Tembo Gold (TEM.V) has entered into a binding agreement with Barrick Gold (GOLD, ABX.TO) whereby the latter will acquire six prospecting licenses from Tembo Gold while the senior gold producer will also take a 5.5% stake in Tembo Gold by acquiring 5.5 million shares at C$0.27 per share.
The six licenses are sold for cash proceeds of US$6M upon closing while the local subsidiary of Barrick Gold will make additional payments up to US$45M based on potential future gold resources on the licenses while committing to spending at least US$9M on exploration in the first four years after the deal closes.
A good deal based on Tembo’s current market capitalization, but historical shareholders are still looking at a 95% loss compared to the share price the first few weeks after the company started trading in 2012. After taking the share consolidations into account, Tembo Gold reached a high of almost C$7 in 2012 and has pretty much in hibernation mode since 2015 as the company preserved cash to keep its licenses in good standing.
Disclosure: The author has no position in Tembo Gold or Barrick Gold. Please read our disclaimer.
