Equinox Gold buys out Orion for almost US$1B as it readies Greenstone for first gold

Equinox Gold (TSX: EQX; NYSE-AM: EQX) is buying partner Orion Mine Finance’s 40% stake in their new Greenstone gold mine in Ontario for US$995 million in cash and shares as it prepares to pour first gold.

The purchase includes US$745 million in cash and 42 million shares valued at US$250 million. It was announced late on Tuesday after Australia’s Gold Road Resources (ASX: GOR) said it was no longer considering buying a stake in Greenstone from Orion. Equinox said it would fund the purchase through a new US$500-million loan and a US$260-million bought-deal equity financing.

“When we acquired our 60% interest in Greenstone in 2021, our goal was to ultimately own the whole mine,” Equinox chairman Ross Beaty said in a release. “Consolidating 100% of Greenstone into Equinox Gold delivers our shareholders full exposure to a mine of outstanding scale and quality.”

Shares in Equinox fell 11% on Wednesday to $7.23 apiece, valuing the company at $2.4 billion. They’ve traded in a 52-week range of $5.36 to $8.79.

The deal increases Equinox’s annual gold production by about 160,000 oz. while boosting earnings and cash flow, the company said. Greenstone will be its largest mine among eight total, producing about 400,000 oz. of gold per year over the first five years. It’s expected to be one of the world’s lowest-cost open-pit gold mines with all-in sustaining costs of US$890 per oz., Equinox said.

Seven others

The company’s other mines are Aurizona, Fazenda, Santa Luz and RDM in Brazil, Castle Mountain and Mesquite in California and Los Filos in Mexico. Equinox expected total output this year of between 660,000 to 750,000 oz. of gold with all-in sustaining costs of US$1,630 to US$1,740 per oz., it said in February.

The company reported on April 9 it had started ore processing and was on track to produce first gold at the $1.2-billion Greenstone project in northern Ontario next month.

Equinox bought Premier Gold for the project, located 275 km northeast of Thunder Bay near the town of Geraldton, and developed it as a 60:40 partnership with New York-based Orion. It aims to produce 400,000 oz. of gold per year and more than 5 million oz. over a 14-year mine life.

“Once operating at full capacity, Greenstone will be our largest and lowest cost-mine,” president and CEO Greg Smith said in a release on April 9. “We look forward to first gold in May and continuing to advance the project to commercial production.”

Equinox produced 564,458 oz. of gold last year with all-in sustaining costs of US$1,612 per oz. for US$304.4 million in earnings before interest, taxes, depreciation and amortization.