Kirkland Lake Gold Buys Newmarket Gold for $1 Billion

On Thursday (September 29), it was announced that Kirkland Lake Gold (TSX:KLG) and Newmarket Gold (TSX:NMI) entered into definitive agreement to create a mid-tier gold company.
The deal, valued at approximately $1 billion, will have Kirkland Lake Gold taking over Newmarket Gold Gold to create a low-cost producer with its operations in Canada and Australia, according to the Financial Post.
Together, the combined company–which will go by Kirkland Lake Gold–will have a market capitalization of $2.4 billion with annual gold production of over 500,000 ounces.
Andrew McCreath, BNN Markets Commentator and founder of Forge First Asset Management, said that investors will likely be keen on the deal and the new company.
“This is a deal that is trying to make a stock more interesting to more shareholders … and also to lower the cost of production of the combined entity with a higher production base,” McCreath told BNN.
As set out in Kirkland’s press release, current shareholders of Kirkland and Newmarket will own roughly 57 percent and 43 percent of the newly combined company, on a fully-diluted in-the-money basis.
Tony Makuch, president and CEO of Kirkland Lake Gold said in the press release that the combination of the two companies is a “very attractive opportunity” for its shareholders.
“The potential that exists at Macassa as we continue to access higher grade mineralization in the South Mine Complex at depth will be complemented by Fosterville, a high-grade operation with exceptional successful drilling results,” he said. “We see several opportunities to grow this company within the expanded portfolio, where the combined teams will have the financial and technical capabilities to execute on our progressive growth strategy.”
According to Dundee Capital Markets, the transaction is beneficial to shareholders of Kirkland Lake Gold in a was that diversify and boost production while creating a mid-tier producer with a new operating platform that it suggests has “largely been ignored” by North American gold producers.
The companies are aiming to have the deal closed by the end of 2016.
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