Eldorado lifts Amex stake to 27% as Sprott sells

[Ben Graham]

Eldorado Gold (TSX: ELD; NYSE: EGO) has raised its ownership in Amex Exploration (TSXV: AMX) by almost one-third, buying a 14.9-million-share block in what appears to be a matched private trade as financier Eric Sprott left the Quebec-focused junior.

Vancouver-based Eldorado said this week it acquired 14,868,200 Amex shares at C$4 apiece for about C$59.5 million, effective from Wednesday. The secondary market deal lifted Eldorado’s position to 38,626,330 shares, plus 207,000 warrants, representing about 27.3% of Amex on a non-diluted basis, the company said.

Amex is advancing its Perron and Perron West projects near Normétal in the Abitibi region, about 730 km northwest of Montreal.

Amex president and CEO Victor Cantore downplayed any shift in the relationship in a call with MINING.COM sister publication The Northern Miner, saying the company has worked closely with Eldorado since the producer first invested. Eldorado took a 9.9% stake in Amex in January last year via a C$15 million strategic investment in the junior’s flow-through financing.

“They’ve been a great partner,” Cantore said. “Other than them controlling more shares, I don’t see anything really different.”

Eldorado’s purchase move demonstrates the industry trend towards raising equity stakes instead of increasing reserves through exploration.

Amex shares gained 5% to C$4.04 apiece by midday in Toronto, contributing to a 274% increase over the past 12 months. It has a market capitalization of C$572.3 million.

Opportunistic transaction

Sprott’s numbered company 2176423 Ontario Ltd. sold 14,868,200 Amex shares on Wednesday through a private agreement at C$4 per share, it disclosed in a separate statement, for the same total proceeds. It leaves the veteran industry investor holding only 435,000 warrants.

The identical share count and price suggest Eldorado took out Sprott’s position, though Eldorado did not name the seller in its disclosure.

Eldorado spokesperson Chad Pederson told The Miner the company had nothing to add beyond its early-warning news release. The purchase was for investment purposes and it has no plans or intentions that would lead to corporate actions under Canadian takeover rules, the company said in the release.

Eldorado described the stake increase as an investment move in response to an “unsolicited opportunity.”

The company also said it relied on the “private agreement exemption” under National Instrument 62-104, including the requirement that the consideration paid not exceed 115% of the market price and that shares be bought from fewer than five people.

Cantore said Eldorado’s contractual rights are limited to maintaining Eldorado’s ownership through future financings, rather than a right of first refusal on other share sales. “There’s no right of first refusal,” he said. “What they have is a top-up. If I do a financing, they have the right to participate at 27%.”

Bulk sample

Amex’s May resource estimate for Perron outlined 8.2 million tonnes of measured and indicated resources grading 6.1 grams gold per tonne for 1.6 million oz. of contained gold, plus 5 million inferred tonnes averaging 4.31 grams gold for 698,000 ounces. Within that total, the Champagne zone accounts for 1.6 million measured and indicated tonnes at 16.2 grams gold for 831,000 oz., plus 406,000 inferred tonnes at 9.8 grams for 128,000 ounces.

Next on Amex’s schedule is bulk sampling, now in permitting, and Cantore said the junior is in talks with several groups about toll milling. With Eldorado’s Lamaque Complex and Sigma mill in Val-d’Or, the producer is among the obvious candidates to process the material if a deal is struck.

In parallel, Amex is planning exploration across its Quebec and Ontario land positions and work on a feasibility study targeted for the first half next year.

“I view the investment as very positive. It shows that Eldorado’s really all-in with us,” Cantore said. “We’re firing on all cylinders right now.”