Agnico Eagle to purchase Kirkland Lake Gold in $13.5 billion inventory deal

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Shares of Agnico Eagle Mines Ltd. and Kirkland Lake Gold Ltd. fell after the 2 Canadian miners introduced a “merger of equals” that provided buyers a decrease deal premium than different gold combos.

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The $13.4 billion transaction, which creates one of many world’s largest gold producers, follows offers among the many world’s largest gold producers which have reshaped the business in recent times, although it provided a extra meager premium than different gold producer takeovers.

Buyers will obtain 0.7935 of an Agnico share for every Kirkland share held, which represents a premium of about 1 per cent over Kirkland’s 10-day quantity weighted common value in Toronto buying and selling, the businesses mentioned Tuesday in a press release. As compared, Newmont Corp.’s takeover of Goldcorp Inc. in 2019 generated a few 17 per cent premium, whereas Kirkland Lake’s buy of Detour Gold Corp. later that yr got here in with a few 24 per cent premium.

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Barrick Gold Corp.’s 2018 takeover of Randgold Assets set the tone of providing low or no premium paid by the customer, whereas mergers of medium or smaller sized gold corporations have traditionally fetched greater premiums.

Agnico shares fell 0.7 per cent to $63.34 at 11:49 a.m. buying and selling in Toronto, whereas Kirkland Lake dropped 7.7 per cent to $51.17 in its largest intraday decline since November.

Agnico’s agreed to mix with Kirkland creates one of many prime gold producers on the earth, with mines and belongings in Canada, Australia, Finland and Mexico and anticipated manufacturing of three.4 million ounces of gold this yr. The deal may herald extra consolidation within the gold business the place buyers search for offers that unlock worth, add long-term worth and platforms to final for a very long time, Agnico Chief Govt Officer Sean Boyd mentioned throughout a convention name with analysts.

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“Each corporations don’t have to do that,” Boyd mentioned through the name. However “strategic rational is sensible and the commercial logic is there,” with a synergy of $2 billion over the following 10 years.

Gold mining reserves and mine lives are shrinking because of years of under-investment in exploration and improvement, whereas producers of the dear metallic face rising manufacturing prices and inflation.

The merged miner will use Agnico’s title and have a board and administration crew drawing from each corporations. Tony Makuch, at present Kirkland’s CEO, will take the highest job as soon as the deal is accomplished, whereas Boyd will turn out to be government chair.

Agnico had shied away from massive offers prior to now, however this deal is “extra about quite a lot of mines and site of mines by way of manageability, fairly than an general ounce quantity,” Boyd mentioned. It’s additionally in regards to the exploration potential the place the merged firm will be capable to develop deposits and lifelong belongings in “good components of the world the place you’ll be able to truly do enterprise.”

Bloomberg.com