Newmarket shareholders will receive one Kirkland Lake share for every 2.1 shares held, implying a valuation of $C5.28 per Newmarket share, a 22.9% premium to the company’s 20-day volume-weighted average price.
Kirkland Lake shareholders will hold 57% of the enlarged company, which will have a market capitalisation of around $2.4 billion, while Newmarket shareholders will hold the balance.
Both companies are listed in Toronto, but all of Newmarket’s operations are in Australia, while Kirkland’s are in Canada.
The merger combines Kirkland Lake’s Macassa and Holt mine complexes in Ontario with Newmarket’s flagship Fosterville mine in Victoria, as well as the Stawell and Cosmo mines in Australia.
The enlarged Kirkland Lake will produce more than 500,000 ounces of gold per annum at all-in sustaining costs of $US1015 an ounce and have cash of around $C275 million.
Newmarket president and CEO Douglas Forster said the deal achieved the company’s aim of becoming a low-cost, plus-500,000oz producer.
“The combination of our two flagship mines, Fosterville and Macassa, will be the cornerstone of an exciting new mid-tier gold producer with an attractive growth profile and operations in two of the best mining jurisdictions in the world,” he said.
“The high-grade, visible gold-bearing Eagle Structure at the Fosterville mine continues to deliver impressive exploration success leading to record mill grades and increased production and we are confident that Fosterville will remain a high-grade producer for many years.”
Newmarket directors Ray Threlkeld and Maryse Belanger will join the Kirkland Lake board as part of the deal, while Newmarket’s Darren Hall will be president, Australian operations.
Eric Sprott will remain as Kirkland Lake chairman, and recently became Newmarket’s largest shareholder with around a 14% stake.
At Diggers & Dealers last month, Newmarket chief financial officer Robert Dufour told reporters the company was actively looking for deals in Australia and the Americas.
“The ultimate goal here is maximising shareholder value full stop, and if the best way to do that is even a takeover – I can completely understand why someone might want Fosterville in their portfolio, then that’s not an issue,” he said.
“A lot of people say ‘are you guys just deal-makers?’ Well no, we take the operating of these assets seriously but we are looking to build a company and it might be, in a way, contributing the other way as well.”
