Two Cos. Merge in Step To Becoming Midtier Gold Producer

Blackwolf Copper & Gold Ltd. has been merged with Treasury Metals Inc. (TML:TSX: TSRMF:OTCQB), forming a combined growth-oriented company, it was announced in a news release.

"The combined company will aspire to mid-tier producer status and move in this direction through strategic acquisitions under the guidance of key investor Frank Giustra," wrote Technical Analyst Clive Maund in a June 26 article. The expected cash position of US$16 million (US$16M) after the merger will allow the company to execute on its development and exploration plans."

Blackwolf's CEO Morgan Lekstrom will be the president and a director of the combined company, and Giustra will be a strategic investor.

About the combined company, Lekstrom said in the release, "Completing this transaction will not only accelerate the ability to build Goliath but the new vision of a buy/build strategy. This strategy comes with putting together near-term, buildable assets that utilize the expert builder team, newly integrated finance and marketing team, to create a platform for strategic growth." Goliath is Treasury Metals' flagship project.

In the deal, Treasury acquired all of Blackwolf's issued and outstanding common shares and issued 87,623,800 of its own shares. Former Blackwolf shareholders are entitled to receive 0.607 of a Treasury common share in exchange for each Blackwolf share held. Upon closing, existing Treasury and former Blackwolf shareholders will own about 68% and 32% of the issued and outstanding Treasury shares, respectively, excluding the first tranche of the concurrent financing.

This first tranche, now completed, consisted of 19,136,000 flowthrough units in a nonbrokered private placement for gross proceeds of CA$4,401,280.

The second tranche is expected to consist of 8,690,000 flowthrough units for gross proceeds of CA$1,998,700, and to be completed on July 5, 2024. Each flowthrough unit consists of one Treasury share issued as flowthrough shares and one common share purchase warrant of Treasury. Each warrant will be exercisable at a price of CA$0.35 until July 2, 2027.

Exploration, Development In One Co.

Blackwolf, the former Canadian explorer-developer of precious and base metals in the British Columbia (B.C.) and Alaska portions of the Golden Triangle, brought to the merger the Niblack project and five highly prospective, Hyder area properties, wrote Jay Taylor, editor and publisher of Gold, Energy & Tech Stocks on June 28.

Niblack, a copper-gold-zinc-silver volcanogenic massive sulphide (VMS) project in southeast Alaska, has a 5.86 million ton resource, consisting of 1.83 grams per ton (1.83 g/t) gold, 29 g/t silver, 0.94% copper and 1.73% zinc. The resource is expected to "increase significantly" with additional drilling. The other properties are Harry, Mineral Hill, Cantoo, Rooster and Texas Creek, in Alaska.

"Most interesting to me is the Cantoo project that Quinton Hennigh has described as the spitting image of the Golddigger gold/silver-rich VMS deposit being advanced by Goliath Resources Ltd. (GOT:TSX.V; GOTRF:OTCQB; B4IF; FSE)," Taylor wrote.

Gold-focused Treasury Metals, headquartered in Toronto, Ontario, has assets in Canada and the U.S. The company is moving its Goliath Gold Complex (encompassing the Goliath, Goldlund and Miller deposits) in northwestern Ontario, toward production, wrote Taylor.

"The project benefits from readily available world-class infrastructure and has secured a federal environmental assessment approval," Taylor wrote in a June 28 issue of Hotline. "The final feasibility study and permitting processes are currently underway."

Treasury also owns other projects in Canada, including the Weebigee-Sandy Lake gold project joint venture in northern Ontario and the Gold Rock grassroots gold exploration property south of Dryden, Ontario.

The new Treasury- Blackwolf entity, according to Taylor, has:

1) Potential near-term gold production: The 2023 GGC prefeasibility study outlined an operation producing 109,000 ounces of gold annually over a 13-year mine life, at an US$892 per ounce ($892/oz) cash cost and a US$1,037/oz all-in sustaining cost during the first nine years. The study estimated the project's net present value at a 5% discount to be US$493M and its internal rate of return to be 33.5%, based on a US$1,950/oz gold price.

2) Strong financial position: The company has about US$10M in cash and will have to US$6.4M in gross proceeds from an in-progress financing.

3) Enhanced capital markets focus: A new capital markets strategy led by Giustra will complement the company's significant expertise in mine permitting, construction, operations and exploration, to create value for shareholders.

4) Renewed exploration commitment: It is expected exploration will intensify in the Dryden, Ontario district, led by an experienced team, with the goal of expanding the current mineral resource area and simultaneously carrying out development.

5) Growth and consolidation strategy: The company will assess and effect strategic acquisitions to accelerate growth and bolster its industry position.

6) Strong, proven management: The company will benefit from the experience and proven record of Treasury and Blackwolf in project exploration and mine development.

"The combination of near-term production from Treasury Metals combined with highly prospective exploration B.C. and Alaskan properties in Blackwolf's portfolio appears very appealing," Taylor wrote, noting he was in favor of the merger.

Metals Poised To Climb Further

According to experts, the outlook for gold and copper are favorable.

The price of gold, one of the best performing assets in global financial markets, is up 12% year to date, Kitco News reported on July 2. It has done so despite a difficult market and the U.S. Federal Reserve's monetary policy supporting a stronger U.S. dollar and higher bond yields.

Gold is holding above the key US$2,300 per ounce support level, Golden Opportunities wrote on July 3, and "may be coiling for a new breakout."  

Ron Struthers of the Struthers Resource Stock Report, wrote on July 3,  "So far gold remains in a stealth rally." He expects gold to hold in its current range for a bit while central banks continue buying it in its higher price range.

"They are hoping the higher prices will convince weaker hands to sell their gold," Struthers wrote. "Once they drain out that gold, prices will go higher."

The World Gold Council (WGC) expects central banks to continue accumulating gold throughout H2/24, Kitco reported. The WGC also expects the metal to be well supported during this period due to ongoing geopolitical uncertainty, the threat of an economic slowdown and persisting inflation.

The gold market needs a catalyst to take the metal's price higher, wrote Kitco, and most probably it will be a real interest rate cut by the Fed. The consensus among analysts is this likely will happen in September.

As for copper, it also has performed well year to date, and analysts expect the upward trend in the price to continue at least through 2026. In May of this year, the copper price reached an all-time high despite continued monetary tightening in the U.S. and China's slow economic recovery, according to a July 1 Techopedia article.

Chen Lin of What is Chen Buying? What is Chen Selling? purported on July 3 that copper bottomed the previous week at US$4.30 per pound. Now that selling and false rumors of an oversupply are in the past, he wrote, "copper is ready to move up."

Several factors should help drive up the copper price this year, including a possible supply deficit, a Fed rate cut, improving demand and a weakening U.S. dollar.

CIBC raised its copper price forecast for 2024, 2025 and 2026 by 10%, 6% and 12%, respectively, it wrote in a June 19 article.

"We forecast upside potential in pricing over the next three years," the analysts wrote.

The Catalyst: Realizing Of Synergies

In the near term, the combined Treasury Metals and Blackwolf Copper & Gold Ltd. company will realize the benefits of having joined together, noted Taylor. The merger is expected to close in Q3/24.

"Combining forces makes possible valuable synergies and economies of scale that will enable them, as the newly merged entity, to advance their projects as one company, especially as the outlook for the metals sector is set to vastly improve before much longer," Technical Analyst Maund wrote. "When the debt markets melt down, a development that is drawing ever closer, enormous amounts of capital will flood into tangible assets with base and precious metals set to soar."

Two Strong Buys

Before Blackwolf and Treasury combined, Maund had a Strong Buy on each, as noted in a June 26 report. He wrote that merging was favorable for both as indicated by their stock charts, which looked good. Thus, the outlook for the combined company "is even better."