Agnico, Kirkland agree to golden merger
Merged company will produce 3.4 million oz of gold this year; have a market cap of US$23 billion at current share prices North of 60 Mining News – October 1, 2021
Last updated 10/7/2021 at 2:44pm
Agnico Eagle Mines Ltd. and Kirkland Lake Gold Ltd. have announced plans to merge into a major mining company slated to produce 3.4 million ounces of gold this year.
With similar market capitalizations and gold production profiles in Canada and other politically stable jurisdictions, the deal is considered a merger of equals that would create a company with a market cap of around US$23 million based on a slight drop in share prices of both companies following the merger announcement.
"The transaction represents a true merger of equals, with the business of both companies to benefit from the significant financial strength of the merged company, the extensive pipeline of development and exploration projects to drive future growth, and the potential to realize significant operational and strategic synergies along the Abitibi-Kirkland Lake corridor," said Kirkland Lake Gold President and CEO Tony Makuch.
Under the agreement, Kirkland Lake Gold shareholders will receive 0.7935 Agnico Eagle shares for each Kirkland Lake Gold share held. Thus, upon closing, existing Agnico Eagle will own roughly 54%, and Kirkland Lake Gold shareholders will own approximately 54% of the new Agnico Eagle.
"This merger starts a new chapter in Agnico Eagle's 64-year history and creates the leading low risk global gold company with growing production, low costs and strong ESG (environmental, social, and governance) leadership," said Angico Eagle Mines President and CEO Sean Boyd.
The companies said the merger will solidify the new Agnico Eagle as Canada's leading gold producer, expected to produce roughly 2.5 million oz of gold this year from the combined portfolio of mines in Ontario, Quebec, and Nunavut.
This Canadian gold production profile is supplemented by Kirkland's Fosterville Mine in Australia and Agnico Eagle's Kittila Mine in northern Finland, as well as its Pinos Altos and La India operations in northern Mexico.
"The deal creates an industry leader with a dominant position in the Canadian market that is deserving of a premium valuation and is poised to generate superior long-term shareholder value going forward," said Makuch.
This value generation is expected to be especially high in the Abitibi-Kirkland Lake corridor, where Agnico's Goldex Mine and Kirkland's Detour Lake and Macassa mines are located. The merging of these gold-producing assets in northern Ontario is expected to unlock significant operational and strategic synergies with an estimated pre-tax value of roughly US$2 billion over an initial 10-year-span.
The merger also brings together a robust pipeline of growth projects and exploration opportunities. Situated in existing mining camps, these exploration projects are expected to drive manageable, low-risk, high-return production growth over the coming decade.
On closing, the combined company will continue to be operated under the new Agnico Eagle brand and headquartered at Agnico Eagle's existing head office in Toronto, Ontario. The gold producer will be led by a team that brings strengths from both companies.
The key senior management team of new Agnico Eagle will include Sean Boyd as Executive Chair; Tony Makuch as CEO; Ammar Al-Joundi as president; and Jeffery Parr as vice-chair.
Jamie Sokalsky will be the lead director of a 13-person board that will include seven directors from Agnico Eagle and six from Kirkland Lake Gold.
"The transaction creates a company with a strong platform of people, assets and financial resources to continue to build and operate a long term sustainable and self-funding business," said Boyd. "Kirkland Lake is an excellent cultural fit with Agnico Eagle, and we look forward to working together to further grow our business through exploration, mine development and optimization of our high-quality asset base."
It is a unique 'strength-on-strength' transaction that combines the two global gold producers with the best track records for increasing per share value," Makuch added.