Barclays-Fresnillo Probe Gold acquisition-stepping outside Mexico at an attractive valuation-20251103

Acquisition appears a cheap entry into a prospective gold province with exploration/resource upside in a tier 1 mining jurisdiction. We expect FRES to focus on scaling up the resource and NPV of the project with possible FID towards the end of the decade. Lower H2 special dividend likely.

Fresnillo announced the proposed acquisition of Probe Gold (PRB CN, not covered) for US$560m in cash (C$3.65/sh). PRB is an exploration company with two assets in Canada. PRB’s principal asset is a 100% interest in the Novador gold deposits in Quebec, which hold M&I resources of 6.4moz gold @ 1.12g/t plus 1.55moz inferred. The resources are spread across four principal mesothermal vein-type deposits in close proximity to one another across a 435km 2 land package, exploitable via both open pit and underground. PRB owns a further four satellite deposits <50km of Novador, in the Val D'Or district, with inferred resources of 2.05moz @ 2.1g/t. In addition, Probe also has an interest in an 1800km 2 pre-resource exploration land package called Detour Quebec, adjacent to Canada's biggest gold mine, Detour Lake.