On the heels of Monday\’s M&A in the gold space, Kootenay Silver (TSXV:KTN) and Northair Silver (TSXV:INM) said Wednesday that they\’ve executed a binding letter agreement under which Kootenay will acquire all of Northair\’s issued and outstanding common shares. 

According to the companies, the combined entity will be “a leading Mexican silver exploration and development company and consolidator” whose assets will include Kootenay\’s Promontorio and La Negra projects, along with Northair\’s La Cigarra project. Notably, Promontorio has a NI 43-101 measured and indicated pit-constrained resource of 92 million silver equivalent ounces, plus a further 24.3 million silver equivalent ounces in the inferred category; meanwhile, La Cigarra has a NI 43-101 pit-constrained measured and indicated resource of 51.5 million silver equivalent ounces, in addition to an inferred 11.5 million silver equivalent ounces.

Aside from those strong projects, the new company will also “have exposure to a continuum of grass-roots pipeline exploration projects, royalty interests and joint ventures, plus a strong balance sheet.”


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Speaking positively about the deal, James McDonald, president and CEO of Kootenay, commented, “

[t]he transaction provides Northair shareholders with an attractive premium on its capital stock, while Kootenay will enjoy the benefits of a substantially increased silver asset base and corporate balance sheet, setting the stage for the future development of its assets, additional potential revenue streams, and further consolidation in the sector.”

In terms of exactly what Northair shareholders will get out the transaction, Wednesday\’s press release states that for each share that they hold, they will receive 0.35 common shares of Kootenay, plus 0.15 of a warrant to buy Kootenay common shares at an exercise price of $0.55 for a period of five years from closing. Including those warrants, that equates to an implied value of $0.076 per Northair common share — that\’s a 45-percent premium based on both companies\’ trailing 20-day volume-weighted average share prices at close of day Tuesday.

The companies expect to put a definitive agreement in place on or before February 3, 2016; once the transaction is complete, Northair will become a wholly owned subsidiary of Kootenay, holding about 40 percent of Kootenay shares on an outstanding shares basis.

Comstock Mining Inc. (NYSEMKT:LODE) holds a large 8,500 acre, contiguous land position in the epithermal, bonanza-grade mining district of Comstock. Its first two resource areas, Lucerne and Dayton, hold approximately 3.25 million gold equivalent ounces in all categories, measured, indicated and inferred. Connect with Comstock Mining to learn more about these world class deposits.

As yet, Kootenay hasn\’t provided detailed plans on what it will do once Northair is under its wing. However, it\’s clear that its big picture idea is to pursue further acquisitions in Mexico. The company notes in Wednesday\’s release that “investors in today\’s market are increasingly attracted by larger, more liquid exploration and development companies,” and it\’s interested in being that type of company.

At close of day Wednesday, Kootenay\’s share price was down 7.89 percent, at $0.175. Meanwhile, Northair\’s was up 22.22 percent, changing hands at $0.055. Like most silver-focused companies, both Kootenay and Northair have seen their share prices hammered over the last year.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

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