The merger includes Kirkland Lake Gold’s Macassa mine in Ontario. (Photo: KLG)

Agnico Eagle Mines Ltd. (AEM) has entered into an all-stock agreement to acquire Kirkland Lake Gold Ltd. (KLG) in a “merger of equals,” which would retain the AEM name and be headquartered at AEM’s existing head office. KLG shareholders will receive 0.7935 of an AEM common share for each KLG share. The consideration implies a combined market capitalization of approximately $24 billion. Upon closing, existing AEM and KLG shareholders will own approximately 54% and 46% of the combined company, respectively.

The acquisition would increase AEM’s gold production from 1.7 million ounces per year (oz/y) to 3.4 million oz/y, making it the No. 3 gold producer behind Newmont and Barrick Gold. Upon closing, AEM is expected to have $2.3 billion of available liquidity, a mineral reserve base of 48 million ounces of gold, (969 million metric tons (mt) at 1.53 g/mt), and an extensive pipeline of development and exploration projects.

In a statement, the companies said the merger will establish the new Agnico Eagle as the gold industry’s highest-quality senior producer, with the lowest unit costs, highest margins, most favorable risk profile and industry-leading best practices in key areas of environmental, social and governance (ESG). The transaction will consolidate operations within the Abitibi-Greenstone Belt of northeastern Ontario and northwestern Quebec. The combined portfolio will also include gold production from Nunavut in Canada, as well as at Fosterville in Victoria, Australia, Kittila in the Lapland region of northern Finland, and Pinos Altos and La India in northern Mexico.

Under the merger agreement, which the board of directors of both companies have unanimously approved, the new AEM will be led by a combined board and management team. The new AEM’s board would consist of 13 directors with seven from AEM and six for KLG. AEM CEO Sean Boyd would become chairman. KLG CEO Tony Makuch would become CEO.

The transaction is expected to close in December 2021 or in the first quarter of 2022.

“This merger starts a new chapter in Agnico Eagle’s 64-year history and creates the leading low-risk global gold company with growing production, low costs and strong ESG leadership,” Boyd said. “The transaction creates a company with a strong platform of people, assets and financial resources to continue to build and operate a long term sustainable and self-funding business. Over time, we believe that the gold industry will continue to evolve and consolidate and with this transaction we are well positioned to take advantage of high-quality opportunities and be a true Canadian mining champion.”

Makuch said both companies will benefit from the financial strength of the merged company, “the extensive pipeline of development and exploration projects to drive future growth, and the potential to realize significant operational and strategic synergies along the Abitibi-Kirkland Lake corridor.”

The merger is also subject to closing conditions customary in transactions of this nature and it includes reciprocal non-solicitation provisions, a reciprocal $450 million termination fee and a $20 million expense reimbursement payable in certain circumstances. The two companies have agreed to use commercially reasonable efforts to complete the merger on or before March 31, 2022.

 

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