Eldorado currently holds about 13 percent of Integra, a gold exploration company, and plans to acquire the rest through an offer that is a 52-percent premium on Integra’s share price at close of trading on Friday (May 12). In total, the transaction is valued at about C$590 million.
“From previous experience of building and operating gold mines in Canada, I am excited about Eldorado’s entry into the Eastern Abitibi region of Canada,” Eldorado President and CEO George Burns said in a statement.
Integra’s main asset is the high-grade Lamaque South gold project, located in Val-d’Or, Quebec. It has the potential to produce an average of 123,000 ounces of gold annually over 10 years, according to a preliminary economic assessment completed in February.
Shareholders at Integra are being offered a combination of cash and Eldorado stock valued at about $1.21 based on the company’s closing share price on Friday. Once the deal is complete, current Eldorado and Integra shareholders will own approximately 10 percent of Eldorado’s stock.
“We view this transaction as a win-win for all stakeholders. Our supportive shareholders realize immediate value for their investment in Integra, and can maintain exposure to our world-class asset as Eldorado continues the rapid advancement of Lamaque,” Stephen de Jong, President and CEO of Integra, commented in a press release.
Credit Suisse has called the Integra transaction “positive” for Eldorado, which now has assets in Europe and South America. The firm praised the company’s “diversification into Canada … and addition of a low capital intensity and low cost asset with high exploration upside.”
Similarly, CIBC analysts believe Integra is a good strategic fit for Eldorado, and noted that the company will be able to “mov[e] investment dollars from lower IRR projects such as TZ/Certej and into the higher IRR Lamaque project.” Eight Capital noted that those projects, along with Eldorado’s Skouries and Perama Hill/Sapes projects, may now be developed more slowly.
Eldorado’s acquisition comes after the company shelved expansion plans for its flagship Kisladag mine in Turkey and put off a development decision on a project in Brazil, citing lower gold prices.
Eldorado also left China after 11 years of operations in 2016, when it sold its stakes in two mines and a development project to Yintai Resources (SZSE:000975) for $600 million.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.