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Kirkland Lake Gold Inc. (TSX:KGI) and St Andrew Goldfields Ltd. (TSX:SAS,OTCQX:STADF) announced that they’ve entered into a binding definitive agreement under which Kirkland Lake will acquire all of the outstanding shares of St Andrew.
Kirkland Lake Gold Inc. (TSX:KGI) and St Andrew Goldfields Ltd. (TSX:SAS,OTCQX:STADF) announced that they’ve entered into a binding definitive agreement under which Kirkland Lake will acquire all of the outstanding shares of St Andrew. Together, the two companies will form a “multi-asset, Ontario-focused, intermediate gold producer.”
Highlights of the new company are as follows:
- Diversified production base – Combined entity will operate four mines and two mills in Ontario’s southern Abitibi greenstone belt, one of the world’s most attractive mining jurisdictions;
- Strong financial position and flexibility – Combined entity will have increased financial flexibility through the aggregated positive cash position and anticipated free cash flow;
- Enhanced scale and capital markets profile – Expected to increase analyst coverage, enhance share trading liquidity and appeal to a larger shareholder base;
- Strong production growth profile – Combined entity is expected to produce 260-310 koz gold in 2016 with attractive cash costs between US$600-690/oz gold;
- Exploration opportunity – Combines two companies with significant exploration upside in two historically prolific and underexplored camps, close to existing mine infrastructure;
- Re-valuation opportunity – Combined entity will have diversified production and cash flow, a strong balance sheet, and substantial prospects for significant growth driven by a proven management team, which creates the opportunity for a re-rating more in line with other mid-tier gold producers.
The press release also states:
Under the terms of the Agreement, common shareholders of St Andrew will receive 0.0906 of one common share of Kirkland Lake (the “Exchange Ratio”) for each St Andrew common share held. The Exchange Ratio represents the equivalent of C$0.47 per St Andrew common share, based on the closing price of Kirkland Lake on November 16, 2015. The Exchange Ratio implies a 46% premium based on both companies’ 20-day volume-weighted average prices and a 25% premium to St Andrew’s closing price, both as at November 16, 2015 on theToronto Stock Exchange. The Exchange Ratio implies a total equity value of approximately C$178 million on a fully diluted in-the-money basis.
Upon completion of the proposed Transaction, existing Kirkland Lake and St Andrew shareholders will own approximately 71% and 29% of the combined company, respectively.
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