Noront Resources

TORONTO (miningweekly.com) – Toronto-based Noront Resources announced on Monday it plans to make an all-share offer for rival Freewest Resources Canada worth about C$90-million, in a move to increase its presence in the 'Ring of Fire' exploration district in the James Bay Lowlands of Ontario.

Noront will offer one of its own shares for four Freewest shares, implying a value of about C$0,3975 for Freewest shares and a premium of approximately 26% , based on closing prices on Friday.

Noront, which already controls 48 600 ha and has joint ventures comprising another 68 000 ha in the Ring of Fire, maintains that it has a “thorough understanding” of the potential of Freewest's discoveries in the area, and that the exchange ratio is full and fair.

But Freewest CEO Mackenzie Watson responded later on Monday that the offer appeared “highly opportunistic” and that it undervalues Freewest's assets and prospects.

Freewest's board will consider the unsolicited offer when it is formally made and make a recommendation to shareholders. It will also hire a financial adviser.

The Ring of Fire is an emerging multi-metal exploration district, and Noront has found high-grade nickel, copper, platinum, palladium, chromite and vanadium mineralisation on its properties, while Freewest has confirmed chromite and vanadium discoveries.

“The acquisition of Freewest will allow the respective shareholders to benefit from the consolidation of the exploration and development potential of the Ring of Fire and the rationalization of activities, paving the way for the sharing of essential infrastructure and logistics,” Noront said in a statement.

“This will result in the capture of synergies between both companies’ chrome deposits and Noront’s high-grade Eagle’s Nest nickel, copper and platinum-group metals deposit.”

The combined company would also be more liquid, with about C$37-million in working capital, Noront CEO Wes Hanson said.

Noront said that it had approached Freewest's Watson with a friendly proposal on Friday, but that he refused to discuss the offer then or over the weekend.

After that, Noront sent a written confirmation of its offer to the Freewest board but, after receiving no response, decided to go directly to shareholders.

In a statement on Monday, the company outlined a list of conditions, however, if the offer is to go ahead.

Firstly, because the offer isn't a permitted bid under Freewest's shareholder rights plan, it would require the plan to be removed if the offer is to proceed.

Secondly, Noront wants Freewest to amend its change of control provisions so that the total amount paid to officers and directors in the event of a change of control is set at a maximum of C$1,5-million.

At the moment, Watson would receive a once-off change of control payment of C$4-million, which Noront believes is “excessive”, while two other vice presidents would also receive undisclosed amounts.

The offer, if it goes ahead, will require acceptance by at least two thirds of Freewest shares on a fully diluted basis.

Shares in Freewest surged 20,6% on Monday morning, to C$0,38 apiece by 10:55 in Toronto.

Noront slid 1,3%, to C$1,57 a share.