Vanstar Mining Resources (VSR.V) has entered into an agreement with IAMgold (IAG, IMG.TO) whereby the latter will acquire Vanstar to get its hands on the 25% stake in the Nelligan gold project in Québec. A spart of the arrangement, Vanstar shareholders will receive 0.2007 shares of IAMgold per share of Vanstar they own. Based on the pre-announcement share price, this represented a value of C$0.69 per share of Vanstar. Based on the current share price of C$3.19 for IAMgold, the offer has a value of C$0.64 per share of Vanstar.
Vanstar will hold a shareholders meeting in January and it is widely expected the transaction will be approved at said meeting. However, it is always possible a third party may pop up and try to acquire Vanstar Mining as a 20% carried interest in what currently is a growing multi-million ounce gold project (2 million ounces in the indicated resource category and 3.6 million ounces in the inferred resource category). The break fee is just C$2M which is relatively low and especially now the fair value of the offer is just C$37M, we can’t rule out a third party kicking the tires of Vanstar. But from an economic point of view, IAMgold can create the most value by acquiring the minority stake in the project it doesn’t own yet.
Disclosure: The author has a long position in Vanstar Mining and will likely sell on the open market before the deal closes. Vanstar Mining is a sponsor of the website. Please read the disclaimer.
