Equinox Gold to buy smaller rival Leagold for $770M

Equinox Gold (TSX: EQX) has become the latest Canadian gold miner to acquire a smaller rival and consolidate portfolios after announcing the acquisition of Leagold Mining (TSX: LMC) for $769.3 million (US$578 million).

The offer, which implies a no-premium consideration of $2.70 per share, will add Leagold’s four mines in Mexico and Brazil to Equinox’s portfolio, consisting of two mines in California, U.S., and one in Brazil.

As part of the transaction, Leagold shareholders will get 0.331 of an Equinox share for each share they own and will hold 45% of the combined entity, led by mining veteran Ross Beaty, who is chairman of Equinox and Pan American Silver (TSX: PAAS).

The transaction includes a concurrent US$670-million financing with Beaty and Mubadala Investment Co., the government of Abu Dhabi’s sovereign wealth fund, as cornerstone shareholders.

“This merger will create one of the world’s largest gold companies operating entirely in the Americas,” Beaty said on a conference call. “Our large scale will provide improved liquidity, greater asset and country diversification, and a lower risk profile for all shareholders. This is the kind of gold company investors want today.”

Leagold’s Los Filos gold mine — 230 km south of Mexico City — in 2017. Credit: Leagold.

Equinox moved from developer to producer status in July, when it kicked off commercial production at its second gold mine, Aurizona, in northeastern Brazil.

The Vancouver-based company is also advancing construction at the previously mined Castle Mountain, located 320 km north of its Mesquite operation, with the target of pouring first gold in the second half of 2020.

Last year, the firm spun out its copper assets into a new company, Solaris Copper, and sold its 83% stake in the Koricancha gold mill in Peru to Inca One, as part of its plan to become a mid-tier gold producer.

The Equinox–Leagold business combination, expected to close in the first quarter of 2020, is just one of the many mergers and acquisitions that have swept the gold sector this year, with pending and completed deals worth US$35 billion so far.

The announcement comes on the same day that Endeavour Mining (TSX: EDV) and Egypt-focused miner Centamin (TSX: CEE; LON: CEY) agreed to assess the merits of a merger that would create a strong mid-tier gold company with an almost US$4-billion market capitalization, and annual output of more than 1.2 million ounces.

This article first appeared in our sister publication, Mining.com. https://www.mining.com/canadas-equinox-gold-buys-smaller-rival-leagold-in-578-million-deal/