AngloGold buys Augusta Gold in Nevada push

[Redator]

AngloGold Ashanti (JSE: ANG; NYSE: AU) agreed to buy Canadian explorer Augusta Gold (TSX: G; US-OTC: AUGG) for about C$152 million ($111 million) in cash to further expand its Nevada footprint. Augusta shares surged.

The C$1.70-a-share price represents a premium of about 28% over Tuesday’s closing price of Augusta Gold’s common stock on the Toronto Stock Exchange, the companies said in separate statements Wednesday. When compared with the volume-weighted average share price over the 20 days before the announcement of the transaction, the premium is 37%.

“This transaction is indicative of AngloGold’s camp-scale ambitions in the Beatty district of Nevada,” BMO Capital Markets mining analyst Raj Ray said in a note Wednesday.

The proposed deal marks another step in AngloGold Ashanti’s efforts to consolidate assets in and around the prolific Beatty mining district, about 300 km northwest of Las Vegas. It follows the $370 million acquisition of Corvus Gold and the $150 million purchase of a Coeur Mining (NYSE: CDE) land package – both of which were announced in 2022.

Reward, Bullfrog

Augusta’s key assets – Reward, a permitted, feasibility stage project, and the Bullfrog deposit – are adjacent to AngloGold Ashanti’s claims in the Beatty district.

“This acquisition reinforces the value we see in one of North America’s most prolific gold districts,” AngloGold Ashanti CEO Alberto Calderon said in the release.

“Securing these properties will not only solidify our leading position in the most important new gold district in the US, but will also improve our ability to develop the region under an integrated plan – with more flexibility, greater access, better infrastructure sharing, and cohesive engagement with all stakeholders.”

Synergies

AngloGold Ashanti’s Nevada projects include Arthur, which has an inferred mineral resource of 12.91 million ounces, according to a 2024 reinterpretation of an earlier geological model. Engineering and study work, which includes a drilling program, is ongoing at Arthur.

North Bullfrog, another nearby project, is expected to produce an average of 76,000 oz. gold annually over the mine’s anticipated 11 years. Federal and Nevada permitting processes are under way, and a Record of Decision from the Bureau of Land Management is anticipated by the end of 2026.

Adding Augusta “gives the company some synergies with its North Bullfrog project and potential flexibility for future infrastructural needs for its large-scale Arthur project,” Ray at BMO said.

Stock surge

AngloGold Ashanti’s offer “represents a clearly superior path forward for stockholders,” Augusta Gold executive chairman Richard Warke said in the company’s statement.

Augusta shares soared 25% to C$1.66 in Toronto Wednesday morning, giving the company a market value of about C$143 million. The stock is at its highest level since January 2023. AngloGold Ashanti, meanwhile, rose 0.2% in New York to $47.54.

Reward has proven and probable mineral reserves of about 15.1 million tonnes grading 0.86 gram per tonne gold for 370,000 oz. contained metal. All required permits are in place to start construction. Augusta’s plan envisions an eight-year mine life with average annual production of 38,563 ounces.

Meaningful premium

Augusta has also been working to develop Bullfrog, which has measured and indicated resources of about 71 million tonnes grading 1.26 grams silver and 0.53 gram gold, according to a 2022 resource. This translates into contained metal of 2.87 million oz. silver and 1.2 million oz. gold.

AngloGold Ashanti’s offer locks in “a meaningful premium and immediate liquidity as compared to waiting for the Reward project to commence construction and then produce by mid-2027,” Warke added.

“Constructing the Reward project would require additional dilution to raise the required equity, substantial time for construction, and time to get the mine operating at capacity. Taking the foregoing factors into consideration, the offer from AngloGold Ashanti represents a clearly superior path forward for stockholders.”

Q4 close

The transaction is expected to close in this year’s fourth quarter. It requires approval by the holders of a majority of Augusta’s common shares, as well as a majority of the votes cast by Augusta Gold common stockholders.

AngloGold Ashanti will fund the acquisition – which is not subject to approval by its own shareholders – with existing cash on hand. It will also provide funds for the repayment of stockholder loans representing about $32.6 million as of March 31.

Some Augusta directors and executive officers who together own 32% of the company’s issued and outstanding shares have agreed to support the deal.

Barrick Mining (TSX: ABX; NYSE: B) holds about 11% of Augusta’s common shares, according to a recent company presentation. Institutions and retail investors control about 47% of the company.