November 2016

Kirkland Lake Gold scoops up Newmarket Gold

By Kate Sheridan

Kirkland Lake Gold will acquire Australian junior miner Newmarket Gold in a share exchange worth $1 billion, the company announced on Sept. 29. The combined company, which will retain Kirkland Lake’s name, will produce about 500,000 ounces of gold each year and have a market cap of about $2 billion. Eric Sprott will be the new company’s chairman.

“This is a good marriage between two very good companies that are profitable and generating cash flow,” said Kirkland Lake CEO Tony Makuch.

Kirkland Lake Gold’s flagship project, the Macassa mine, has Proven and Probable Reserves of 2.4 million tonnes of gold at a grade of 15.8 grams per tonne as of January 2015. Newmarket’s key operation, Fosterville, has nearly 1.1 million tonnes at 6.95 grams per tonne in Proven and Probable Reserves, according to a March 2016 report.

Across all of Newmarket’s operations, the company reported all-in sustaining costs (AISC) between US$900 and US$975 per ounce; Kirkland Lake Gold’s company-wide AISC is about US$925. The combined company’s AISC is expected to be below US$1,015 per ounce.

Makuch said he hoped the deal, structured as a reverse takeover, would create value for shareholders of both companies by attracting a different kind of investor to the merged entity. “Some funds won’t invest in junior companies, they have limitations on size,” he said.

Makuch said new investments will allow the company to continue diamond drilling operations, which he called “one of the core competencies of the company,” from a position of greater financial security.

“You’re always limited in terms of money to invest in diamond drilling for new discoveries and resource growth,” he said.

Larger companies are also more protected from investors’ reactions to fluctuations in the market. “By being a larger company, we have the ability to weather a storm a bit better.”

Newmarket first approached Kirkland Lake about a deal after Makuch joined the company this summer, he said.

The merged company will be headquartered in Toronto, but the projects will continue to operate autonomously.

The deal is still pending shareholder approval.

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