QMX Gold (QMX.V) – Merger Arbitrage – 9% Upside

Current Price: C$0.30

Offer Price: C$0.33

Upside: 9%

Expected Closing: late March/early April 2021

Press release

This idea was shared by Thomas.


On the 21st of January mid-tier gold miner Eldorado Gold announced the acquisition of exploration stage mining company QMX Gold. Each QMX share will be exchanged into 0.01523 of Eldorado shares + C$0.075/share in cash. Total consideration amounts to C$132m. Both companies have listings in Canada and the US. Canadian QMX listing is somewhat cheaper and more liquid, however, on IB borrow is available only for the US listing of Eldorado (ticker: EGO). 1m shares are available with a fee rate of 0.43%.

Approval from 2/3rds of QMX shareholders will be required – the meeting will take place in March (the exact date is not announced yet).

Overall, the likelihood of successful closing seems fairly high.


Positive aspects of this trade

  • Eldorado is a relatively large and credible buyer ($2.2bn market cap). They’ve carried numerous acquisitions in the past (up to $2.5bn in size), so this deal is tiny in comparison. Moreover, Eldorado is the largest shareholder of QMX (holds 18%) and owns a mine in the same region where QMX properties are located (Val-d’Or, Quebec). So the buyer is well acquainted both with the target company as well as the geographical region. Strategic rationale naturally makes sense – it will increase Eldorado’s footprint in the area and enhance future growth prospects in Canada (Eldorado’s current mine there has 8 years of mine life remaining). Worth noting that multiple drillings in QMX target locations showed very positive results (exceeded expectations according to the management).
  • Shareholder approval is quite likely. QMX exploration operations are still in the early stages (drillings are ongoing) and any real revenue generation is still far away. Moreover, Eldorado controls a substantial stake in QMX, so hopes for a competing offer should be rather limited. In this context, it’s quite possible that shareholders will take the offer, especially when the major part of it is in stock, which will allow them to participate in further industry tailwinds from the elevated gold prices.
  • EGO liquidity is high and borrows fees are likely remain low until the merger closes.
  • Closing is estimated within 1.5 – 2 months, which would result in substantial IRR for this arbitrage.



Even with the points stated above, the most prominent risk is shareholder approval. Also, mining is one of the more risky industries in terms of M&A breaks. So the chances of merger termination are still present, however, the credibility of the buyer and strategic sense somewhat lowers this risk.


Eldorado Gold

The group has multiple mining assets all over the world:

qmx eldorado portfolio

Together with the rest of the gold mining industry, Eldorado Gold was positively impacted by the surge in gold price last year:

Apparently, the company hasn’t done any significant acquisitions lately. The most recent one was in 2017 – Integra Gold (C$590m). In the past Eldorado was more active in M&A field (see here). A notable one is the merger with European Goldfields in 2012 (for C$2.5bn).



QMX is a junior exploration company focused on exploring its assets in Val d’Or, Abitibi District of Quebec.

The company’s presentation can be found here.

Major shareholders:

qmx shareholders


10 thoughts on “QMX Gold (QMX.V) – Merger Arbitrage – 9% Upside”

  1. Hey, interesting idea. Can you please elaborate a bit more on “mining is one of the more risky industries in terms of m&a breaks”? To me this is not obvious

  2. How does the US version QMXGF factor into this equation? Their share price is .2185. Do they receive 7.5 cents in cash and .01523 EGO shares as well?

  3. What happens if you go long the Canadian stock QMX.V and short EGO in the United States? Will the shares automatically cancel each other out?

    • I’m skeptical very many folks here got 9%. I was very patient with fills and am going to get 6% on small size. Curious how others did and if anyone is willing to share some tactics to get a better price on these little guys. Looking to learn.

  4. Still waiting on my EGO shares with this one. Closed 12 days ago now. Anyone else?

    • Thanks. I got them today. Seems they rounded out the partial shares of EGO for themselves, I expected to get the difference in cash. What’s the normal?


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