Orca Gold deal falls on deaf ears: Perseus and Resolute dragged lower on negative market sentiment

The market appears to have displayed a dislike to this morning’s news that Perseus Mining (ASX: PRU) has agreed to pay CAD$17.5m for a 15% interest in TSX-listed Orca Gold Inc from Resolute Mining (ASX: RSG) with both stocks down -1.36% and -5.08% in early afternoon trade.

Orca’s key assets include a 70% interest in the Block 14 Gold Project (“Block 14”) in northern Sudan and a 31.5% interest in Montage Gold Corp (“Montage”), which owns the Koné Gold Project in northern Côte d’Ivoire.

Prior to the Resolute share acquisition, Perseus had been in exclusive discussions with Orca, subject to due diligence and other considerations, about a possible change of control transaction whereby Perseus would acquire all the outstanding securities of Orca.

Two highly prospective assets

Perseus management believe Orca potentially provides the gold miner with exposure to two highly prospective assets with significant resource bases.

Management also note that Orca assets are consistent with Perseus’ strategy of building a platform of long life, highly profitable African gold assets, namely in Ghana and Côte d’Ivoire.

Coinciding with today’s announcement, Perseus has also agreed to provide Orca with a US$5.0m short term loan facility, which Orca plans to use for both working capital and further exploration and development activities at Block 14.

Value accretive

Perseus’s Managing Director and CEO Jeff Quartermaine believes the acquisition of the 15% interest in Orca provides Perseus with a pivotal position in Orca from which to further evaluate an exciting potential growth opportunity.

Perseus recently achieved an annualised gold production rate of 500,000 ounces of gold per year from its three existing operating mines.

"While it expects to be able to maintain this level of production based on exploration success around its existing gold mines, we are always seeking to identify value accretive inorganic growth opportunities,” Quartermaine noted.

"We believe that Orca could represent such an opportunity."

Gold one of the worst performing sectors

Despite the market’s cold shoulder to today’s announcement, both gold stocks recently posted fairly positive trading updates.

For example, on 20 January Resolute Mining (RSG) slightly increased gold production over the December 2021 quarter, and a day earlier Perseus confirmed resource upgrade potential at Yaouré gold mine.

However, sentiment towards gold stocks at large has not been good, with the recent dip in prices making gold one of the market’s worst performing sectors.

Note the All Ord Gold's underperformance, relative to the broader market.