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Equinox Gold, Leagold merger to create a top North American gold producer

Kitco News

(Kitco News) - Equinox Gold Corp. (NYSE American: EQX, TSX: EQX) has agreed to acquire Leagold Mining Corp. (TSX: LMC) in an all-stock deal to create a mining company expected to produce 1 million ounces of gold within two years, the companies announced Monday.

The transaction was described as an “at-market merger,” with the combined company continuing as Equinox Gold and to be headquartered in Vancouver.

Leagold shareholders will receive 0.331 of an Equinox share for each Leagold share held, implying at-market consideration of C$2.70 per Leagold share, based on closing prices of both companies on the Toronto Stock Exchange on Friday. At closing, existing Equinox Gold and Leagold shareholders will own 55% and 45% of the merged company, respectively.

A joint announcement outlining the merger said gold production is projected at 700,000 ounces in 2020, then increasing to 1 million ounces in 2021 and beyond, based on analyst consensus estimates. The company will have six operating mines in the U.S., Mexico and Brazil. Officials said operating and administrative synergies will be in excess of $10 million annually.

Equinox Chairman Ross Beaty will be chairman of the board of the merged company, which will have four members from each producer. The management team will be led by Neil Woodyer as chief executive officer, Christian Milau as executive vice president for corporate, Attie Roux as chief operating officer and Peter Hardie as chief financial officer. Woodyer is currently CEO of Leagold, and Milau is CEO of Equinox.

There will be a concurrent $670 million financing package, including an at-market $40 million equity investment from Beaty, a new $130 million convertible debenture issued to Mubadala Investment Co. and $500 million in underwritten commitments from a syndicate of lenders to refinance existing credit facilities.

"This merger will create one of the world's largest gold companies operating entirely in the Americas,” Beaty said. “In addition to having strong financial and operating metrics, our large scale will provide improved liquidity, greater asset and country diversification and a lower risk profile for all shareholders.”

Frank Giustra, chairman of Leagold, said the merger will deliver on a promise that his company made to shareholders when Leagold was launched three years ago. This, he said, was “to create a major gold producer in a short time frame in anticipation of a new phase of the gold bull market that started in 2001.”

Giustra said he will step down as chairman and director to focus on philanthropic work but will remain an “enthusiastic shareholder” of Equinox.

Special meetings of Equinox Gold shareholders and Leagold security holders are expected to be held in January. If approved, the transaction is expected to close in the first quarter of 2020.

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