(Kitco News) - Merger and acquisition activity in the mining sector is picking up as Alamos Gold announces its plan to buy Argonaut Gold in an all-shares transaction valued at $325 million.
The two companies announced the friendly acquisition on Wednesday before the North American equity market open. Under the agreement, Argonaut shareholders will receive 0.185 shares of Alamos and one share of a spinoff company.
“This represents a 34% premium based on Argonaut’s and Alamos’ closing prices on March 26, 2024, on the Toronto Stock Exchange (“TSX”), and a 41% premium based on both companies’ 20-day volume-weighted average prices,” Alamos said in a statement.
Alamos Gold will bring Argonaut’s Magino project into the fold while spinning out its other properties. Argonaut’s assets in the United States and Mexico will be spun out to its existing shareholders as a newly created junior gold producer (SpinCo). SpinCo will own the Florida Canyon mine in the United States, as well as the El Castillo Complex, the La Colorada operation, and the Cerro del Gallo project, located in Mexico, the company said.
According to Alamos, the deal will create one of Canada’s largest and lowest-cost gold mines.
“Combined, Magino and Island Gold mines are expected to produce approximately 280,000 ounces in 2024, and increase to over 400,000 ounces per year at first quartile costs, following the completion of the Phase 3+ Expansion in 2026. The two deposits contain Mineral Reserves of 4.1 million ounces, and total Mineral Reserves and Resources of 11.5 million ounces supporting a mine life of more than 19 years, with significant exploration upside,” the company said in the press release.
“This is a logical and attractive transaction for both companies. The combination of the adjacent Island Gold and Magino mines will immediately unlock tremendous value, with significant longer-term upside through further optimizations of the combined operation, and ongoing exploration success. Both assets complement each other well with large Mineral Reserve and Resource bases, long mine lives, and existing infrastructure that can support the bright future for the larger combined operation. Together, Island Gold and Magino will create one of the largest and most profitable mines in Canada, further enhancing our leading position as a Canadian-focused intermediate gold producer,” John McCluskey, President and CEO of Alamos Gold, said in a prepared statement.
Richard Young, President and CEO of Argonaut Gold, said the deal provides solid benefits for his company’s investors.
“After considering a broad range of alternatives, we believe this Transaction provides a unique opportunity to place Magino in the hands of a well-capitalized and well-run company, who will be able to realize significant synergies given the proximity of the adjacent Island Gold Mine. We believe with adequate capital and an optimal expansion at Magino, the mine will deliver significant value to all stakeholders. We are grateful to our team at Magino for their significant contribution and hard work during mine and mill ramp-up. Similarly, we thank our exceptional teams in Mexico and Nevada for their continued hard work throughout the years,” he said in a prepared statement.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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