Alamos Gold and AuRico Gold plan to merge, creating a new, leading intermediate gold producer (MergeCo). The deal, valued at $1.5 billion, combines two complementary asset portfolios, including two gold mines: AuRico’s Young-Davidson mine in Ontario, Canada, and Alamos' Mulatos mine in Sonora, Mexico.
In addition, a new company, to be named SpinCo, will be created to hold AuRico's Kemess project, a 1.5% net smelter return royalty (NSR) on the Young-Davidson mine, AuRico's Fosterville and Stawell royalties, and will be capitalized with $20 million of cash.
Upon completion, MergeCo will own a 4.9% equity interest in SpinCo.
MergeCo is expected to produce 375,000 to 425,000 oz of gold in 2015 and will have the potential to grow organically to more than 700,000 oz/yr of gold. The development portfolio is anchored by quality, low-cost projects in Turkey as well as three projects in North America (Esperanza, Lynn Lake and Quartz Mountain).
“Alamos has remained disciplined in its growth initiatives, building and preserving a robust balance sheet for the right opportunity,” said John McCluskey, president and CEO of Alamos. “We believe the addition of the flagship, long-life Young-Davidson mine is just that opportunity. The combination of diversified production from three mines and a pipeline of low-cost growth projects in safe jurisdictions equate to a leading gold intermediate.”
The senior executive team and chairman of the combined company will include Alan Edwards, chairman (AuRico); John McCluskey, CEO (Alamos); Peter MacPhail, COO (AuRico); and Jamie Porter, CFO (Alamos). Scott Perry will be the executive chairman (AuRico) of SpinCo.