Westgold and Karora to Merge in AU$1.23 Billion Deal, Unlocking Value in Australian Mining Sector

Westgold Resources (ASX:WGX,OTCQX:WGXRF) and Karora Resources (TSX:KRR,OTCQX:KRRGF) have inked a deal to merge with the aim of creating a new powerhouse in the gold industry.

"The prize here is Beta Hunt’s gold potential," emphasised Wayne Bramwell, managing director and CEO of Westgold. The combined company will have a production capacity of over 400,000 ounces per year.

“Rarely do you find a gold asset of the quality and potential of Beta Hunt hiding in a nickel belt and drilling is expected to further unlock value at this mine,” he added. “Westgold welcomes the Karora team, shareholders and stakeholders to the Westgold family and looks forward to creating value across two of Western Australia’s most iconic goldfields.”

Westgold is to acquire all of Karora's issued and outstanding common shares through a statutory plan of arrangement.

Karora shareholders will receive 2.524 Westgold fully paid ordinary shares, AU$0.68 in cash and 0.3 of a share in a new company to be demerged from Karora, dubbed SpinCo, for each Karora share held at the closing of the transaction. This equates to about AU$6.60 per Karora share based on Westgold’s April 5 closing share price on the ASX of AU$2.28.

SpinCo will inherit assets including Karora’s existing 22.1 percent interest in Kali Metals (ASX:KM1,OTC Pink:KLIMF), a 1 percent lithium royalty on certain mining interests held by Kali, the right to receive a deferred consideration payment due to Karora relating to the on-sale of the Dumont asset and AU$6 million in cash.

The deal represents a 10.1 percent premium to Karora’s TSX closing share price of AU$5.995 on April 5, and is an 18.9 percent premium to Karora’s 20 day volume-weighted average price on the TSX.

Upon completion of the transaction, Westgold shareholders will possess a 50.1 percent stake in the combined entity, while former Karora shareholders will hold 49.9 percent. The enlarged Westgold is anticipated to boast a market capitalisation of approximately AU$2.2 billion.

Karora Chairman and CEO Paul Huet anticipates that the merger, with an estimated AU$490 million in synergies, will unlock substantial value for shareholders through optimised operations and enhanced profitability.

“With the combination of Westgold and Karora, we are taking the next step by combining two highly complementary, free cash flow generating asset bases in one of the world’s finest mining jurisdictions to create a premier Western Australian mid-tier gold producer,” he highlighted in a press release.

Don't forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.