Beaty’s Equinox acquiring Leagold Mining

The Aurizona Gold Mine in Brazil. Source: Equinox Gold Corp.

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Equinox Gold Corp. [EQX-TSXV; EQXGF-OTC] said Monday December 16 that it has agreed to acquire Leagold Mining Corp. [LMC-TSX; LMCNF-OTCQX] in an all-share transaction worth $769.3 million, creating one of the world’s leading gold producers operating entirely in the Americas.

The transaction will see Leagold shareholders receive 0.331 of an Equinox share for each Leagold shares, implying an-at market consideration of $2.70 per share.

The combined company, to be named Equinox Gold, will have six operating mines in Mexico, Brazil and the U.S., with combined production approaching 700,000 ounces of gold in 2020.  It will also have two development projects and two expansion projects.

The transaction will be subject to shareholder votes by both companies at a special meeting to be held early in 2020. The deal is subject to reciprocal breakup fees of $20 million for each company.

The proposed leadership team will include Ross Beaty as Chairman of the combined company with Neil Woodyer acting as CEO. Christian Milau becomes Executive-Vice President, Corporate Development.

“The combination of Leagold and Equinox Gold will deliver on a promise we made to our shareholders when we launched Leagold three years ago: to create a major gold producer in a short time frame in anticipation of a new phase to the gold bull market that started in 2001,” said Leagold Chairman Frank Giustra.

“This merger will create one of the world’s largest gold companies operating entirely in the Americas,” said Equinox Gold Chairman Ross Beaty.

Highlights of the transaction include a concurrent $670 million financing package, including an at-market equity investment of $40 million by Ross Beaty, a new $500 million convertible debenture issued to Mubadala Investment Co. and $500 million in underwritten commitments from a syndicate of lenders to refinance existing credit facilities.

Mubadala Investment Co. is a sovereign wealth fund and based in the United Arab Emirates.

Equinox shares advanced on the news, rising 0.613% or $0.05 to $8.20. The shares trade in a 52-week range of $4.70 and $8.90.

Leagold was off 0.3% or $0.01 to $2.69 on volume of 2.9 million. The shares trade in a 52-week range of $1.36 and $3.06.

Under Beaty’s leadership, Equinox Gold has emerged as a well-funded, multi-asset company. Its portfolio includes the wholly-owned, past-producing Aurizona Gold Mine, and wholly-owned past-producing Castle Mountain gold mine in California. Equinox struck a deal with New Gold Inc. [NGD-TSX, NYSE American] in September, 2018, enabling it to acquire the Mesquite gold mine in California for $158 million cash.

The acquisition of the Mesquite Mine immediately established Equinox as a gold producer with 25,601 ounces of gold produced in 2018. Mesquite has produced an average of 135,000 ounces of gold annually for the past 10 years, after commencing operations in 1985.

Leagold has established itself as a mid-tier gold producer with a focus on opportunities in Latin America.

Its key asset is the Los Filos Mine, which is located 230 km south of Mexico City. The open pit mine started commercial production in 2008.

In May, 2018, Leagold completed the acquisition of Brio Gold Inc., an established Canadian mining company with significant gold producing, development, and exploration-stage projects in Brazil. The company’s portfolio includes three operating gold mines, and a fully-permitted, fully-constructed mine (Santa Luz) that was on care and maintenance and currently is in development to be restarted at the end of 2018.

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