agree to the acquisition. Thus, barring an outside event, it is very likely that the acquisition will be completed without any issues.
The terms of the deal are as follows. First, Brigus gold shareholders will receive 0.175 Primero Mining shares. This increases the number of outstanding Primero shares from about 117 million to 159 million. Second, Brigus gold shareholders will get 0.1 share of a new company (aka “SpinCo”) that consists of the Brigus’ secondary properties. Primero Mining will also own 10 percent of the outstanding shares of SpinCo.
There are many things to like about the new Primero Mining. First, the company nearly doubles its production by adding the Black Fox mine to its portfolio. The Black Fox mine is located in Ontario and it is expected to produce 120,000 ounces of gold at $1,100 per ounce, making the project economical. Sandstorm Gold (NYSEMKT:SAND) owns a royalty on the Black Fox property, entitling it to 8 percent of the gold produced there at $500 per ounce. While the current mine plan indicates seven years of production, the company predicts that it will be able to extend this by at least another seven years.