Vancouver-based American Pacific Mining announced this week it will acquire Constantine Metal Resources and the Palmer Project, a mixed metals mining exploration project north of Haines.
A special shareholder meeting is required to approve the agreement between the two companies, which will occur in two to three months. The Madison Mine in Montana is American Pacific’s largest project and is under option to partner with Kennecott Exploration Company, a division of multinational mining company Rio Tinto.
American Pacific CEO Warwick Smith said in a YouTube promotional video that the year 2022 “brings American Pacific its first takeover of a public company in its purchase of Constantine Metals.”
“Our desire was to own the Palmer Project…that will be the most advanced asset that American Pacific owns,” he said.
In an Aug. 15 announcement, Constantine CEO Garfield MacVeigh said American Pacific’s “focus, financing capabilities and breadth of exploration experience in the U.S. will result in Palmer reaching its full potential.”
Jim Kuipers, a former mining engineer and project manager at mines in Montana, Nevada and Alaska, said changes of project ownership at this stage of exploration is common.
“In this case a company with two properties is better than two companies each with one property. But there is a big difference – Madison has the interest of Rio Tinto, a mining industry giant,” Kuipers said. “The primary investor in Palmer is still DOWA, so I’d say nothing much really changed. The exploration and development work over the next year or two will likely determine the short-term future of the project.”
Constantine’s share of the project has been diluted over the past several years after it historically operated with a 51% controlling interest, which required the company to finance its share of exploration. In October 2019, Constantine took out an unsecured, five-year $630,000 loan at 12% interest from an investment group to pay for operating costs. Constantine’s project partner, Japan-based Dowa Metals and Mining (DOWA), committed to funding the entire 2021 and 2022 exploration program.
Anchorage-based North of 60 Mining News publisher Shane Lasley told the CVN it’s somewhat atypical for a junior mining exploration company like Constantine to be acquired by another junior company such as American Pacific.
“Most of the time a junior company will take it to a certain point with the ultimate goal of selling it to a producing company,” Lasley said. “Constantine’s share price has been fairly low. It’s been hard for them to raise the money. What they’ve done in recent years has foregone putting up their share. It was diluting their interest in the project.”
The Palmer Project is in an advanced exploration stage. Monday’s announcement stated that the company will “be well financed with a…cash balance exceeding $10 million allowing (American Pacific) to aggressively progress projects while leverage spending commitments of partners.”
The Alaska Department of Environmental Conservation two months ago approved Constantine’s engineering plans for a revised wastewater management system at the Palmer Project. The $18 million 2022 budget funded by DOWA covered construction of new infrastructure in preparation for underground exploratory operations, which the company expects to begin in mid-2023 and includes building an underground tunnel that would allow year-round exploration.
Should shareholders approve the agreement, American Pacific Mining will have the option to contribute before the end of the calendar year to mitigate further dilution.
The deal means that Constantine shareholders will receive shares of American Pacific at a 48% premium compared to the value of the 20-day average share price of Constantine shares.
“Anybody that holds Constantine shares, they’re getting more than what the price has been selling for recently,” Lasley said. “It won’t be a cash value. They’ll get that much worth of shares, which they could sell.”
The top three Constantine shareholders include Michael Gentile, John Tognetti and Garfield MacVeigh. Gentile is also the largest shareholder of American Pacific.