Richmont shareholders will receive 1.385 Alamos shares for each Richmont share held, the company said on Monday (September 11). That implies consideration of C$14.20 and is a 22-percent premium on Richmont’s share price at close of day on Friday (September 8).
The Island gold mine in Ontario is Richmont’s key asset, and as a result of the takeover, Alamos’ output is expected to jump to 500,000 ounces of gold in 2017. Once the transaction is complete, nearly 60 percent of the company’s production will come from Canada.
“The Island Gold Mine is a high quality asset in every respect. We see excellent potential for reserve and production growth from one of the highest grade, lowest cost gold mines in Canada,” John McCluskey, president and CEO of Alamos, said in a statement.
Alamos currently operates three producing mines in North America. Those are the Young-Davidson mine in Northern Ontario, Canada, and the Mulatos and El Chanate mines in Sonora State, Mexico. The company also has development projects in Canada, Mexico, Turkey and the US.
The takeover is expected to close in November, once shareholders approve the transaction. Upon completion of the deal, existing Alamos and Richmont shareholders will own around 23 percent of the company. If the deal doesn’t proceed, the companies have agreed to a reciprocal $35-million break fee.
In a separate Monday transaction, Richmont announced that it will sell all of its Quebec assets to Monarques Gold (TSXV:MQR). In return, it will receive a 19.9-percent equity stake in the corporation, which will transfer to Alamos after the takeover is closed. Richmont’s Quebec assets include the Beaufor mine, the Camflo mill and the Wasamac development project.
As of 1:00 p.m. EST on Monday, shares of Alamos were down more than 14 percent, trading at C$8.72 in Toronto and $7.16 in New York. Meanwhile, shares of Richmont surged more than 3 percent, trading at C$11.93 in Toronto and $9.85 in New York.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.