written by reader Kiska Metals Acquisition

By kwoodj, March 15, 2017

Anybody else see this? Aurico is currently trading for $2.86/share. Just curious as to the thoughts of others — seems like there is an arbitrage opportunity, depending on the certainty of close.

http://www.kiskametals.com/s/News.asp?ReportID=781835

NEWS RELEASES

Mar 08, 2017
AURICO METALS INC. COMPLETES ACQUISITION OF KISKA METALS CORPORATION
Vancouver, B.C., March 8, 2017 — Kiska Metals Corporation (TSX.V: KSK) (”Kiska”) is pleased to announce the completion of the previously announced plan of arrangement (the ”Arrangement”) involving Kiska and AuRico Metals Inc. (TSX: AMI) (”AuRico”) and holders of common shares of Kiska (”Kiska Shares”) (”Shareholders”) and options of Kiska (”Kiska Options”) (”Optionholders”) (together, ”Securityholders”) pursuant to which AuRico acquired all of the issued and outstanding Kiska Shares that were not already owned by AuRico or its affiliates. Kiska is now a wholly-owned subsidiary of AuRico.

The Arrangement was approved at a special meeting of Securityholders held on March 1, 2017 by approximately 96.31% of the votes cast by Securityholders (voting as a single class) present in person or by proxy at the meeting and 96.21% of the votes cast by Shareholders (voting as a single class) present in person or by proxy at the meeting (95.91% after excluding the votes cast by those persons whose votes must be excluded in determining minority approval for the Arrangement pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions). A final order approving the Arrangement was obtained from the Supreme Court of British Columbia on March 3, 2017.

As a result, the Kiska Shares will be delisted from the TSX Venture Exchange and Kiska will apply to the relevant securities commissions for Kiska to cease to be a reporting issuer under Canadian securities laws.

The Arrangement

Under the Arrangement, AuRico acquired all of the issued and outstanding Kiska Shares (including Kiska Shares issued to Optionholders under the Arrangement, but excluding Kiska Shares held by AuRico or its Affiliates) in exchange for: (i) 0.0667 of an AuRico common share (”AuRico Share”), plus (ii) C$0.016 in cash for each Kiska Share held.

Full details of the Arrangement and certain other matters are set out in the management information circular of Kiska dated January 27, 2017 (the ”Circular”). A copy of the Circular is available under Kiska’s profile on SEDAR at http://www.sedar.com.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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Travis Johnson, Stock Gumshoe
March 16, 2017 9:41 am

If AuRico were at $2.86 it would be a phenomenal arbitrage, and such things don’t typically exist — unfortunately, AuRico is at about $1.08 — so the implied value for each Kiska share (most of which they’ve already bought, if not all — this is probably not a trade that one could actually make) is 8.8 cents. (all numbers in Canadian $)

I speculated on Kiska for a little while, mostly because it was a way to get shares of Brazil Resources (now Goldmining, Inc.) “for free” after their deal to sell one of their properties to BRI/GOLD for stock, but I sold when I was preparing for a real estate transaction — turned out to be pretty fortunate, but they will likely be better off in the larger AuRico portfolio. AuRico is a small royalty owner, with (before Kiska) one development property — perhaps a little richly valued unless you love the development property, since development is sucking up their royalty cash flow and more, that development property does have some appeal but looks to me like it is fairly close to the bone in terms of value because of the mine financing they would need.

The Kemess mine is AuRico’s flagship project, it has received at least one environmental approval recently but would require about C$600 million in Capex to finance development, and therefore needs gold over US$1,000 for break-even according to their feasibility study — at $1,250 they estimate the after-tax NPV at a 5% discount rate to be C$289 million, vs. AuRico’s market cap of about C$160 million. I don’t know what the timeline is for development, and that discount rate isn’t high enough, in my book, but there’s still some reason for possible optimism if you’re positive about gold, mostly because of the royalty cash flow that provides some ballast (they received about C$8 million in royalties last year, mostly from the Fosterville and the Young-Davidson mines, they indicate that royalties this year will be similar and will be balanced by C$7 million in cash operating expenses and $6 million in Capex for Kemess).

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