Last Friday, AUX announced buyout offers for both Galway Resources (GWY.V) and Calvista Gold (CVZ.TO), in a move to consolidate the area around their La Bodega-project, which they acquired through buying Ventana Gold a few years ago.
AUX offers C$2.05 in cash per share of Galway Resources, and every Galway-shareholder will receive 0.9 share of a company holding the Vetas Gold project and 1 share of a new entity that will hold the Victorio Tungsten-Molybdenum Project. AUX also promises to inject C$18M and C$12M cash in both new companies.
After studying the offer, we concluded it’s a very fair offer for all Galway-shareholders. If we attribute an (arbitrary, we admit) value of C$30M for Vetas and C$5M for Victorio, and add the total of C$18M and C$12M cash, 90% of Vetas is worth C$43M and 100% of Victorio will be worth approximately C$17M. The combined (theoretical value) of both companies as standalone operations is approximately C$60M, or C$0.48 per share of Galway Resources. The total value of the offer then is C$2.53.
We would recommend accepting the offer of AUX, but keeping the shares of Galway Resources until the transaction is finalized, as we believe the fair value of the offer is much higher than the current share price of C$2.15.
We would also recommend to accept AUX’ offer for Calvista Gold, and to sell the shares on the open market, as the current share price of C$1.07 is quite close to the offer of C$1.10.
Disclosure: The author holds a long position in Galway Resources Ltd, and has sold the Calvista Gold Corp. position. Please see our disclaimer for current positions.