In a March 23 research note, Haywood Securities analyst Pierre Vaillancourt reported that Troilus Gold Corp. (TLG:TSX; CHXMF:OTCQB) agreed to acquire, for CA$19 million in an all-share deal, all of the shares of UrbanGold Minerals Inc. (UGM:TSX.V) that it does not already own. The transaction is expected to close at the end of May 2021.
"The acquisition of UrbanGold complements the existing land position at Troilus and establishes Troilus Gold Corp. as a major area play in the Frôtet-Evans Greenstone Belt in the Chibougamau camp," Vaillancourt wrote.
Haywood has a CA$4 per share target price on Troilus Gold; it is trading now at about CA$1.03 per share.
Vaillancourt described terms of the agreement. Troilus Gold will issue about 17.2 million Troilus Gold shares to UrbanGold. Its shareholders will receive 0.3 of a Troilus Gold common share for every UrbanGold share, or about CA$0.30 per UrbanGold share. UrbanGold's management and board, which owns 6.59% of the company's shares, favor the transaction.
"The exchange ratio represents a premium of 35% based on the 20-day volume-weighted average price of the UrbanGold shares," Vaillancourt noted.
Dilution to Troilus Gold shareholders is an estimated 11.5%, he added.
Vaillancourt also highlighted how the acquisition benefits Troilus Gold by "adding optionality." For one, it expands Troilus Gold's land package in the Frôtet-Evans Greenstone Belt by 33%, or 35.1 hectares, taking the company's total to 107.3 haectares, the largest amount of mineral claims held in the region by any company.
Some prospective targets have been identified, and minimal drilling has been done on this UrbanGold property, but no resource estimate has been established for it.
Two, Troilus Gold may be able to extend the Southwest zone into this new land area. Thus, it is expected the company will drill there, in the Cressida block, in the future.
Three, "the acquisition also adds blue sky opportunities to the southeast of the Southwest zone, near Troilus Gold's Testard target," the analyst indicated.
"We expect the addition of the UrbanGold property will add to the potential of the Southwest zone, ultimately expanding the resource," Vaillancourt wrote.
Looking forward, he added, once the transaction closes, Troilus Gold will revisit its planned 2021 drill program and potentially revise it to encompass some of its new property.
"For now, plans remain for completion of a prefeasibility study in Q4/21, but the timeline could be extended, depending on drill success," Vaillancourt pointed out.
Haywood has a Buy rating on Troilus Gold.
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Haywood Securities, Troilus Gold Corp, March 23, 2021
Analyst Certification: I, Pierre Vaillancourt, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Of the companies included in the report, the following Important Disclosures:
▪The Analyst(s) preparing this report (or a member of the Analysts' households) have a financial interest in Troilus Gold (TLG-T).
▪ Haywood Securities, Inc. has reviewed lead projects of Troilus Gold (TLG-T) and a portion of the expenses for this travel have been reimbursed by the issuer.
▪ Haywood Securities, Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Troilus Gold (TLG-T) in the last 12 months.
▪ Haywood Securities, Inc. or one of its subsidiaries currently provides market making services to Troilus Gold (TLG-T), for which Haywood is compensated by the issuer on a monthly basis.