Treasury Metals to combine with Giustra-backed Blackwolf Copper and Gold

Treasury Metals (TSX: TML; OTCQX: TSRMF) is bolstering its balance sheet and leadership team with a proposed deal to acquire Alaska-focused Blackwolf Copper and Gold (TSXV: BWCG; OTCQB: BWCGF) and its development-stage Niblack project.

In a press release Thursday, the Toronto-based Treasury Metals said it will offer 0.607 of a common share for each common share of Blackwolf. At the time of announcement, Treasury's stock traded at $0.20 apiece in Toronto, while Blackwolf's shares were priced at $0.13 each, with respective market capitalizations of $29.7 million and $15.9 million.

Upon completion of the share exchange, existing Treasury and Blackwolf shareholders will own approximately 68.3% and 31.7% of the combined company.

To provide financial flexibility, Treasury has amended its agreement with Sprott Resources Streaming and Royalty to waive its quarterly minimum payments due to Sprott over the next four quarters. In exchange, the quarterly minimum payment will increase from US$500,000 to US$675,000, and the deadline of last payment will be moved forward.

The merger remains subject to shareholder approval on Blackwolf's side. Canadian mining financier Frank Giustra, a cornerstone shareholder in Blackwolf, is anticipated to vote in favour of the deal alongside other senior officers and directors.

Treasury expects this business combination to help advance its Goliath Gold Complex (GGC) project in northwestern Ontario to production through a strengthened cash balance of $10 million and a new capital markets strategy led by Giustra.

Building new gold camp

The GGC refers to a 65-km trend within a 330 km² land package that hosts three distinct projects within the Wabigoon greenstone belt. The main Goliath project includes an open-pit and underground gold mine and associated milling facility located 20 km east of Dryden, Ontario.

A February 2023 pre-feasibility study gave the Goliath complex a total 13-year mine life, producing 109,000 ounces of gold annually at a cash cost of US$892 per ounce and an all-in sustaining cost (AISC) of US$1,037 per ounce during the first nine years. The PFS projected a net present value of $493 million at a 5% discount rate, and an internal rate of return of 33.5% based on a gold price of US$1,950 per ounce.

Federal environmental approval for the project was obtained in 2019. The final feasibility study and permitting processes are currently underway.

Commenting on the deal, Giustra said he believes this is "a strong transaction" that puts the company on the path of a buy-and-build strategy that he has implemented many times.

“This is a tremendous win-win opportunity for Blackwolf and Treasury shareholders," said Morgan Lekstrom, CEO of Blackwolf and expected president of the combined company.

"Treasury has done an incredible job of advancing the GGC project through the start of engineering and permitting, and we are optimistic that it can evolve into a major Canadian gold camp."

Giustra financing

Concurrent with the merger, Treasury Metals will undertake a private placement of approximately 17.4 million units at $0.23 per unit for gross proceeds of $4 million. Each unit consists of a common share and one warrant exercisable at $0.35.

Frank Giustra is expected to be the lead subscriber and become the company's largest shareholder following completion.

Net proceeds will be used to advance the GGC project and select ‎exploration programs across the exploration portfolio of the newly combined company.

Niblack project

On top of GGC, Treasury will also look to develop the newly acquired Niblack project located on Prince of Wales Island in southeast Alaska. The project covers approximately 25 sq. km. and is located adjacent to tidewater.

Past exploration on the property has led to the discovery of six copper-gold-zinc-silver mineralized areas. Two of those have NI 43-101 mineral resource estimates totalling 5.9 million indicated tonnes grading 0.94% copper, 1.83 g/t gold, 1.73% zinc and 29 g/t silver, containing 345,800 oz. of gold equivalent.

Blackwolf acquired the Niblack project through an option agreement with Teck Resources back in 2006. Under that agreement, Blackwolf is obliged to pay Teck $1.25 million in cash upon a change in project ownership; the parties have now entered an addendum to allow Blackwolf to pay the same amount in shares.

Blackwolf has agreed with Matrix Camps and Logistics to release each other from all prior claims under the Niblack camp support and rental agreement from 2021. Instead, it will buy the camp assets at the Niblack project from Matrix. In exchange, Matrix will retain a US$100,000 deposit from the prior agreement receive 9.3 million Blackwolf shares.