MAG Silver Corp. (AMEX: MAG) inked a definitive arrangement agreement with Gatling Exploration Inc. in accordance with which MAG will buy all of the issued and outstanding common shares of Gatling in an all-share transaction. The Gatling’s Larder property gives MAG a significant foothold along with this regionally rich gold-bearing structure, where it believes there should be more gold to be found.
Gatling is a gold exploration firm based in Canada that is working to advance the Larder Gold Project, which is situated in the Abitibi greenstone region in Northern Ontario. Three high-grade gold resources are located along the Cadillac-Larder Lake Break, 35 kilometers east of Kirkland Lake, on the Larder project. Gatling controls the entire project, which includes registered and unpatented claims, leases, and mining licenses of occupation in the McVittie and McGarry Townships.
Furthermore, as per the agreement, each Gatling shareholder will get 0.01702627 (the Exchange Ratio) of common shares of MAG for each share of Gatling owned. Based on the 5-day volume-weighted average price (VWAP) of each company as of the close of trade on March 10, 2022, the Offer values Gatling at about C$0.40 per share, providing a premium of about 47.4 percent to Gatling shareholders. On an outstanding basis, Gatling stockholders are estimated to hold 0.79 percent of MAG shares when the Transaction is completed.
The Transaction is scheduled to be completed through a court-approved Plan of Arrangement under the Business Corporations Act, which will be dependent on shareholder approval at a Gatling security holders meeting. In addition to this, MAG and Gatling have also decided to provide Gatling with a C$3 million secured convertible bridging loan to finance Gatling’s accounts payable and operational costs, contingent upon MAG’s prior approval.
The Definitive Agreement further stipulates that certain Gatling consultants who are eligible to change of control payments in connection with the Acquisition agree to adjust such payments, including allowing payment of such amounts in MAG shares (the Compensation Amendments). The issuance of MAG shares following the Compensation Amendments will be conditional to the authorization of the TSX.