Anaconda Mining – Sets Record Straight on Misleading Statements by Maritime Board
This takeover bid by Anaconda Mining to Maritime Resources shareholders has been very fascinating to watch so far. Anaconda is doing their very best and trying to outline to the Maritime shareholders how it is a win-win situation while the Maritime management is doing all they can to muddy that message. The release below is the latest in the communication by Anaconda. I liked the part where the Company addresses the misleading comments made by Maritime management in its last letter to shareholders.
Anaconda Mining Inc. (“Anaconda” or the “Company”) – (TSX:ANX) today has issued a letter to the shareholders of Maritime Resources Corp. (TSX-V:MAE) (“Maritime”) concerning Anaconda’s previously announced offer (the “Offer”) to acquire all of the outstanding common shares of Maritime (“Maritime Shares”), together with the associated rights issued under the shareholder rights plan of Maritime, for consideration of 0.390 of an Anaconda share per Maritime Share.
Anaconda’s letter to Maritime shareholders highlights the significant benefits of accepting the Offer, while addressing misleading and factually incorrect statements in Maritime’s Directors’ Circular (the “Circular”) filed on SEDAR on April 30, 2018. Anaconda believes that there is nothing in the Circular that detracts from its compelling Offer which allows Maritime shareholders to immediately benefit from a significant purchase premium, while maintaining the ability to participate in the creation of an emerging Atlantic Canadian gold producer with a significant growth profile.
Anaconda is concerned and disappointed by the numerous misleading and factually incorrect statements made by the Directors and Management of Maritime in the Circular, which highlights their underlying motivation of personal entrenchment, rather than any meaningful consideration of this compelling Offer.
Anaconda has highlighted some of these statements below, and addresses them fully in the letter to shareholders:
Maritime Assertion
Anaconda Response
Anaconda’s assets are depleting and fast
Maritime’s allegation that the Point Rousse Project has only five months of ore remaining is patently and demonstrably false.
Per Anaconda’s NI 43-101 Technical Report dated February 26, 2018, the Company has in excess of two years of ore supply from the Pine Cove and Stog’er Tight mines at the Point Rousse Project.
The Argyle Deposit will be the next available feed source to the Pine Cove Mill, with the process already underway to permit a mine in an area that will not infringe on any protected watershed area.
The Goldboro Gold Project, a long-life high-grade Mineral Resource, is projected to begin production in 2021; The Preliminary Economic Assessment, filed on March 2, 2018, estimates production of approximately 376,000 ounces of gold over nearly 9 years.
Maritime Shareholders would contribute 83% of the Mineral Reserves but only receive a 23% interest in Anaconda
Anaconda is contributing a 1,300 tonne-per-day mill, 15+ years of tailings capacity, generation of operating cash flow that has averaged $4.7 million after corporate G&A, 61% of the Measured and Indicated Mineral Resources, and an experienced workforce and senior management team; Maritime did not include these important business attributes in its evaluation and, thereby, presented information to Maritime shareholders that is incomplete.
Maritime’s proven and probable reserves are not actually Mineral Reserves, as they are not quoted on a diluted and recoverable basis; Anaconda’s proven and probable reserves include a dilution and recovery factor, in keeping with industry reporting standards.
Maritime incorrectly stated Anaconda’s Inferred Resources in their Circular – Anaconda has 456,390 ounces of Inferred Resources between Point Rousse, Goldboro and the Great Northern Project.
Anaconda is spending more than it’s making
Anaconda generated earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $5.6 million from its Point Rousse Project during the seven months ended December 31, 2017, and generated operating cash flow of $2.0 million, after corporate and other costs. In the first quarter of 2018, the Company generated $3.3 million of EBITDA at Point Rousse, and generated operating cash flow of $1.0 million, after corporate costs.
Comparatively, over the past 2 years Maritime has raised almost $4.7 million in dilutive financing with almost 50% spent on corporate G&A.
Offer not a good value
Despite claiming the Offer is not fair, Maritime concurrently announced a below-market financing of less than $0.10 per Maritime Share.
The Offer provides for an immediate purchase premium, a clear and accelerated path to production for Hammerdown, while offering Maritime’s investors a continued participation in the growth of the combined entity with the potential for a significant re-rating and the associated stock price appreciation.
Upon closing of the transaction, the pro forma Company will have an enterprise value per Measured and Indicated Mineral Resources of $43 per ounce, with a significant re-rating potential to a peer group average of $119 per ounce, which can only be generated if the Offer is accepted.
Maritime suggests Anaconda and the market has not adequately valued its asset. The valuation gap between any resource estimate and the market value of Maritime is a clear and unbiased reflection of the capital markets’ view of Maritime Management’s ability to realize the company’s inherent value.
Maritime’s “View to Production”
The Circular does not actually outline a plan to develop Hammerdown with any meaningful milestones.
Maritime does not have the management team to execute on the development of Hammerdown. Anaconda has a complete senior staff with development and production experience in Newfoundland.
The Nugget Pond Mill will not be available in the near-term, if at all. Anaconda’s Pine Cove Mill is available now.
Nugget Pond has no spare tailings capacity. Anaconda has 15+ years of fully permitted tailings capacity now.
Nugget Pond does not have spare crushing and grinding capacity. Anaconda’s Pine Cove Mill has spare capacity now.
Board’s Unanimously Recommends Rejecting the Offer
Maritime has only one independent director, and two of the four Board members are the CEO and COO, who retain more value in their salaries and benefits than in equity.
