Kirkland Lake Gold and Detour Gold Corp have entered into a definitive agreement will see the ASX- and TSX-listed miner become a plus-1.5 Moz/y gold producer through the all-share acquisition of Detour and its Detour Lake gold mine, in Ontario, Canada.
Under the terms of the transaction, which values Detour at C$4.9 billion ($3.3 billion), all the issued and outstanding common shares of Detour Gold will be exchanged at a ratio of 0.4343 of a Kirkland Lake Gold common share for each Detour Gold common share. Upon completion of the transaction, existing Kirkland Lake Gold and Detour Gold shareholders will own around 73% and 27% of the pro forma company, respectively.
Kirkland Lake says Detour Lake is a uniquely large-scale, long-life Canadian mine, with current production of around 600,000 oz/y and substantial growth potential.
The deal also solidifies Kirkland Lake’s position as a senior gold producer with pro-forma 2019 output targeted at more than 1.5 Moz and analyst consensus 2019 free cash flow of almost $700 million, Kirkland said.
The deal also increases Kirkland Lake’s mineral reserve base, adding 15.41 Moz to Kirkland Lake Gold’s mineral reserve base and extending its reserve life index by eight years.
The financial strength and technical expertise of the combined company is expected to support the continued optimisation and potential expansion of Detour Lake, Kirkland Lake said, explaining that opportunities exist to significantly increase production at improved unit costs and to expand current mineral reserves and mineral resources.
It also provides exploration upside, with Detour Gold’s land position covering 1,040 km2 along the northernmost sections of the prolific Abitibi Greenstone Belt (including 646 km² on existing Detour Lake property).
Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, said: “The acquisition of Detour Gold is an excellent fit for Kirkland Lake Gold. We have already taken two mining operations, Macassa and Fosterville, and transformed them into high-quality assets that generate industry-leading earnings and free cash flow. The addition of Detour Lake provides an opportunity to add a third cornerstone asset that is located in our back yard in northern Ontario.
“Detour Lake will provide the pro forma company with a 20-plus year mine life which provides unparalleled optionality and excellent growth potential for the benefit of all shareholders. The management team at Detour Gold has done an exceptional job in making improvements and building momentum at the mine.
“Once the transaction is completed, we will continue efforts to optimise current operations and commence engineering work to evaluate expansion opportunities at Detour Lake, which we anticipate could lead to significant production growth, improved unit costs and higher levels of mineral reserves and mineral resources.”