AMN - M & A: Ashanti and Desert Gold intend to combine

Ashanti Gold Corp and Desert Gold Ventures have entered into a definitive combination agreement to which Desert Gold will acquire all the issued and outstanding common shares of Ashanti. The transaction is being carried out by way of a three-cornered amalgamation.

Ashanti shareholders will vote on the amalgamation at a special meeting of Ashanti shareholders with closing expected to take place by the end of May 2019.

Under the terms of the agreement, all the issued and outstanding Ashanti shares will be exchanged on the basis of 0.2857 Desert Gold common shares for each Ashanti share.

The exchange ratio implies consideration of C$0.0514 per Ashanti share based on the closing price of the Desert Gold Shares on the Toronto Venture Stock Exchange on March 8, 2019. This represents a premium of 28.5% based on the closing price of Ashanti shares on that date.

This values the proposed transaction at about C$3.8 million on a fully diluted in-the-money basis, representing 31% dilution to Desert Gold shareholders.

Ashanti’s CEO Tim McCutcheon said: “The definitive agreement comes on the back of the Letter of Intent announced on March 11, 2019, and both teams are moving forward to close this transaction and continue onward to develop the combined, bigger, land package of both companies.

“This bigger land package encompasses major geological structures in the area, similar to other structures that have given the industry multiple large gold deposits.

“Since the Letter of Intent was announced, investor interest has been high and we look forward to creating value for Ashanti and Desert Gold shareholders through the completion of the business combination.”

The land package occupies an excellent location on the prolific Senegal Mali Shear (SMSZ) and Main Transcurrent Shear Zones (MTSZ). The SMSZ is related to plus-30 million ounces of gold production and resources while the MTSZ hosts Barrick's 3 million-ounce Massawa deposit.

The combined properties of around 190sqkm host more than 11 known gold zones occurring both east and west of the SMSZ and MTSZ, suggesting significant exploration potential in a variety of geological settings.

In addition to shareholder and regulatory approvals, the closing of the proposed transaction is conditional on Ashanti being granted a new exploration permit over the Kossanto East exploration permit in western Mali where the company has existing rights which are due to expire May 7, 2019.

The board of directors of Ashanti, following a review of the terms and conditions of the combination agreement and consideration of a number of factors, has unanimously determined that the amalgamation is in the best interests of Ashanti shareholders and is fair, from a financial point of view to Ashanti shareholders and will recommend that Ashanti shareholders vote in favour of the amalgamation.

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