Canadian mid-sized bullion miners Alamos Gold (TSX:AGI)(NYSE:AGI) and AuRico Gold (TSX:AUQ)(NYSE:AUQ) have inked a US$1.5 billion friendly deal to merge, creating a company with operating mines in Ontario and Mexico and a minority stake in a spinoff firm working on a project in British Columbia.
The operation marks the latest tie-up to emerge among smaller miners seeking to offset falling gold prices and higher costs with cost-synergy opportunities and an increased focus on low-risk mining operations. In February, Tahoe Resources Inc. struck a $1.4 billion deal to buy Rio Alto Mining Ltd.
The Alamos-AuRico tie-up is structured as a merger of equals, the Toronto-based companies said in a joint statement. Shareholders of each will own about 50% of the merged company, which will retain the Alamos Gold Inc. name and own AuRico’s Young-Davidson mine in Ontario, its El Chanate mine in Mexico and Alamos’s Mulatos mine in Mexico.
“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 and a significant re-rate opportunity for our collective shareholders,” said the chief executive of Alamos, John McCluskey, who will remain CEO of the merged firm.
The deal will also result in a spinoff company to be called AuRico Metals Inc., which will hold AuRico’s development Kemess Property in northern British Columbia and three royalty assets.
The new Alamos Gold will own the spinoff 4.9%, with the remainder held by former Alamos and AuRico shareholders.
The new company owns the Young-Davidson mine in Ontario and two operating mines in Mexico, Alamos’ Mulatos and AuRico’s El Chanate. It is expected to produce 375,000 to 425,000 ounces of gold in 2015, with the potential to grow to 700,000 ounces.