Mercator Minerals to buy Stingray Copper for USD 40 million
Tuesday, 06 Oct 2009
Canadian Press reported that Mercator Minerals Limited has struck a friendly USD 40 million deal to acquire Stingray Copper Inc.
Vancouver based Mercator has the Mineral Park mine in northwestern Arizona, one of the largest modern copper molybdenum mining milling operations in North America. Toronto based Stingray is developing the El Pilar copper project in northern Mexico.
Mr Peter Mordaunt chairman and CEO of Stingray said that we think the fit is really outstanding in terms of really getting El Pilar built on heels of Mineral Park that is really coming into its own stride. He said the deal is a 52% premium to Stingray's closing stock price on Thursday.
Mr Michael Surratt president & CEO of Mercator said that the deal will substantially increase Mercator's copper holdings and is a robust development opportunity for shareholders after the Phase II of Mineral Park is completed in about a year.
Mr Mordaunt told investors that we never put the for sale sign up. He said the discussion started casually and heated up into something more meaningful.
Stingray said that the deal helps it transition from a development stage company to a high growth profile producer with higher valuation multiples. The merger would also improve access to capital markets and financing alternatives for its Mexican El Pilar copper project. Stingray also holds gold, silver and other copper, exploration properties in Mexico.
Mercator produces molybdenum, a silvery white metal used mainly as a component of alloyed steel. Molybdenum prices are currently trading around USD 15 per pound after surpassing about USD 30 per year ago. Both companies are involved in copper, which has a wide range of uses including in piping, computers, fertilizer and machinery. The price of copper has rebounded in recent months to just below USD 3 per pound after falling to around USD 1.50 at the end of 2008.
Mercator said that the pairing with Stingray will diversify its assets and increase production while lowering long term cash costs. It will gain additional annual copper production of approximately 70 million pounds per year starting in 2012 at El Pilar, which it said had manageable capital expenditures.
Mr Ron Coll an analyst at Jennings Capital Inc said that the deal is a good one for Mercator because it's small enough that it won't disrupt its expansion plans at Mineral Park. Once that is complete, scheduled for the end of 2010 the company can move right into the development of El Pilar which will be ready in 2011.
He said that "It's a perfect little bite for Mercator to show some additional growth after the expansion of Mineral Park. The price Mercator is paying is inexpensive at about 1.7 cents per pound of copper in the ground.
