New Found Gold buys Maritime for $212M

[Redator]

New Found Gold (TSXV: NFG; NYSE-A: NFGC) is acquiring Maritime Resources (TSXV: MAE) in a deal valued at about C$292 million ($212 million) that would create a multi-asset gold producer in central Newfoundland.

The combined company would bring together New Found’s Queensway project, due to start production in 2027, with Maritime’s Hammerdown project, which aims to begin output this year, the companies said Friday. The two projects, 180 km apart, are expected to benefit from shared infrastructure including Maritime’s Pine Cove mill and the Nugget Pond hydrometallurgical plant.

The deal comes at nearly a one-third premium to Maritime’s recent share price and 56% more than its July 30 close, the day before the companies signed a letter of intent, New Found CEO Keith Boyle said on a conference call.

“We were able to get comfortable with with [the premium] because of the financing synergy associated with using the Hammerdown cash flow to fund a material portion of the Queensway development capex,” Boyle said. “Number two, the addition of Maritime’s processing assets and the associated infrastructure: the mill and tailings was a real significant de-risking event for Queensway’s development.”

Shares in New Found Gold fell 3.1% to C$2.52 apiece on Friday morning in Toronto, valuing the company at C$591 million. Maritime’s stock slipped 2.7% to C$1.82 each for a market capitalization of C$212 million.

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Maritime CEO Garett Macdonald, whose future with the combined company wasn’t yet clear, said the deal offered shareholders longer-term exposure to a larger producer and resource building.

“There’s fantastic exploration potential throughout our properties, around the Hammerdown project, and also around the Pine Cove mill,” Macdonald said on the call. “We focused very closely on developing the Hammerdown and getting to cash flow, timing it really well here with gold prices taking off the way they have.”

The agreement follows a series of consolidation moves in Canada’s gold sector as companies seek scale and near-term output with bullion hitting all-time highs. Calibre Mining (TSX: CXB) purchased Marathon Gold and its Valentine project in Newfoundland this year. Agnico Eagle Mines (TSX: AEM; NYSE: AEM) last year completed its takeover of Yamana Gold’s Canadian assets through a joint bid with Pan American Silver (TSX: PAAS; NYSE: PAAS). Analysts have said the trend reflects investor preference for producers with multiple assets, lower costs and steady cash flow.

According to Investing.com, Maritime enters the transaction with a solid financial position, including a current ratio of 5.05, meaning it has more than five times the short-term assets needed to cover its short-term liabilities. Coupled with a low debt-to-equity ratio of 0.12, the balance sheet suggests Maritime can meet obligations and contribute stability to the merged company.

Roughly 70-30

Maritime shareholders receive 0.75 of a New Found share for each Maritime share held, according to the agreement. Once complete, New Found shareholders will own about 69% of the combined company, while Maritime holders will have about 31% based on all shares that could be outstanding if options and warrants were exercised.

New Found Gold plans to truck ore at a cost of $75 per tonne to the Pine Cove mill, which has a 700-tonne daily capacity, Boyle said. The Nugget Pond plant can handle 1,300 tonnes a day, he said.

Hammerdown is fully permitted and was the subject of a 2022 feasibility study that envisioned 50,000 oz. of annual production at an all-in sustaining cost of $912 per ounce. Proven and probable reserves stand at 1.9 million tonnes grading 4.46 grams gold per tonne for 272,000 contained ounces. The feasibility study calculated an after-tax net present value of C$251 million at a 5% discount rate using a base-case gold price of $2,500 per ounce.

The site has produced before: Richmont Mines operated Hammerdown as an underground mine from 2000 to 2004, averaging 15.7 grams gold per tonne and turning out 143,000 oz. during that period. Gold-bearing stockpiles are expected to be processed at Pine Cove starting this fall, with ramp-up to full production planned for early 2026.

Two stages

Queensway, near Gander, is envisioned as a 15-year mine that would produce 1.5 million oz. at all-in sustaining costs of $1,256 per oz., according to a preliminary economic assessment issued in July. The plan calls for a C$155 million capex stage one output averaging 69,300 oz. annually in the first four years, followed by a C$442 million stage two expansion to about 172,200 oz. per year.

The project has a base-case after-tax net present value at a 5% discount rate of C$743 million and an internal rate of return of 56% at $2,500 per oz. gold, according to the July study. At a higher gold price assumption of $3,300 per ounce, the after-tax NPV rises to C$1.45 billion with an IRR of 197%.

The companies expect to close the deal in this year’s fourth quarter, after which Maritime’s shares would be delisted from the TSX Venture Exchange.

The transaction will proceed under a court-approved plan of arrangement in British Columbia and requires two-thirds approval from Maritime shareholders. About 49% of Maritime’s shares, including those held by investment firms Dundee Resources and SCP Resource Partners, as well as gold bug Eric Sprott, are already locked up in support agreements. New Found shareholder approval is not required.