WASHINGTON/ VANCOUVER – Intergeo MMC, a mining company controlled by Russian billionaire-turned-politician Mikhail Prokhorov, has agree to acquire Canadian copper producer Mercator Minerals Ltd in a $100 million deal that will require listing of the new firm’s shares in Toronto, the companies announced Thursday.
Prokhorov’s Onexim Group’s mining company Intergeo MMC will hold an 85 percent ownership stake with Mercator stakeholders holding the remainder in the new company, which will be named Intergeo Mining, a joint statement by Onexim and Mercator said.
Vancouver-based Mercator Minerals Ltd., a TSX listed Canadian mining company, holds the potential to be one of the fastest growing base metal profiles in its peer group. It is a copper, molybdenum and silver producer with a diversified portfolio of high quality assets in safe mining friendly jurisdictions in the USA and Mexico.
Mercator has a triple track organic growth profile which provides investors exposure to current copper, molybdenum and silver production from the large tonnage long life Mineral Park Mine in Arizona, potential mid-term exposure to copper at the El Pilar deposit in northern Mexico and longer term exposure of molybdenum and copper through the potential development of the El Creston deposit in northern Mexico.
Mineral Park, which owns the mine, will become cash flow positive from the new $100 million investment, and will be able to service its outstanding debt at current commodity prices.
“We are very excited about the potential of Intergeo Mining,” Onexim chief executive Dmitry Razumo said in a statement.
“The combined company will be led by a team of professionals with unique experience in managing metals and mining companies internationally.”
Prokhorov will invest $100 million in the new company as part of the deal, which is conditional upon Intergeo Mining’s listing on the Toronto Stock Exchange, according to a statement issued by Mercator.
“We intend to focus our efforts initially on optimizing Mineral Park, bringing El Pilar to production and then developing Ak-Sug in a financially disciplined manner,” stated Intergeo CEO John Lill.
“We have assembled a highly experienced management team and board of directors to execute our vision.”
Lill will lead the new management team, with the board to comprise eight Intergeo directors and one continuing Mercator director. The deal, which is subject to shareholder approvals and includes a break fee of $6 million, is expected to close in the second quarter of next year.
Under the terms of the deal, Daselina Investments, Intergeo’s controlling shareholder, will invest $100 million in the company at roughly $0.12 per share.
Prior to closing the deal, Daselina has agreed to advance up to $14 million of the investment through a bridge loan to provide Mercator with enough financing to stabilize its operations until the transactions is completed.
About $50 million of the new funds will be used to fund payments under Mineral Park’s existing credit facility, as well as to trade payables, and for deferred maintenance and capex spending.
The remainder of the proceeds will be used to fund closing costs of the deal, and to advance Mercator’s El Pilar development project in Mexico, as well as Intergeo’s Ak-Sug asset in central Asia.
Intergeo’s shareholders, Daselina and Kirkland Intertrade Corp., will get 8.35 common shares of the combined company for each Intergeo share, and will also receive one newly-created non-voting special share in the new entity, giving them the right to nominate up to three directors and to appoint the chair and CEO.
Mercator shareholders will get one new common share of the combined company plus one transferable “put right” for each existing Mercator common share, it said.
Intergeo had planned an initial public offering in Canada last year but postponed the move, citing an unfavorable market, Bloomberg reported.
Prokhorov, 48, made his fortune in metals, banking and an array of investments. Forbes Russia estimated his net worth this year at $13 billion, Russian news agency Rio Novosti reported.
His most high-profile move into North American was his 2010 purchase of the New Jersey Nets of the National Basketball Association, a team he relocated to Brooklyn, which has a large Russian-speaking population.
Prokhorov entered into Russian politics in 2011, unsuccessfully attempting to participate in the parliamentary elections. He also squared off against Vladimir Putin in last year’s presidential race, finishing third with about 8 percent of the vote.