SolGold to make offer to Cornerstone Capital shareholders

SolGold announced its intention to make an offer to acquire all outstanding common shares of Cornerstone Capital Resources on Thursday, saying the all-stock transaction offered Cornerstone shareholders continued exposure to the world-class Cascabel Project through a 100% consolidated vehicle.

The London-listed firm said it would also allow Cornerstone shareholders the opportunity to convert their Cornerstone shares into freely tradable SolGold shares, at an immediate premium of about 20%.

It offered 0.55 SolGold shares for every one Cornerstone share tendered, with holders of warrants outstanding on expiry of offer entitled to participate based on prescribed ratios.

Tax-deferral would also be available to Cornerstone shareholders resident in Canada, the board confirmed, via an exchangeable share structure.

SolGold’s board said its offer had a “compelling rationale”, and provided Cornerstone shareholders with “numerous advantages”, including the ability to participate in the Cascabel Project through the 100% consolidated operator SolGold.

It also pointed to a reduced risk of material dilution and significant loss of investment value through the elimination of future Cornerstone standalone funding obligations.

SolGold said it had a “highly experienced [and] proven” management team, noting it was responsible for the 7000% market cap appreciation since December 2015.

It would also provide for additional participation in the upside of 72 “highly prospective” licenses in Ecuador, and assets in other jurisdictions, with a particular near-term focus on La Hueca, Porvenir, Blanca Nieves and Blanca.

The acquisition would provide for a simplification of the group’s structure, and the removal of value drag from duplicative overhead costs, as well as relief from various structural and funding challenges of Cornerstone's current interest in Cascabel.

Increased trading liquidity and capital markets exposure were also touted as benefits, through SolGold's growing supportive research analyst universe.

“We are pleased to have reached the point where we feel that an offer to combine SolGold and Cornerstone makes sense for Cornerstone shareholders,” said SolGold chief executive officer Nicholas Mather.

“The combined entity will have tremendous economic upside, further de-risk the ownership structure and present a simplified and highly attractive value proposition for investors.

“We encourage Cornerstone shareholders to closely consider these factors and we are confident that once they do, they will recognise the potential this proposal holds and tender to our offer.”