Kirkland Lake Gold Inc. (TSX: KLG) and Newmarket Gold Inc. (TSX: NMI) announced Thursday that they have entered into an agreement to merge in an all-stock deal valued at C$1.01 billion.
The merger will create a value of $2.4 billion and produce over 500,000 ounces of gold annually for Kirkland. Existing Kirkland shareholder will receive 0.475 shares on a fully diluted in-the-money basis for each share help for 57% of the merged deal. Kirkland Lake Gold shares will be exchanged at a ratio of 2.1053 Newmarket shares per Kirkland Lake Gold share. The exchange ratio implies consideration of $5.28 per Newmarket share, a premium of 9.4 per cent to Newmarket’s close on Wednesday.
“The potential that exists at Macassa as we continue to access higher-grade mineralization in the South Mine Complex at depth will be complemented by Fosterville, a high-grade operation with exceptional successful drilling results,” said Tony Makuch, president and chief executive officer of Kirkland Lake Gold. “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.”
This is the second Kirkland Lake merger completed this year, as they purchased St Andrew Goldfields in January. This all-stock transaction was valued at C$178 million.
The merger statement said this growth strategy will show a balance sheet of over C$275 million and free-cash flow of C$92 million, in the first half of 2016.
Douglas Forster, president and CEO of Newmarket, said the deal accomplishes Newmarket’s goal of becoming a low-cost producer with more than 500,000 ounces per year while providing shareholders with an immediate premium.
“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.