High Desert Gold (HDG.V) has announced it entered into an agreement to be acquired by South American Silver Corp (SAC.TO) which already held 18.5% of HDG’s shares. The transaction will not involve any cash payment, but HDG-shareholders will receive 0.275 shares of SAC. This means that at the current share price of South American Silver of C$0.41, the offer is worth C$0.11275 per share of HDG, which is a very fair value compared to the previous closing price.
As we think the offer is very fair and as by merging with SAC, HDG will have access to $13M in cash and the diversification of a large-scale copper project in Chile which contains 5.6 billion pounds of copper and 1.1 million ounces of gold. We strongly believe that in this case 1 + 1 will equal three, and are planning to accept the offer made by South American Silver.
The combined entity will have an enterprise value of C$42 million and will have approximately 1.4 million ounces of gold (but very likely closer to 2 million ounces of gold when the updated Gold Springs resource estimate will be released) and 5.6 billion pounds of copper.
Disclosure: The author holds a long position in High Desert Gold and plans to accept the offer. High Desert Gold is a sponsor of the website. Please see our disclaimer for current positions.