More reports on: Mining

OceanaGold acquires Romarco Minerals for C$856 mn

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31 July 2015

Canadian-Australian gold and copper miner OceanaGold Corp has agreed to buy US-focused gold developer Romarco Minerals Inc for approximately C$856 million ($658 million) in a consolidation move aimed to create the world's lowest cost gold producer.

Toronto-based Romarco's flagship project is its Haile gold mine in South Carolina which is under construction with first production anticipated by the end of 2016.

The mine is estimated to produce around 540,000 ounces of gold annually by 2017 at an all-in sustaining cost of less than $600 an ounce, significantly lower than the $730-$780 an ounce at Canadian giant Barrick Gold's low-cost gold mines.

Prices of gold has fallen over 40 per cent from their 2011 highs of around $1,890 an ounce to $1,083 yesterday.

In the past one year, prices for the yellow metal have dropped 18 per cent, and global gold producers are looking for ways to cut costs and capital spending to compete in the market.

Under the terms of the all-stock transaction, Romarco shareholders will receive 0.241 OceanaGold stock for each share they own representing C$0.68 per Romarco share and a 73-per cent premium to the closing price of the share on 29 July 2015. The exchange ratio implies a valuation of about $856 million for Romarco.

Further to the closing of the deal, OceanaGold shareholders will own a majority 51 per cent of the combined entity, while the remaining 49 per cent will be held by Romarco shareholders.

OceanaGold managing director and CEO Mick Wilkes said, ''We believe the addition of the low-cost, long-life Haile Gold Mine provides such an opportunity while underpinning an industry leading business.''

''The combination of the sector low cost profile with significant free cash flow generation, diversified production and a pipeline of organic growth opportunities form the lowest cost gold producer globally,'' he further stated.

Diane Garrett, president and CEO of Romarco said the transaction with OceanaGold represents a logical business combination that will create a premier intermediate gold producer with a diversified asset base, underpinned by a solid balance sheet.

OceanaGold, with its offices in Vancouver and Melbourne, operates New Zealand's largest gold mining operation Macraes Goldfield in Otago and Reefton mine in the southern island. The company is in the process of acquiring the Waihi gold mine in the northern island.

Besides, the miner has its flagship gold-copper operation in Philippines, the Didipio mine in Luzon Island. OceanaGold is listed on Toronto, Australian and New Zealand stock exchanges.

The company, targets to produce 295,000-335,000 ounces of gold and 21,000-23,000 tonnes of copper in 2015.

The agreement provides for a break fee of C$34 million to Romarco under certain circumstances.

National Bank Financial Inc is acting as the exclusive financial advisor to OceanaGold while Romarco is advised by RBC Capital Markets in this transaction.





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