PNG GOLD, which wholly owns two gold exploration licences on Normanby Island, in Papua New Guinea’s Milne Bay Province, is set to exit the market through a reverse takeover with a Canadian oil re-refiner.

The company is following the lead of Goldminex Resources, which moved to acquire financial software company Enzumo Group in 2014, and Quintessential Resources, which acquired technology venture accelerator Yonder & Beyond through a back door listing.

In an announcement, PNG Gold said it had been working to minimise its capital expenditure in 2014, in light of what it said were unfavourable equity markets for resource companies.

“(PNG Gold) is not currently conducting or planning additional exploration drilling at its properties,” it said – those being the EL 1091 Normanby and the EL 1069 Sehulea properties.

The company took an impairment loss of C$30 million in its third quarter results in 2013 – the most recent market update available.

“Over the past several months, PNG Gold has been considering various alternatives to increase shareholder value, and believes that the proposed business combination with VeroLube represents significant opportunity,” PNG Gold said.

VeroLube owns a re-refining technology called ReGen which it says produces high yields of high quality hydrocarbon products from used oils, having acquired it from PetroTex Hydrocarbons in 2013.

The company aims to develop and operate a used oil re-refining plant, potentially expanding across the globe and developing new re-refineries with joint venture partners, as well as licensing technology to third parties.

Under the deal, PNG Gold will consolidate its existing 131.2 million shares on a one for ten basis, leaving it with a total issued capital of 13.1 million shares before moving to acquire VeroLube’s existing issued capital.

The acquisition will see the consolidated PNG Gold swap new shares in its consolidated capital with VeroLube’s existing 51.5 million shares on a one for one basis.

In addition, all warrants of VeroLube will be exchanged for equivalent securities of PNG Gold.

Once the deal is completed, which is expected to be by 30 June 2015, PNG Gold will change its name to VeroLube and carry on VeroLube’s present business.

The board of the new company will hold three directors appointed by PNG Gold and four from VeroLube on completion of the transaction, which relies on regulatory and shareholder approval.

PNG Gold chairman Greg Clarkes currently holds 2.5 million, or 5% of VeroLube, the company said, adding that this was currently the only link between the two groups.

PNG Gold has previously loaned VeroLube about C$500,000, which is repayable on demand any time after 30 March and which is also convertible into common shares of VeroLube at the rate of C$0.40 per share.

As partial consideration for the loan, VeroLube has agreed to issue 250,000 shares to PNG Gold, and to grant PNG Gold a royalty-free, non-exclusive, perpetual license to use the ReGen process in Canada, Mexico and Central and South America, ahead of the reverse takeover taking place.

PNG Gold must also lend VeroLube an additional C$250,000 to maintain its business as a condition of closing.