(MENAFN- ProactiveInvestors - Australia) Canadian explorers Polar Star Mining (TSE:PSR) and Iron Creek Capital (CVE:IRN) have agreed to merge and rebrand under a new name, controlling more than 330,000 hectares of exploration ground in northern Chile focused on copper, gold and silver.
A non-binding letter of intent agreement has been signed between the two parties, with the companies aiming to come to a definitive agreement within a month, and to close the deal before the end of this year.
Under the terms, Iron Creek shareholders will get 3.82 common shares of Polar Star for every Iron Creek share they hold. Polar Star will, in total, issue roughly 147.5 million common shares to Iron Creek shareholders, representing just over 42 percent of the new company.
The companies said Polar Star's name will be changed to a name that has yet to be agreed upon, with the company intending to maintain its main board TSX listing.
Iron Creek's current management team, led by president Tim Beale, will continue on at the newly merged entity, with the board initially comprised of four current directors of Iron Creek and two current directors of Polar Star.
The new company will have a total of $3 million in its treasury after the deal has closed, with the merger also expected to result in synergistic cost savings in terms of management and overhead, Polar Star and Iron Creek said in a joint statement.
It will also have three existing option and joint venture agreements with major mining companies, including Kinross Gold, Newmont Mining and BHP Billiton, they added.
A definitive agreement is still subject to due diligence, as well as shareholder support, with closing requiring court, shareholder, stock exchange and regulatory approvals.
The two parties have agreed to enter a period of exclusivity for 90 days.
Both Polar Star and Iron Creek have similar prospect generator business models, with a focus on building out prospective properties with the intent of attracting major joint venture partners. The business model will continue at the new company, which will be based in Vancouver, with a technical team on the ground in Santiago, Chile.
Iron Creek's largest 50,000 hectare property, Las Pampas, was optioned to a subsidiary of Kinross Gold, and Polar Star's flagship asset, Montezuma, is being explored through a joint venture deal with a subsidiary of Newmont Mining.
"This year, Iron Creek management and directors have taken a series of decisions that will allow the company to grow and become more sustainable, and increase the chances of discovery success for its shareholders," said president of Iron Creek, Tim Beale, who will lead the new company as both president and chief executive officer.
"We have completed a significant private placement financing, signed an option agreement with Kinross Gold, completed the acquisition of several new properties from Minera Fuego, and now with the friendly merger between Iron Creek and Polar Star, the new company will be one of the principal "go-to" companies with prospective ground in Chile."
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