Westgold Resources (ASX:WGX) and Canada’s Karora Resources (TSX:KRR) have mapped out plans to merge to create a larger $2.2 billion, plus 400,000-ounce-per-annum Australian gold miner.
Both Westgold’s and Karora’s boards unanimously recommend their respective shareholders vote in favour of the transaction.
Westgold has engaged Argonaut PCF as financial advisor, Thomson Geer as Australian legal advisor, and Stikeman Elliott as Canadian legal advisor.
Karora’s directors and senior management hold 1.2% of the outstanding Karora shares and have entered into agreements to vote their respected shares in favour of the transaction.
Key institutional shareholders with a combined shareholding of about 9%, including Canadian billionaire businessman Eric Sprott, have also indicated their intentions to support the transaction.
Under the offer, Westgold will offer Karora shareholders 2.524 shares, $0.68 in cash and 0.30 of a share in a new company to be demerged from Karora for each Karora share held.
The intended spin-out company’s assets will comprise Karora’s existing 22.1% interest in Kali Metals (ASX:KM1), a 1% lithium royalty on certain mining interests held by Kali, the right to receive a deferred consideration payment due to Karora regarding the on-sale of the Dumont asset, and $6 million in cash.
The spin-out will be wholly owned by existing Karora shareholders.
The offer equates to about $6.60 per Karora share based on Westgold’s closing share price on the Australian Securities Exchange (ASX) of $2.28 on 5 April 2024.
It is also a 10.1% premium to Karora’s closing share price on the Toronto Stock Exchange (TSX) of $5.995 on 5 April and an 18.9% premium to its 20-day volume weighted average price of $5.552 up to and including 5 April.
Upon completion, Westgold shareholders will own the majority 50.1% of the combined company, while former Karora shareholders will hold the remaining 49.9%.
Karora Chairman and CEO Paul Huet says the merger will unlock just shy of half a billion of operational and capex synergies in what will become the “largest, unhedged gold producer in Australia.”
If successful, the proposed merger will create a plus 400,000-ounce per-annum Australian gold miner with a market capitalisation of about $2.2 billion, a pipeline of growth projects, and exploration targets supported by financial resources of $160 million.
Estimated operating synergies of the combined assets currently sit at $209 million, with an estimated corporate savings of $281 million.
According to Westgold, the merger will equip the enlarged company with financial resources of $160 million in cash and liquidity through its existing corporate revolver facility and, upon full repayment of Karora’s existing $44 million revolving facility, will support an accelerated resource development program.
Westgold says a successful merger will result in the larger company emerging as a top five ASX-listed gold producer with a combined reserve of 3.2 million ounces and resources of 13 million ounces.
Westgold will also apply for a dual-listing on the TSX on completion of the transaction.
“The prize here is Beta Hunt’s gold potential,” says Westgold Resources Managing Director and CEO Wayne Bramwell.
“Rarely do you find a gold asset of the quality and potential of Beta Hunt hiding in a nickel belt, and drilling is expected to further unlock value at this mine. This merger brings Beta Hunt together with Big Bell, the emerging Bluebird and the iconic Great Fingall mine under one Australian management team.”
Westgold Resources is a Western Australia-focused gold miner forecasting 240,000 and 260,000 ounces of gold production in FY2023.
Karora Resources is a multi-asset resource company focused primarily on the acquisition, exploration, evaluation and development of precious metal properties.
Write to Adam Drought at Mining.com.au
Images: Westgold Resources & Kali Metals
