OceanaGold (TSX:OGC) has entered into a binding scheme implementation deed to acquire Ausgold (ASX:AUC), which owns the Katanning Gold Project in Western Australia.
Under the deal, Oceana will acquire Ausgold through scrip consideration of 0.03365 new OceanaGold common shares for each Ausgold share held. This represents an implied offer price of $1.36 per Ausgold share and a total equity value for Ausgold of $776 million on a fully diluted basis.
Ausgold shareholders will also have the opportunity to elect to receive up to 100% of the scheme consideration value in cash by making a cash election.
If the total aggregate cash elections exceed the maximum cash pool of $194 million, cash-electing Ausgold shareholders will be scaled back and will receive a mix of cash and OceanaGold shares.
The scheme consideration represents a premium of 28% to Ausgold’s last closing share price of $1.065 per share on 14 August, as well as 35% to the 10-day volume weighted average price of $1.011 per share.
Upon completion, OceanaGold shareholders are expected to own 92.1% of the combined OceanaGold Group and Ausgold shareholders are expected to own up to 7.9%.
In connection with the transaction, OceanaGold has agreed to provide Ausgold with an unsecured $20 million term loan.
OceanaGold has $927 million in cash and cash equivalents at hand, and an undrawn revolving credit facility of $283 million, providing $1.21 billion of available liquidity.
Diversified and dual-listed
Ausgold Executive Chairman John Dorward says the combined OceanaGold Group will be positioned as a diversified, dual-listed intermediate gold and copper producer, benefiting from a robust balance sheet, strong cash generation, and proven development capability.
“OceanaGold’s demonstrated skillset across exploration, development, and production is expected to maximise the potential of the Katanning Gold Project following development,” Dorward says.
Gerard Bond, CEO of OceanaGold, adds that Katanning will be the company’s fifth asset, and is considered a natural fit with its capabilities.
“Our projected free cash flow generation and strong balance sheet gives us the ability to fund the development of the Katanning Gold Project, advance the world-class Waihi North Project and our existing growth pipeline, while continuing to deliver meaningful capital returns to both Ausgold and OceanaGold shareholders,” Bond says.
“This marks our first acquisition in Australia, and we are excited to build on the great work done by the Ausgold team to further optimise the development of the Katanning Gold Project for the benefit of both OceanaGold and Ausgold shareholders.”
Advisers delivering
OceanaGold appointed Jarden and BMO Capital Markets as its financial advisers and Corrs Chambers Westgarth as its legal advisers in connection with the transaction.
Ausgold appointed Canaccord Genuity and SCP Resource Finance as its financial advisers and Baker McKenzie as its legal adviser.
“This transaction provides an attractive premium to Ausgold shareholders together with the opportunity for them to participate in the future growth of a larger, globally diversified gold and copper producer,” Baker McKenzie M&A partners and joint leads Richard Lustig and Rick Troiano say.
“The proposed combination brings together a high-quality Australian development asset and an established international mining company with the financial strength, operational expertise and market presence to support the next phase of the Katanning Gold Project’s development.”
Ausgold is an Australian mid-tier gold producer developing the Katanning Gold Project. The Katanning Gold Project contains a 2.44 million ounce resource and a 1.33 million ounce reserve, with 120,000 ounces of targeted average annual gold production over a more than 10-year mine life.
OceanaGold is a global gold company with 35 years of exploration, development, and operation experience.
Write to Aaliyah Rogan at Mining.com.au
Images: OceanaGold
