Orica has entered into a binding agreement to acquire 100% of the common stock of Cyanco from an affiliate of Cerberus Capital Management for US$640 million. The acquisition of Cyanco, a US-based leader in the manufacture and distribution of sodium cyanide primarily serving the gold mining industries in the US, Canada, Mexico, Latin America, and Africa, is expected to complement Orica’s established Mining Chemicals business and create an integrated global manufacturing and distribution network.
In line with Orica’s strategy for growth beyond blasting, Orica will establish a Mining Chemicals business vertical and create an integrated global sodium cyanide manufacturing and distribution network. The move more than doubles Orica’s existing sodium cyanide production capacity from Yarwun, Australia to approximately 240,000 t/y via the contribution of Cyanco’s two manufacturing plants in Nevada and Texas.
Orica said that it significantly increases Orica’s footprint in the very attractive North American gold mining industry and strategically located to access cost competitive US natural gas-based manufacturing assets. The acquisition will be largely funded from Orica’s existing cash and undrawn committed debt facilities, alongside a A$400 million underwritten institutional placement.
The acquisition together with the placement are expected to be mid-single digits earnings per share (EPS) accretive in the first full year of ownership (pre-synergies). Given the highly complementary nature of the two businesses, run-rate net cost synergies of ~US$10 million are expected by the end of year three of Orica’s ownership. The acquisition is expected to be completed by the end of FY2024, subject to the expiration of certain regulatory waiting periods and other customary closing conditions.
Orica Managing Director and CEO Sanjeev Gandhi said: “I am delighted to announce the acquisition of Cyanco today, accelerating the delivery of Orica’s Mining Chemicals strategy and creating a leading global mining chemicals business. Cyanco is a highly complementary business, and by combining it with our established sodium cyanide business, Orica will create a leading integrated global sodium cyanide producer with world-class supply capabilities in mining. The acquisition will more than double Orica’s existing sodium cyanide production capacity and provide us with the ability to cater to the highly attractive US and Canadian gold mining industries.”
He adds: “By combining these two leading businesses, we expect to improve our ability to serve our customers by enhancing Orica’s global network of transfer stations in key gold mining regions, supporting security of supply to mine sites. The acquisition is mutually beneficial to both Cyanco and Orica stakeholders, and we look forward to welcoming Cyanco’s employees to Orica. We are excited about the opportunities this will create for Orica, our customers, and our shareholders.”
Cyanco is a leading manufacturer and distributor of sodium cyanide, a specialised chemical required for gold processing. Cyanco’s production facilities are strategically located to serve the Nevada gold mining region and seaborne export market. Cyanco is a leading supplier of sodium cyanide in the US, with a well-established distribution footprint, enabling service to gold mines in Canada through rail link and supply capabilities into international regions through seaborne transportation. Orica says it will incorporate Cyanco’s greenhouse gas emissions profile into its global Scope 1, 2 and 3 inventory and remains committed to delivering on its existing public climate change targets.
Orica said it offers a complementary geographic expansion into attractive US and Canada gold mining industries, with long-term industry trends driving demand for sodium cyanide. Global sodium cyanide demand growing at ~4% per annum from 2023 to 2028, with North American sodium cyanide demand growing at ~5% per annum in the same period. Global treated ore is forecast to grow faster than historic rates due to greenfield and brownfield mining projects and decreasing ore grades.
As stated, it expands Orica’s network to three manufacturing facilities, increasing supply networks and improving security of supply to customers. It will mean an extensive transfer station network in key gold mining regions, including Asia Pacific, US, Canada, Latin America, and Africa, with expansive in-country commercial and technical teams providing an extensive support network. Orica adds that it brings the opportunity to expand customer relationships and solutions offered across the mining value chain. It also will allow the application of Orica’s digital and technical expertise in ore monitoring and processing to provide value-added services, plus an enhanced ability to service mining customers with a broader suite of products and services across the mining value chain.