Asanko Gold (AKG.TO, NYSEMKT:AKG) has announced it made an offer to acquire all of the outstanding shares of PMI Gold (PMV.TO) in a share swap whereby shareholders of PMI Gold will receive 0.21 shares of Asanko Gold per share they own. Based on the latest closing price of Asanko Gold at C$1.71, this offer has a value of C$0.36 per share of PMI Gold. This allows for an arbitration possibility (if you think this deal will go through) by shorting Asanko Gold and going long on PMI Gold as there’s a 4% difference between the current value of the offer and PMI’s share price.
The combination of both entities makes a lot of sense, as the combined company will have an extremely robust cash position of in excess of $275M, a financing deal for the Asanko project and the near-term producing Obotan project which is just down the road from Asanko’s current operations. Even though PMI Gold walked away from the deal earlier this year, we think this second attempt will prove to be successful.
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Disclosure: The author holds no position in either Asanko Gold or PMI Gold. Please see our disclaimer for current positions.
