Kirkland Lake Gold (ASX:KLA) - President & CEO, Tony Makuch
President & CEO, Tony Makuch
Source: The Melbourne Mining Club
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  • Kirkland Lake Gold (KLA) is the latest to join this year’s merger spree after announcing a deal with Toronto Stock Exchange-listed Agnico Eagle Mines
  • Kirkland Lake shareholders will receive 0.7935 of an Agnico Eagle share for each Kirkland share they hold
  • The new company will continue under the name Agnico Eagle Mines Limited with a market capitalisation of roughly US$24 billion (A$33.12 billion)
  • The transaction is expected to close in either December this year or the first quarter of 2022
  • KLA is trading 8.50 per cent down at $54.90 per share at 1:40 pm AEST

Kirkland Lake Gold (KLA) is the latest to join this year’s mega-merger spree, announcing a deal with Toronto Stock Exchange-listed Agnico Eagle Mines to create a new gold mining behemoth.

According to this morning’s announcement, Kirkland Lake shareholders will receive 0.7935 of an Agnico Eagle share for each Kirkland share they hold.

While the buyout price represents a negligible premium to Kirkland’s 10-day volume weighted average share price as of Friday last week, it will nevertheless give way to a combined company. This will continue under the name Agnico Eagle Mines Limited and have a market capitalisation of around US$24 billion (A$33.12 billion).

President and CEO of Kirkland Lake Tony Makuch said the deal was a unique “strength-on-strength” transaction that combined two global gold producers with significant track records for increasing per-share value.

“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 realise significant operational and strategic synergies along the Abitibi-Kirkland Lake corridor,” he said.

Upon completion of the merger, the company is estimated to have US$2.3 billion (A$3.17 billion) in liquidity, a mineral reserve base of 48 million ounces of gold — which has doubled over the past 10 years — and a significant pipeline of exploration and development projects to drive “sustainable, low-risk growth”.

Many of these projects exist within the Abitibi-Greenstone Belt in northeastern Ontario and northwestern Quebec. By consolidating their presence in the region, the two companies are expecting “significant value creation opportunities through synergies and other business improvement initiatives”.

Not only that, but the merged company will enjoy being the only gold producer in the rugged but potentially lucrative territory of Nunavut, Canada, and has other assets dotted across Australia, Finland and Mexico.

The transaction is expected to close in either December this year, or the first quarter of 2022, after which the company will be led by a combined board and management team.

“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 leadership,” Agnico Eagle CEO Sean Boyd said.

“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.”

This year has been a record period for mergers and acquisitions globally. According to data from Refinitiv, the total value of pending and completed deals has already hit US$3.6 trillion (A$4.97 trillion) by mid-August, surpassing 2020’s full-year tally of US$3.59 trillion (A$4.95 trillion).

Earlier this month, South African miner AngloGold Ashanti agreed to buy Canadian-listed Corvus Gold in a deal valuing the exploration firm at C$570 million (A$621 million).

But it’s not just mining. The US merger between AT&T’s Warner Media and Discovery is the biggest so far, with the enterprise value of the combined company standing at more than US$120 billion (A$166 billion).

“The M&A momentum points to a fundamentally strong market looking ahead,” global vice chair at Ernst & Young Andrea Guerzoni said.

“This pace of dealmaking could continue for the next 18-24 months, with new financing solutions and sectors driving activity.”

KLA is trading 8.50 per cent down at $54.90 per share at 1:40 pm AEST.

KLA by the numbers
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