Adriatic Metals (ASX: ADT) is proposing to acquire 100% of Toronto-listed Tethyan Resource Corp (TSX: TETH) to grow its base and precious metals portfolio in the Balkans.
The company today announced it has entered into a binding letter agreement to acquire 100% of the issued share capital of Tethyan by way of a plan of arrangement.
The deal will add about 301sq km of land across Bosnia and Serbia, including two past-producing silver-zinc-lead mines at Kizevak and Sastavci, to Adriatic’s existing portfolio comprising the Vares polymetallic project in Bosnia and Herzegovina.
In conjunction with the transaction, Adriatic has agreed to advance Tethyan a secured convertible loan of up to €1.3 million (A$2.15 million) in tranches.
Adriatic managing director and chief executive officer Paul Cronin said the acquisition presents a “unique” opportunity for the company to add assets that have the potential to match the quality of the Vares project, where a pre-feasibility study is due for completion in the third quarter.
“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,” he said.
“Applying our team and strong balance sheet to Tethyan’s assets positions us well to proceed through the project development cycle,” Mr Cronin added.
Tethyan president and chief executive officer Fabian Baker said the combined assets are expected to “bring high quality assets to production in a timely and sustainable manner, ensuring lasting benefits for both shareholders and the communities in which [the company] operates”.
According to Adriatic, the acquisition will position it as the leading base and precious metals developer in the Balkans region.
Terms of the deal
Pursuant to the plan of arrangement, Tethyan shareholders will each receive 0.166 Adriatic shares per Tethyan share held, which will result in Tethyan shareholders owning about 6.9% of the enlarged Adriatic.
The plan consideration implies a price of C$0.184 (A$0.02) per Tethyan share based on the 20-day volume weighted average price of Adriatic at 8 May, representing an implied equity value of C$14.7 million (A$16.12 million).
Tethyan’s board of directors has unanimously approved, and resolved to recommend its shareholders vote in favour of, the transaction; voting support agreements have been received from about 54% of Tethyan shareholders.
The acquisition is expected to close by the end of August, once all conditions have been satisfied.
Under the additional secured convertible loan agreement, the funds are intended be used by Tethyan to finance its acquisition of Serbian company EFPP, commence confirmation drilling at Kizevak and to meet Tethyan’s expanses and costs of completing the acquisition transaction.
Although incorporated in British Columbia, Canada, Tethyan is focused on the Tethyan metallogenic belt in eastern Europe, mainly Serbia.
In April, the company announced it had entered into an arm’s length agreement to purchase 100% of Serbian company EFPP, which holds two exploration licences over the historical Kizevak and Sastavci silver-zinc-lead mines in south-western Serbia.
The first of the two-stage acquisition involves Tethyan securing 10% of EFPP shares for a total cash consideration of €525,000 (A$869,036).
At any time within 12 months of this first closing, Tethyan may elect to acquire the remaining 90% stake in EFPP for €1.375 million (A$2.28 million) in cash plus granting a 2% net smelter return over the Kizevak and Sastavci licences, issuing a total of 664,000 Adriatic shares, and a deferred cash payment of €500,000 (A$827,653).
Adriatic said it plans to rapidly advance the two Serbian mines towards a maiden JORC-compliant resource by the end of the 2020 fourth quarter.
Tethyan also holds the Raska licence, which includes the Rudnica and Kremice gold-copper porphyry targets and Karadak silver-lead-zinc target, plus two other exploration licences that are expected to be relinquished this year.