NYSE- and TSX-listed McEwen and TSX-V-listed Canadian Gold have entered into a binding letter of intent (LoI) under which McEwen will acquire all outstanding shares of Canadian Gold in an all-share transaction that would see Canadian Gold become a wholly owned subsidiary.

The proposed transaction, announced on Monday, will be carried out via a court-approved plan of arrangement. Under the terms, Canadian Gold shareholders will receive 0.0225 of a McEwen common share for each Canadian Gold share, representing an offer price of C$0.35 a share – a 26% premium to the 30-day volume-weighted average price as of July 25. Upon closing, Canadian Gold shareholders will own approximately 8.2% of the combined company.

Canadian Gold’s primary asset is its 100% interest in the Tartan mine, a high-grade former gold producer in Manitoba with established infrastructure and near-term restart potential. The company also holds greenfield exploration assets in Ontario and Quebec.

"I am enthusiastic about the Tartan mine for several reasons. First, it is a high-grade gold deposit with strong exploration potential in Canada. Second, the existing infrastructure, including the mine ramp, roads, and power, provides an opportunity to restart operations within a relatively short timeframe. Third, Manitoba stands out as one of the world's premier mining jurisdictions, offering a skilled workforce, low-cost renewable energy, and attractive mining tax credits. Additionally, the Tartan mine shares many similarities with our Fox Complex, enabling us to leverage our internal expertise and resources to maximize its potential," said McEwen chairperson and chief owner Rob McEwen.

Canadian Gold chairperson Peter Shippen said: “I’d like to thank Mr McEwen, McEwen and all our shareholders for the support of Canadian Gold over the past several years. We believe that this acquisition by McEwen is a fantastic result for our shareholders as we will benefit from a broader portfolio of high-quality assets.”

The companies expect to finalize a definitive arrangement agreement outlining the full terms. Completion of the deal remains subject to customary conditions, regulatory and court approvals, and shareholder votes.

Canadian Gold shareholders will vote at a special meeting expected by year-end. The transaction will require approval by two-thirds of votes cast and a majority of minority shareholders, excluding shares held by McEwen and Rob McEwen.

To meet NYSE rules, Rob McEwen will not receive more than 1% of newly issued McEwen shares without prior shareholder approval. Any excess will be settled in cash.

The LoI includes a C$2.2-million break fee payable to McEwen under certain conditions, as well as customary non-solicitation and superior offer provisions.

Independent special committees from both boards have approved the transaction following legal and financial review. Directors with conflicts - including Rob McEwen, Ian Ball, Alexander McEwen, and Jim Downey - abstained from voting.

Formal fairness opinions and valuations are being prepared by the companies’ independent financial advisers. 

The Tartan mine produced 47 000 oz of gold from 1987 to 1989 and includes a ramp to 320 m below the surface, road access, and power infrastructure. Canadian Gold recently expanded its property holdings along a 29.5-km strike zone, more than tripling its original footprint.