Investors and analysts all but applauded during a Lake Shore Gold (LSG-T) and West Timmins Mining (WTM-T) conference call yesterday discussing the merger agreement signed between the two Timmins, Ont.-focused gold companies.
The deal will see Lake Shore absorb West Timmins in an all stock deal worth $319 million.
Calling it a deal that “makes sense” Tara Hassan, an analyst with M Partners, says that Lake Shore is now on the way to becoming a mid-tier producer.
“It confirms both our valuation of West Timmins and our long-term view that Lake Shore has the ability to break into the mid-tier ranks in a short time frame,” Hassan said in a Friday morning note to clients. Her 12-month target for Lake Shore is $4.50 per share.
The Timmins-focused companies already had a 60-40 joint venture for the Thunder Creek mill and mine and the deal will allow them to consolidate Thunder Creek and Lake Shore’s Timmins mine and Bell Creek Mill (expected to reach commercial production next year) into one wholly-owned mining complex.
Lake Shore also believes that it will now be able to expedite production from Thunder Creek by at least three years and take advantage of synergies through the use of the Timmins mine, infrastructure and permits.
By joining forces with West Timmins, Lake Shore will have a land position that covers 130 sq. km along the Timmins gold structure west of the Mattagami River fault. The geology here is similar to that of the past producing mines in the Timmins gold camp where some 70 million oz. gold have been produced. And on top of that both companies have had exploration success in recent times causing much speculation on the Street about such a deal.
Under the terms, West Timmins shareholders will receive 0.73 of a Lake Shore share per West Timmins share.
In the end, Lake Shore Gold will be 67% owned by current Lake Shore shareholders and 33% by West Timmins shareholders.
Three of Lake Shore’s 13 board of director’s seats will go to West Timmins board members.
More to come.
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