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Kirkland to buy Newmarket Gold in Cdn$1 billion deal

(Image of Macassa mine courtesy of Kirkland Lake Gold )

Canada’s Kirkland Lake Gold (TSX:KLG) is buying fellow bullion miner Newmarket Gold (TSX:NMI) in an all-stock deal worth about Cdn$1 billion ($764 million), which will create what the firms said will be a low-cost producer with operations in Canada and Australia.

The deal gives existing Kirkland shareholders 57% of the combined company and to Newmarket’s the rest. 

Toronto-based Kirkland said its shareholders will own about 57% of the merged company, which will keep Kirkland Lake Gold as its name, with Vancouver’s Newmarket holding the rest.

Kirkland chief executive Tony Makuch will lead the company and sit on its board, while Kirkland chairman Eric Sprott will have the same title in the combined company, the miners said in the statement.

The combined gold miner will have a market capitalization of about Cdn$2.4 billion and produce more than 500,000 ounces of the yellow metal a year, with all-in sustaining costs of less than $1,015 an ounce, the firms said.

Kirkland to buy Newmarket Gold in Cdn$1 billion deal

A sustained rally in gold prices during 2016 has prompted a significant number of mergers and acquisitions in the sector, since early in the year. In February, Tahoe Resources (TSX, NYSE:THO) agreed to acquire Toronto-based miner Lake Shore Gold (TSX:LSG) in a Cdn$945 million ($680 million) all-share deal.

In July, Goldcorp. Inc. (TSX:G) finalized the acquisition of Vancouver junior miner Kaminak Gold Corp. (TSX-V: KAM:), announcing it was also moving to acquire a 20% stake in another Canadian junior, Independence Gold Corp.

Analysts predict even more deals of this kind in the next three to six months, especially in Canada. However, BMI Research expects the market to remain dominated by the usual suspects — Barrick Gold, Goldcorp and Yamana Gold—, which will keep focussing on maintaining competitive cash costs and shedding non-core assets.