(Adds details on transaction and operations, comments from
executives on conference call, stock prices)
By Susan Taylor
TORONTO, Sept 29 Canada's Kirkland Lake Gold
will acquire Australian miner Newmarket Gold
for about C$1 billion ($764 million) in stock, creating a
mid-tier producer poised to grow, the companies said on
The transaction is somewhat of an outlier, as gold mining
executives say the rising price of bullion has made acquisitions
costlier for a sector focused on financial discipline.
The combination makes "something we can build from,"
Kirkland Lake Chief Executive Officer Tony Makuch said on a
conference call. Kirkland Lake will hold 57 percent of the new
company, which will have the same name, and Newmarket
shareholders will get 43 percent.
Shares of Kirkland Lake fell 6.5 percent to C$10.39 on the
Toronto Stock Exchange after the deal was announced, while
Newmarket gained 0.8 percent to C$4.87.
The transaction comes just 10 months after Kirkland Lake
acquired fellow Canadian gold miner St Andrew Goldfields for
about C$178 million in stock, creating an Ontario-focused
producer with four mines and two mills.
The new Kirkland Lake will operate seven underground mines
and five mills, producing more than 500,000 ounces of gold in
Output will be anchored by Kirkland Lake's Macassa and
Taylor mines in Ontario and Newmarket's Fosterville mine in
Victoria, Australia. Exploration around existing sites is
expected to drive production growth, said Makuch.
Management said the combined company, with a market
capitalization of about C$2.4 billion, would get increased
analyst coverage and valuation.
"We see significant upside here on valuation," Newmarket CEO
Doug Forster said on the conference call. "That's really one of
the motivations for us."
Newmarket shareholders will receive 0.475 shares of the
combined company for each share held. The companies said the
deal valued Newmarket at C$5.28 per share, a 9.4 percent premium
to its close on Wednesday.
Shareholders of both companies must approve the deal, which
the parties expect to close in the fourth quarter.
Luxor Capital Group, which holds about 15.7 million
Newmarket shares, said in a release that it supported the deal.
Foster said the deal also had the support of Canadian fund
manager Eric Sprott, Kirkland Lake's non-executive chairman with
stakes of about 6.7 percent in that company and 15 percent in
Newmarket Gold. Sprott will be chairman of the combined company.
($1 = 1.3091 Canadian dollars)
(Additional reporting by Arathy S Nair in Bengaluru; Editing by
Lisa Von Ahn)