Canada's Kirkland Lake Gold yesterday struck a deal to buy Australia's Newmarket Gold for about C$1 billion ($764 million) in stock, in order to create a new mid-tier gold company.
Under the terms of the deal, existing shareholders of Newmarket will receive 0.475 for every share of Newmarket. The exchange ratio is a premium of 9.4 per cent, which implies a consideration of C$5.28 per Newmarket common share based on Kirkland's closing price yesterday.
The implied equity value is C$1.01 billion.
Post closing, Kirkland Lake Gold and Newmarket shareholders will own approximately 57 per cent and 43 per cent of the combined company, respectively.
The combined company, to be renamed Kirkland Lake Gold, will have a market cap of around C$2.4 billion and produce over 500 koz [thousand ounces] of gold annually.
Kirkland operates its flagship Macassa Mine Complex in Kirkland Lake gold camp, as well as the Holt, Holloway and Taylor gold mines located in northeastern Ontario.
With the addition of Newmarket's Fosterville Gold Mine located in the state of Victoria, Australia and its other gold producing Cosmo and Stawell mines, the targeted gold production of the combined company will be over 500 koz for the full year ended 2016, Kirkland said in a statement.
Tony Makuch, president and CEO of Kirkland, said, "The combination with Newmarket is a very attractive opportunity for our shareholders . ………… We see several opportunities to grow this company within the expanded portfolio, where the combined teams will have the financial and technical capabilities to execute on our progressive growth strategy."
''The Transaction with Kirkland Lake Gold accomplishes Newmarket's goal of becoming a quality, low cost +500,000 ounce per year gold producer while providing our shareholders with an immediate premium on their shares. 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,'' said Douglas Forster, president and CEO of Newmarket.