Dunav Resources (DNV.V) has announced a resource update on its Kiseljak and Yellow Creek deposits in Serbia. The total resource estimate now stands at 2.8 billion pounds of copper and 2.2 million ounces of gold. The grade is relatively low (even for a copper-gold porphyry target) at 0.23% Cu and 0.22g/t gold, so this project definitely looks like it will need a high daily throughput to be able to benefit from economies of scale.

We were keeping an eye on Dunav because the company was trading below its net cash value (so you basically got the project for free), but fellow explorer Avala Resources (AVZ.V) noticed this net cash position as well and proposed to merge both companies by making an all-share offer at a 22% premium. Even though we think this is a low-ball offer (as Avala’s offer has a value below Dunav’s cash position), we acknowledge a merger makes sense as there will be a lot of synergies.

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Disclosure: The author holds no position in Avala or Dunav, but might initiate a speculative position in Dunav Resources. Please see our disclaimer for current positions.

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