(Alliance News) - Adriatic Metals PLC on Monday said it has agreed to buy Tethyan Resource Corp and to advance an up to EUR1.3 million loan to Tethyan.
Shares in Adriatic were up 7.4% at 71.40 pence in London in afternoon trading.
Adriatic will issue 0.166 Adriatic shares per Tethyan shares, giving Tethyan shareholder an approximately 6.9% stake in the enlarged company. The deal represents an implied equity for Tethyan of CAD14.7 million, about USD10.6 million, with an implied price of CAD0.184 per Tethyan share. The deal represents a 29% premium to Tethyan's closing price on May 8, CAD0.15 per share.
The deal will add Tethyan's Serbian brownfield development projects, Sastavci and Kizevak, as well as a "large prospective landholding on the Tethyan mineral belt", which Adriatic believes will position the firm "as the leading Balkan base and precious metals developer".
The deal requires approval from two thirds of Tethyan shareholders - voting support agreements have already been obtained from 54% of shareholders - and includes a CAD700,000 break fee plus up to CAD150,000 of costs and expended for Adriatic payable by Tethyan "under certain circumstances" and a CAD350,000 break fee payable by Adriatic to Tethyan "under limited circumstances".
Tethyan has also entered a deal with Serbian firm EFPP d.o.o, which holds two exploration licences which comprise "the central parts of the Kizevak and Sastavci deposits", to acquire EFPP in a two-stage acquisition.
The first stage involves Tethyan paying EUR525,000 in cash to EFPP's sellers in return for a 10% stake while the second allows for Tethyan to pay EUR1.4 million in cash and grant a 2% net smelter return for the other 90% stake. Obtaining the other 90% stake also requires the issue of 664,000 Adriatic shares in four tranches to EFPP and the payment of a EUR500,000 deferred cash payment on the second anniversary of the first half of the deal.
The companies have agreed that Adriatic will lend up to EUR1.3 million to allow Tethyan to completed the EFPP acquisition and begin drilling at the Kizevak project.
Adriatic Managing Director Paul Cronin said: "Tethyan has been successful in consolidating the Raska district in Serbia, and with the recent addition of the Kizevak and Sastavci licenses, the acquisition presents a unique opportunity for Adriatic to add assets to our portfolio that have the potential, over time, to match the quality of our exceptional Vares project in Bosnia.
"In a short time, Adriatic has built a significant presence in the region, by developing our assets with a very competent team at the helm. Applying our team and strong balance sheet to Tethyan's assets positions us well to proceed through the project development cycle.
"These are past producing mines, and the historical data we have reviewed provides ample confidence that we are adding significant value to our portfolio with minimal outlay and dilution to our existing shareholders. I look forward to working with Fabian and his team over the coming months to close the transaction and demonstrate the potential of these assets."
Tethyan President Fabian Baker said: "We are excited that our assets will soon be part of the Adriatic story. Adriatic Metals has built an excellent reputation in the Balkans based on their development capability and positive engagement with local stakeholders. We are confident that the combined assets and team will go forward to bring high quality assets to production in a timely and sustainable manner, ensuring lasting benefits for both our shareholders and the communities in which we operate."
By Anna Farley; annafarley@alliancenews.com
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Adriatic Metal. (ADT1)