Two gold miners associated with financier Eric Sprott are raising eyebrows with their plans to join forces and create a mid-tier bullion producer that will span Canada and Australia.
Kirkland Lake Gold Inc., which owns mines in northwestern Ontario, said on Thursday that it has struck an all-stock $1.01-billion deal to buy Newmarket Gold Inc., which owns mines in Australia.
The combined company will be known as Kirkland Lake Gold and will be headquartered in Toronto. Based on the values of the existing businesses, it will have a market capitalization of around $2.4-billion and produce more than 500,000 ounces of gold a year from seven mines, the companies said.
The deal, which still requires shareholder approval, will increase the stock-market profile of the combined operation. However, it lacks obvious cost-cutting opportunities, given the very different locales in which the two companies operate.
“We own Kirkland Lake [shares] and we’re not super-excited about this deal,” said Chris Mancini, a research analyst for Gabelli Gold Fund in Rye, N.Y. “It seems like two companies coming together, trying to make a bigger company, with no obvious synergies. … The concept may be to attract more investment interest, but our concern is that it dilutes the value of Kirkland Lake.”
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