The Detour Lake mine site Credit: Detour Gold
TORONTO – Kirkland Lake Gold has announced that it has entered into a definitive agreement to acquire all of the outstanding shares of Detour Gold.
The transaction would exchange each Detour share for 0.4343 of a Kirkland Lake share, an implied consideration of $27.50 per Detour share based on TSX closing on Nov. 22. This would be a 24% premium to Friday’s close and a 29% premium based on the 20 day weighted average price of the companies. The equity value of the transaction is an estimated $4.9 billion.
Pre-tax synergies are estimated at US$75 million to US$100 million a year. Kirkland Lake shareholders would own 73% of the pro forma company.
The Detour Lake mine, 300 km northeast of Timmins, is expected to produce 570,000 oz. to 605,000 oz. of gold this year at all in sustaining costs of US$1,175 to US$1,250 per ounce.
Kirkland Lake forecasts production of 950,000 oz. to 1 million oz. in 2019 at AISCs of US$520 to US$560 per ounce. The company has operations in Canada and Australia with the Macassa mine in Kirkland Lake expected to produce 240,000 oz. to 250,000 oz. this year with an additional contribution from the Holt complex in Matheson, Ontario. Fosterville in Australia is expected to contribute 570,000 oz. to 610,000 oz. in 2019.
Detour holds a total land package of 1,040 sq. km along the north part of the Abitibi greenstone belt. Following a reorganization of its board of directors in 2018, Detour announced a number of changes to its management team and a new board chair earlier this year.
The transaction requires at least a 66.67% approval of the votes cast by Detour shareholders. Officers and directors of Detour have entered into agreements to vote their shares in favour of the transaction. Approval for the associated issue of Kirkland Lake shares is based on the majority of votes cast with officers and directors entering into agreements to vote in favour of the transaction.
There are associated termination fees of US$148 million payable to Kirkland Lake and US$202 million payable to Detour under certain circumstances.
Shareholder meetings and closing of the transaction are expected by the end of January 2020.
For more information, visit www.KLGold.com or www.DetourGold.com.