Pinecrest Resources (PCR.V) announced it plans to acquire full ownership (90%, as the state keeps a 10% stake in the project of the Enchi project from Edgewater Exploration (EDW.V) and Kinross Gold (K.TO, NYSE:KGC) by issuing shares to Edgewater Exploration so that Edgewater will own 40% of Pinecrest after the deal closes and wiring a C$150,000 cash payment for its 51% stake in Enchi. As consideration for Kinross’ 49% stake, Kinross will obtain 19.9% of Pinecrest, a 2% NSR and a right of first refusal to process the Enchi ore at its Chirano mill should toll milling be considered at Enchi. Additionally, a payment of $10 is due per ounce of gold added to the measured and indicated categories.
This could be a good deal for Pinecrest Resources, as this is the first time one junior company will own 90% of Enchi (with the government holding the balance), the market should give it a higher value than a 51% stake. That being said, the fact that Edgewater Exploration will distribute the Pinecrest-shares amongst its shareholders might result in some selling pressure on Pinecrest as soon as those shares become tradeable after the lockup period.
As the management team of Pinecrest will be the same as the Edgewater team, this transaction should be seen as separating Edgewater’s Spanish project from the Ghanaian assets.
Disclosure: The author holds a long position in Edgewater Exploration. Please see our disclaimer for current positions.