ATAC Resources in Play
ATAC Resources (ATC.V) put out a press release today which “acknowledged receipt” of an unsolicited, non-binding offer for all its shares at $0.12 from its neighbour, Victoria Gold.
“ATAC responded on January 19, 2023, that it did not believe the Offer fully captured the significant value of ATAC, including the district-scale precious and critical metals potential of its Rackla Gold Property ("Rackla") and ATAC's other properties in the Yukon and British Columbia.”
Which counts as a soft “no” given the next sentence, “ATAC indicated that it was willing to engage in further discussions with Victoria related to a transaction that more fairly valued”. ATAC went on to say, “Following receipt of the Offer, ATAC directed its financial advisors to engage other parties to evaluate alternatives to maximize value for shareholders, and discussions are ongoing.”
The Rackla Gold property stretches for miles in some of the most beautiful country I have ever seen. (That’s the Rackla camp above.) And, yes, there is gold in them thar hills. “Work on its ~1,700 km2 Rackla Gold Property in Yukon has resulted in the Osiris Deposit Indicated Resource of 732,000 oz of gold at 4.12 g/t (in 5.5 Mt) and Inferred Resource of 1,044,000 oz of gold at 3.47 g/t (in 9.4 Mt), the Tiger Deposit Measured & Indicated Resource of 464,000 oz of gold at an average grade of 3.19 g/t (in 4.5 Mt), a positive Preliminary Economic Assessment for the Tiger Gold Deposit (Pre-tax NPV of $118.2M and IRR of 54.5%), and numerous early-stage gold and base metal discoveries.”
There is about 4 million dollars in working capital in the Treasury. ATAC’s management, led by Graham Downs, has proven itself over the years as the company has proven up ounces and weathered the difficult junior resource market.
Victoria Gold (VGCX.T), led by John McConnell, operates the largest gold mine in the Yukon. The Eagle Mine produced a little over 150,000 ounces of gold in 2022. It is heading towards a 200,000 ounce per year production target. It is exploring to extend its mine life out towards 2040.
Victoria’s press release, terminating its offer for ATAC has the following quote from McConnell, “With our demonstrated track record permitting, financing, constructing and operating the Eagle Gold Mine in Yukon, we believe that we can add value to ATAC’s portfolio which would benefit shareholders of both companies. Our offer is more than reasonable given that, although we see opportunities at ATAC’s properties, we are also aware that risks lie ahead, including the uncertainty surrounding the advancement of permits at the Rackla Gold Property. We will not be increasing our offer consideration. We are disappointed our offer has not been taken to ATAC shareholders and we hope that ATAC’s Board of Directors will reconsider not allowing shareholders to decide the outcome for their company.”
Now all of this may read as a bit “inside baseball” but it is also, perhaps, the kickoff for a junior market consolidation.
Victoria Gold has a market cap of 607 million dollars, ATAC has a market cap, despite a run-up around the Victoria Gold offer, of less than 20 million dollars. Bambi meets Godzilla in the Yukon.
But, I suspect, knowing the two men and the two companies, it is not at all like that. ATAC is severely undervalued - as are most juniors at the moment. Part of that is “the market”, part of it is that the Rackla property is an essentially stranded asset. A couple of years ago, a road proposal into the Rackla property, which was widely regarded as pretty much a sure thing, was turned down by the Yukon Government in 2020.
This clobbered ATAC and, of course, COVID did not help. Shares went from a high of over $0.30 in October of 2020 to $0.06 when Victoria made its offer in early January 2023.
(**PURE SPECULATION**) I suspect this offer was genuine but that McConnell was well aware that he was low-balling ATAC. It was non-binding with no break fee and, according to the press releases, no negative consequence for either company if it was unsuccessful. But it did set a base price for a potentially very valuable set of assets and it put those assets “into play”.
Like most junior explorers, ATAC is significantly undervalued by the market. The new Premier of Yukon, and then Minister of Energy, Mines and Resources, Ranj Pillai stated, “the government hadn't ruled out the road for good, and that ATAC could improve and re-submit its application.
"This is not a full stop on this."
“Fair value” for ATAC is very much a moving target. Bigger companies than Victoria will be alerted by McConnell’s offer. And that may very well have been the game plan.
Downs and McConnell are both huge proponents of the junior resource market and the Yukon. Putting ATAC into play spotlights both the junior market and the Yukon.
Well worth keeping an eye on ATAC if there is an after offer drop. At a guess, Victoria Gold will not be the only suitor.
[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.