Research and Interviews

Combined Creston Moly and Tenajon to create Largest Molybdenum Explorer in North America

Difficult times continue to lead to difficult measures for companies in the resource sector. For many, the solution is mergers and acquisitions. It’s a sensible solution for many because the move can slash costs and improve the likelihood of success.

Creston Moly Corp. (CMS: TSX-V) has announced that it has signed a definitive agreement under which Creston Moly will acquire all of the issued and outstanding shares of Tenajon Resources Corp. (TJS: TSX-V) consideration for the issue of Creston shares on the basis of 0.84 share of Creston for each share of Tenajon. Both boards have unanimously agreed to the terms.

The deal will see two new projects in Creston’s fold, the Ajax Molybdenum Property and the Moly Brook Property. Both projects have existing 43-101 compliant molybdenum resources.

The Ajax Molybdenum Property is 15.76 square kilometres and is located 13 km north of Alice Arm, BC. Tenajon has called this a world-class primary Molybdenum property in the advanced stage of exploration. Ajax is the larger of the two projects by about four times: Moly Brook has inferred and indicated resources that total about 117 million tonnes; Ajax has close to 480 million tonnes. Moly Brook has the added bonus of some low grade copper in the mix while both projects have grades between 0.56% and 0.65% Mo.

At current prices for moly and copper Ajax brings $118 per share and Moly Brook another $34 per share (neither figure includes costs or recovery rates. Check out the calulators at www.shareknow.net to adjust prices, etc.).

This numbers are good news for shareholders and potential shareholders of the company. News of the acquisition did nothing to the company’s share price, likely due to the early stage of the project and the depressed price of molybdenum. Nevertheless, Creston already has the upside of a major deposit in its Creston Molybdenum (and copper) Deposit. The company has a nice looking prefeasibility with an NPV of about $700 million… at higher than present prices, mind you. The company is looking for $15 moly and $1.75 copper, which is reasonable in the not too distant future according to folks like Bart Melek at BMO.

• Creation of a platform for the combined company to become a leading molybdenum development company via organic growth and acquisition opportunities;
• Consolidation of a large reserve and resource base consisting of three projects in favourable geographic locations (Mexico and Canada);
• 100% ownership of the Creston Molybdenum Deposit which has a pre-tax NPV8% of US$503 million at $15/lb Moly and $1.75/lb Cu under an owner mining scenario. Direct cash costs are estimated at $5.74/lb of Mo equivalent under an owner mining scenario;
• 100% ownership of two Canadian development molybdenum deposits, including the Ajax deposit and the Moly Brook deposit, both of which possess significant 43-101 Resource estimates;
• Excellent exploration potential on all three resource projects;
• Strengthened management team with extensive development experience;
• Upon completion of the transaction, the combined company will have approximately 175 million shares outstanding.

Following completion of the Transaction, Bruce McLeod will be appointed as President and CEO, Colin K. Benner will continue to serve as Chairman and Wayne Johnstone will continue serving as CFO. Upon completion of the Transaction, Jonathan George will continue with Creston serving as an advisor to the Board.