Goldcorp makes offer to acquire Probe Mines
Ore to be trucked to Dome mill in Timmins
Most junior mining companies spent 2014 conserving cash and crossing their fingers for better times. Probe Mines Limited was an exception. The Toronto based junior had drills turning all year on its Borden Lake property near Chapleau, completed a $26 million flow-through private placement in August, and closed a $41.6 million cash and share deal to consolidate the Borden land package in December.
Then, on January 19, it all paid off with the announcement of a friendly takeover by Goldcorp. The offer, agreed to by Probe management but subject to a favourable vote of two-thirds of shareholders, includes “0.1755 of a Goldcorp share per Probe share, equivalent to $5 per Probe share based on the closing price of Goldcorp shares on January 16, and total consideration of $526 million.”
Shareholders will also receive one-third of a New Probe share for each Probe share. New Probe will continue to operate under the same management with its other properties, including some in the Ring of Fire, and will receive $15 million in cash from Goldcorp to fund exploration. Borden Lake was an ideal target for Goldcorp as it’s located 160 kilometres west of the company’s Porcupine operation in Timmins.
Goldcorp president and CEO Chuck Jeannes described the acquisition as “consistent with the company’s longstanding strategy of securing growth opportunities in and around our existing districts with a focus on low cost, high-quality gold production.
“Goldcorp is uniquely suited to add Borden to its asset portfolio due to its proximity to our Porcupine operation, which includes the large milling facility at the Dome complex,” said Jeannes.
“Transporting ore to Porcupine would significantly reduce capital costs and permitting requirements compared to a standalone development while delivering higher-grade gold production to Porcupine within a relatively short development period.”
The agreement gave Goldcorp three business days to match any competing bids and could compel Probe “under certain circumstances” to pay Goldcorp a termination fee of $18.4 million if the transaction isn’t completed. At the time of the offer, Goldcorp owned 8.4 million Probe shares, representing 9.3 per cent of the company.
Probe’s share price on the TSX Venture Exchange rose through 2014 – from $2.55 in January to $3.32 at year end, but shot up to $5.20 by January 20th.
Borden Lake, located one kilometre off Highway 101 and nine kilometres from the Town of Chapleau, was acquired by Probe Mines in 2010 as a non-core property it could work on during a lull in activity at its Black Creek chromite property in the Ring of Fire.
The area was never considered to be favourable ground for mineral exploration and had been largely overlooked, but prospectors Mike Tremblay and Jack Robert had showings of gold and talked Probe Mines president and CEO David Palmer into picking up the property.
Palmer found a drill in what was then a hot market and every hole “came back top to bottom with continuous runs of gold.”
The initial results were indicative of a lowgrade deposit, but as drilling continued, the grades improved. The real game changer occurred in December 2012.
“We were stepping out 100 metres by 100 metres away from the discovery to expand the deposit,” recalled Palmer. “We were up to two kilometres of strike length and our next hole went from one gram material to 10 grams. It was an order of magnitude jump.”
Drilling to date reveals a high grade zone with an indicated resource of 1.6 million ounces averaging 5.39 grams per tonne gold and an inferred resource of 0.43 million ounces averaging 4.37 g/t. That’s in addition to an open pit constrained resource of 2.32 million ounces averaging 1.03 g/t at a 0.5g/t cut-off grade.
Confident that it had a mine in the making and anxious to consolidate the land package, Probe acquired 100 per cent ownership of the mineral rights to 486 patented claims in and around the Borden Lake property, including several key claims within the high-grade zone and an extensive land package connecting the Borden Lake project to the company’s East Limb project 22 kilometres to the east.
“We consolidated the entire belt,” said Palmer. “It’s a very, very rare occurrence for a discovery in a new, unexplored belt. Probe paid the Quebec-based forestry company Scierie Landrienne Inc. $25 million in cash and six million shares, giving it 6.6 per cent ownership of the junior miner. The land acquired was originally granted by the Crown as patent lots to veterans of the Boer War and subsequently assembled and transferred from one forestry company to another, said Palmer.
Probe had a minimum of four drills turning on the site through 2014, including eight drills on the ice pulling up core from the deposit under Borden Lake last winter and had planned to continue drilling this winter.
Probe officers and directors have agreed to vote their shares in favour of the transaction.
“We believe this transaction is an excellent outcome for Probe shareholders as it provides them with a significant premium that recognizes the value embedded in Borden,” said Probe chair Jamie Sokalsky, former president and CEO of Barrick Gold who joined the junior miner late last year. “In addition, New Probe will be well funded and will continue to expose Probe shareholders to further potential exploration and development success.”
Probe president David Palmer, who will be honoured in March as year’s winner of the Prospectors and Developers Association of Canada’s Bill Dennis Award for prospecting success, said, “Over the past four years Borden has grown into what is widely considered to be one of the best development assets in the industry.
This acquisition represents not only a validation of the project and its value, but also an opportunity for shareholders to participate in future success with one of the industry’s most respected gold producers, Goldcorp, as well as an experienced and committed team of explorers in New Probe.”
Tagged Barrick Gold, Bill Dennis, Black Creek, Chuck Jeannes, David Palmer, Jack Robert, Jamie Sokalsky, M&A, Mike Tremblay, Probe Mines Limited, Prospectors and Developers Association of Canada, Scierie Landrienne Inc., TSX Venture Exchange, www.goldcorp.com, www.probemines.com