Golden Reign inks LOI to merge with Wexford Capital’s Marlin Gold

VANCOUVER (miningweekly.com) – The TSX-V-listed equity of Golden Reign Resources jumped nearly 32% on Tuesday after it announced that it has signed a letter of intent (LoI) to acquire private firm Wexford Capital’s Marlin Gold business.

Golden Reign plans to buy all of the issued and outstanding common shares of Marlin Gold, following a Marlin reorganisation, in exchange for scrip, which would result in Marlin and certain of its subsidiaries, namely Oro Gold de Mexico and Marlin Gold Trading, becoming wholly-owned subsidiaries of Golden Reign.

On completion of the proposed transaction, current shareholders and option holders of Marlin will own about 45% of the shares of Golden Reign, after distributing any Golden Reign shares already owned by Marlin to its shareholders and current non-Marlin Golden Reign shareholders will own about 55% of the shares.

The potential transaction will bring together under one company, Golden Reign's wholly-owned San Albino-Murra property in Nueva Segovia, Nicaragua, and Marlin's La Trinidad mine, in Sinaloa, Mexico.

“The combined entity creates a focused precious metals exploration and development company with an unencumbered high-margin asset in Nicaragua, immediate production and cash flow from La Trinidad, cash flow growth, no debt, geographic diversification and significant exploration potential,” Golden Reign president and CEO Kevin Bullock stated.

Bullock is expected to continue as CEO of the entity resulting from the business combination and Golden Reign will be renamed. The board of the new company will comprise seven members – three from Golden Reign, three determined by Marlin and at least one independent director.

Sailfish chairperson and CEO Akiba Leisman characterised the proposal as "the culmination of over four years of work to provide Marlin shareholders access to one of the most attractive development assets in the Americas".

In connection with the contemplated merger, Marlin will provide bridge financing to Golden Reign in the amount of C$4-million over a term of one year, bearing interest at 8%. Following the transaction, the debt will become intercompany debt and be terminated.

Marlin will also agree to sell its Commonwealth silver/gold property, in Cochise county, Arizona, to controlling shareholder Wexford, which will extinguish certain of Marlin's debts and liabilities. Marlin will also distribute any additional proceeds from this sale, as well as its current shareholdings in Golden Reign to Marlin's shareholders, allowing Golden Reign to acquire Marlin on a debt-free basis.

Sailfish will also restructure a streaming agreement it holds on the San Albino project, to have the equivalent effect of a 3% net smelter royalty (NSR) over the existing area of interest, and a 2% NSR on the rest of the 138 km² area surrounding the existing area of interest, with no security interests granted, among other concessions, which include the elimination of $13.9-million funding obligation and the assignment by Marlin to Sailfish or no additional consideration, the El Compas (1.5% NSR) and La Cigarra (1% NSR) royalties, in Mexico; and the right to option the Gavilanes property, also in Mexico, for nominal payment, which is expected to be converted to a royalty upon entering into an exploration agreement with an operating partner.

The boards of Golden Reign, Marlin and Sailfish, respectively, have each appointed a special committee to consider the proposal, as well as any strategic alternatives, and the boards have unanimously approved entering into the LoI.

“We are excited to shortly be able to begin construction of a 500 t/d mine at San Albino and grow production and cash flow to fund exploration of the highly prospective 138 km² high-grade gold camp in Nicaragua,” Bullock said.

The companies have agreed to an exclusivity period ending on the earlier of June 15, or signing of a definitive agreement, or such other date as the parties may mutually agree, with a view to negotiating and settling a definitive agreement as soon as possible.

Golden Reign shares were up 31.82% on TSX-V to C$0.29 apiece. Marlin Gold's stock fell to a new 52-week low of C$0.23 a share, down 65%.