Billionaire Prokhorov’s Intergeo to Buy Canada’s Mercator

Intergeo MMC Ltd., a mining company controlled by Russian billionaire Mikhail Prokhorov’s Onexim Group, agreed to buy copper producer Mercator Minerals Ltd. in a reverse takeover that will give it a share listing in Toronto.

The combined company will be renamed Intergeo Mining Ltd., Vancouver-based Mercator said today in a statement. Intergeo MMC shareholders will get 8.35 shares of the new company. Mercator investors will get one share and a put option giving them the right to sell a share of the new company for 10 Canadian cents.

The statement didn’t give a valuation for the deal. Mercator more than doubled today after the announcement to close at 9.5 cents in Toronto, giving it a market capitalization of C$30 million ($28.2 million). Its total debt stood at $140.2 million at Sept. 30, according to data compiled by Bloomberg.

Mercator stock had plunged 91 percent this year through yesterday as the company struggled to repay debt. On Sept. 30 the miner said it hired BMO Capital Markets to advise on a potential sale or merger.

“The acquisition is positive to Mercator as it provides the much-needed financial backing,” Patrick Morton, a Toronto-based analyst at Royal Bank of Canada, said in a note. “The transaction is at a premium to the current trading price, provides much needed liquidity to Mercator and will create a new company with a promising growth profile and strong financial backing.”

Russian Project

The takeover will give Intergeo MMC “access to public capital markets to develop its attractive projects,” Onexim said today in an e-mailed statement, citing Ak-Sug, a copper-porphyry deposit in Russia’s Tyva region. The project has about

1.8 million metric tons of copper resources, company data show.

The transaction also gives Intergeo MMC access to Mercator’s Mineral Park mine in Arizona, which produces copper, molybdenum and silver, as well as the El Pilar and El Creston projects in Mexico.

Onexim Chief Executive Officer Dmitry Razumov said in April that an initial public offering for Intergeo MMC that was tentatively planned for the following month had been postponed because of market conditions.

Intergeo MMC’s controlling shareholder, Daselina Investments Ltd., agreed to invest $100 million and an amount equal to the interest accrued on a bridge loan Daselina will provided to Mercator’s Mineral Park Inc. mining unit. Daselina will lend as much as $14 million to the unit via the bridge loan, Mercator said.

Private Sale

The total funding from Daselina will be made possible via a private sale of shares in the new company at $0.1224 apiece, according to Mercator.

Mercator must remain listed in Toronto as a condition for the deal. Intergeo MMC CEO John Lill will lead the combined company.

BMO is acting as financial adviser to Mercator on the takeover and DuMoulin Black LLP and Blake, Cassels & Graydon LLP are acting as its legal counsel. Stikeman Elliott LLP is acting as legal counsel to the special committee of the board of directors of Mercator.

Intergeo’s financial adviser is Morgan Stanley and its legal counsel is Norton Rose Fulbright.

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