It's another absolute bloodbath for North American markets on Wednesday, with the Dow Jones Industrial Average down more than 400 points in early afternoon trading. If it holds, it will be the first time the Dow has shed 400 points in one day in more than three years. The Toronto markets are still in freefall, including the Venture exchange looking to post its seventh straight red day and 20th in the past 22 sessions, putting it at its lowest level since December 2008, the month that the markets finally found a bottom amid the Great Recession.
Amid the accelerated selling, Prophecy Coal Corp. (TSX:PCY) is actually ahead a tad after striking a deal with Apogee Silver Ltd. (TSX-Venture:APE) to acquire Apogee’s subsidiaries.
Per the Letter Agreement, which needs to be followed with a definitive agreement on or before October 24, amongst other things, to be finalized, Prophecy will buy Apogee Minerals Bolivia S.A. and ASC Bolivia LDC for cash and shares. The two subsidiaries hold the Pulacayo-Paca Silver Lead Mining Project in Bolivia. In an article from April 2013, we gave a quick overview of the silver and tin production in Bolivia as well as some commentary on development at the project by Apogee Silver.
The Pulacayo-Paca property, which covers approximately 22,850 hectares of contiguous mining concessions, is located 18 kilometres east of the town of Uyuni in the Department of Potosi in southwestern Bolivia. Apogee has conducted about 70,000 meters of diamond drilling and trial mining and toll milling programs began in November 2011, running for the next 19 months. In that time 12,550 total tons of ore produced 270 g/t silver, 2.7% lead and 2.4% zinc.
The new project would be a jump across the globe and diversification in business model for Prophecy, who is currently focused on developing energy projects in Mongolia.In consideration for the two subsidiaries, Prophecy has agreed to pay Apogee $250,000 in cash and 60 million Class B convertible non-voting shares of Prophecy. Based upon Prophecy’s closing price of five cents per share on October 10, the shares have an implied value of $3 million.
The Class B shares will be convertible into listed shares over a two-year period in tranches with the first tranche to be converted one year after the closing of the transaction. The conversion can be accelerated upon certain conditions, such as Prophecy shares trading above certain price points or "certain major triggering events" relating to Prophecy.
Currently there are 251.88 million shares of Prophecy issued and outstanding. If 60 million Class B are converted (assuming no more shares are added to current levels), Apogee would have a 19.2% stake in Prophecy.The boards of both companies are recommending that shareholders approve the transaction.
Certain Apogee shareholders that control 18.2 percent of Apogee shares (377.82 million total shares outstanding, according to QuoteMedia) have already signed support agreements.
Shares of have edged ahead by 11.1% to five cents in Wednesday trading on only 11,950 in volume. Shares of oft-illiquid APE haven’t traded a share, staying at one cent each where they closed on Tuesday.
