On December 16, 2019, Equinox Gold Corp. (TSX: EQX, NYSE: EQX) and Leagold Mining Corporation (TSX: LMC, OTCQX: LMCNF) entered into an agreement to combine the companies in an at-market merger.
The new combined entity will continue as Equinox Gold with Ross Beaty as Chairman, Neil Woodyer as CEO, and be headquartered in Vancouver, Canada.
Leagold shareholders would receive 0.331 of an Equinox Gold share for each Leagold share held and values the Leagold common share at C$2.70, using the closing prices for both Equinox Gold and Leagold shares on the Toronto Stock Exchange on December 13, 2019.
At closing, existing Equinox
Gold and Leagold shareholders would own approximately 55% and 45% of the merged company, respectively, on an issued share basis.
The transaction would create a gold producing company, operating entirely in North and South America, with forecasted production of 700,000 ounces of gold in 2020 and 1 million ounces of gold production in 2021. The combined company would have 12.7 million gold ounces in Reserves and 23.6 million gold ounces in Resources.
The combined company would have operations in the USA, Mexico and Brazil, with 6 producing mines and 2 development projects. The companies expect to save $10 million annually in operating and administrative synergies.
Figure 1: Combined Company – Locations
Chairman of Equinox Gold, Ross Beaty, stated: “This merger will create one of the world’s largest gold companies operating entirely in the Americas. 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. This is the kind of gold company investors want today and I’m very pleased we are combining forces to achieve it.”
As part of the transaction, Ross Beaty will subscribe for $40 million in a private placement of Equinox Gold common shares at a price of C$8.15 per share to maintain an approximate 9% stake in the company.
To refinance existing debt and credit facilities of both Equinox Gold and Leagold, a syndicate of banks comprising The Bank of Nova Scotia, Société Générale, Bank of Montreal, and ING Capital LLC have provided underwritten commitments for a 5-year term loan of $100 million and a 4-year revolving credit facility of $400 million.
Finally, Abu Dhabi-based MDC Industry Holding Company (“MDCI”), a wholly owned subsidiary of Mubadala Investment Company PJSC, announced their intention to subscribe to US$130 million in Convertible Notes of Equinox Gold.
The 5-year Convertible Notes will have an interest at 4.75% per year and will be convertible at MDCI’s option into common shares of the new merged company (“New Equinox”) at a price of US$7.80 per share.
MDCI currently owns US$130 million of Convertible Notes in Equinox Gold and, if converted in full, would entitle MDCI to acquire 24.8 million Equinox Gold shares, representing approximately 17.9% of issued and outstanding shares of Equinox Gold.
All of these financings are conditional upon the closing of the proposed merger of Equinox Gold with Leagold Mining.
Special meetings of Equinox Gold and Leagold shareholders are expected to be held in January 2020 and the transaction is expected to close in the first quarter of 2020.
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Equinox Gold (TSX:EQX)
- www.equinoxgold.com
- Headquartered in Vancouver, Canada, Equinox Gold engages in the acquisition, exploration, and development of mineral deposits, primarily gold, and has operations in Brazil and California.
- Equinox Gold is currently trading at $9.10 with a market cap of $1,032.2 million.
Leagold (TSX:LMC)
- www.leagold.com
- Headquartered in Vancouver, Canada, Leagold engages in the acquisition of gold mining properties and other development projects in Mexico and Brazil.
- Leagold is currently trading at $2.93 with a market cap of $834.9 million.
Figure 2: Equinox 1-Year Stock Chart
Figure 3: Leagold 1-Year Stock Chart
