New Gold is aiming to acquire Bayfield's three mineral properties adjacent to its Rainy River open pit mining project and Bayfield's shareholders, in turn, would get a minority stake in New Gold, a Vancouver-based intermediate gold producer.
"By adding these three properties within and adjacent to our project area, it simplifies our development plans, increases our gold and silver mineral resources and adds to our prospective land package," New Gold vice-president Hannes Portmann said in a statement Monday.
The offer values Bayfield at about $16.6 million, a 50 per cent premium to its Nov. 7 closing price. At midday Monday, New Gold shares were down and Bayfield stock was up — changing the deal's value and premium.
Bayfield's board of directors and shareholders representing about 3.3 per cent of the company's stock are supporting the transaction but it requires approval from two-thirds of votes cast at a Bayfield shareholders meeting.
"This transaction delivers an immediate and attractive premium to our shareholders. It allows our shareholders to continue to share in the potential of the Rainy River project through their New Gold shares as well as gain exposure to New Gold's diversified gold production base and strong growth profile," said Bayfield chairman and CEO Jim Pettit.
Bayfield has agreed to give New Gold a right to match competing offers and will pay a $650,000 termination fee under certain circumstances if the deal doesn't close. In addition, it would be required to repay $300,000 that New Gold has agreed to lend to cover transaction-related costs.
Bayfield shares rose to 36 per cent to 19 cents while New Gold shares fell four per cent to $4.21 at midday Monday.
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