FAIRBANKS, Alaska - Contango ORE, Inc. (NYSE American: CTGO), a gold exploration company, has announced the acquisition of all issued and outstanding shares of HighGold Mining Inc. (TSXV: HIGH, OTCQX: HGMIF) in a transaction valued at approximately US$37 million.
Under the terms of the definitive arrangement agreement, HighGold shareholders will receive 0.019 shares of Contango common stock for each HighGold share, implying a transaction price of C$0.55 (US$0.40) per HighGold share.
The exchange ratio indicates a 59% premium based on the 20-day volume-weighted average prices (VWAP) of both companies. Post-acquisition, Contango shareholders will hold roughly 85% of the combined entity, while HighGold shareholders will own about 15%. Additionally, HighGold will have the right to appoint one director to the Contango board.
Contango's President and CEO, Rick Van Nieuwenhuyse, emphasized the strategic fit of the acquisition, noting the potential to apply Contango's direct ship ore (DSO) model to HighGold’s Johnson Tract Project. The transaction is expected to triple Contango's current resources by adding over 1 million ounces of gold equivalent at approximately 9.4 grams per tonne.
The acquisition is strategically positioned to create a leading Alaskan gold company, with plans to initiate production at the Manh Choh Project in the second half of 2024, which is expected to generate significant organic cash flow. Contango's partnership with the Alaska Native Tetlin Tribe and the Cook Inlet Region, Inc. (CIRI) demonstrates its commitment to sustainable practices and collaboration with indigenous communities.
The transaction is subject to approval by HighGold shareholders and option holders, with a special meeting anticipated in late June 2024. Both Contango and HighGold boards have unanimously approved the agreement, and fairness opinions have been provided to HighGold's board.
This acquisition is based on a press release statement and is aimed at advancing Contango's portfolio of high-grade gold deposits and enhancing its financial and operational capabilities. The companies expect the transaction to close in July 2024, subject to regulatory approvals and other customary closing conditions.
InvestingPro Insights
As Contango ORE, Inc. (NYSE American: CTGO) moves forward with its strategic acquisition of HighGold Mining Inc., investors are closely watching the company's financial health and market performance.
According to InvestingPro data, Contango has a market capitalization of approximately $202.76 million and is trading at a high Price / Book multiple of 18.56 as of the last twelve months ending in Q1 2024. Despite not being profitable over the past year, with a negative P/E ratio of -4.48, Contango's stock has shown strong returns recently, with a one-month price total return of 14.73% and a three-month return of 29.16%.
Two InvestingPro Tips highlight critical aspects for investors considering Contango's stock. Firstly, the company's liquid assets exceed its short-term obligations, which may offer some financial flexibility in the near term. Secondly, Contango's operation with a moderate level of debt suggests a balanced approach to leveraging. Still, analysts do not anticipate the company will be profitable this year, and it is worth noting that Contango does not pay a dividend to shareholders.
For those looking to delve deeper into Contango's financials and market potential, InvestingPro offers additional insights and tips. In fact, there are 6 more InvestingPro Tips available that could provide further guidance to investors. To access these tips and gain a more comprehensive understanding of Contango's investment profile, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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