A headframe at AuRico's Young-Davidson mine which is expected to produce over 140,000 ounces of gold this year (Photo: AuRico Gold)

A headframe at AuRico's Young-Davidson mine which is expected to produce over 140,000 ounces of gold this year (Photo: AuRico Gold)

Carlisle Goldfields (CGJ.TSXV) updated investors on two recently announced transactions involving the junior developer; one a strategic investment and joint venture with AuRico Gold and the other being an all-cash takeover proposal by London-listed Nordgold.

After mulling over the request by Nordgold which would allow them to offer $0.096 per share in cash to each shareholder of Carlisle (representing a 140% premium), Carlisle's board decided to reject the proposal.  Carlisle says it believes that "the transactions with AuRico represent the best option for the company and its shareholders."

On November 11, AuRico proposed a strategic investment into Carlisle as well as a substantial joint venture agreement.

Under the terms of the deal, AuRico would subscribe for 70.6 million shares of Carlisle at $0.08 per share (100% premium to the prior day's close).  Additionally, AuRico would have the right to earn an initial 25% interest in the Lynn Lake gold camp in Manitoba for a cash payment of $5 million.  They could earn another 35% by spending at least $20 million on the project over the next 3 years including delivering a feasibility study.  AuRico will operate this joint venture and will also be entitled to two seats on Carlisle's board.

With Carlisle's rejecting the all-cash offer from Nordgold, the TSX has now approved the $5.65 million private placement by AuRico and that is now closed.

Once AuRico earns its initial 25% interest, Carlisle will have nearly $11 million cash, or $0.03 per share (after accounting for the issuance of the 70.6 million shares to AuRico).  The company's shares closed today down half a penny to four and half cents (market cap of $14 million).

Although the Nordold offer would represent immediate liquidity to Carlisle investors, I think management is doing the right thing in rejecting the outright sale.  Why sell for cash now, when you've essentially funded yourself through feasibility?

Clearly Carlisle is onto something highly prospective in their Lynn Lake gold camp.

Both AuRico and Nordgold  are mid-tier producers (AuRico and Nordgold produced roughly 200,000 ounces and 924,000 ounces of gold, respectively in 2013) and generally these types of companies don't get into an early-stage area unless they believe it has big potential.

Scott Perry, a CA and AuRico's President, referred to the Lynn Lake gold camp as "a compelling, but low risk opportunity."

Based on their 2014 PEA, the Lynn Lake project is expected to produce an after-tax NPV (5%) of $257 million and an IRR of 26% based on $1,100 per ounce gold and initial capital of $185 million.

Read: Carlisle Goldfields Announces TSX Approval for Proposed Private Placement

Related: AuRico joins Carlisle Goldfield's efforts to develop Manitoba's next gold mine

Also: Carlisle questions validity of Nordgold's takeover offer