Agnico Eagle Mines Limited (TSX: AEM) (NYSE: AEM) and Kirkland Lake Gold Ltd. (TSX: KL) (NYSE: KL) (ASX: KLA) announced today that they have entered into an agreement to combine in a merger of equals, with the combined company to continue under the name “Agnico Eagle Mines Limited”. The Merger will establish the new Agnico Eagle as the gold industry’s highest-quality senior producer, with the lowest unit costs, highest margins, most favourable risk profile and industry-leading best practices in key areas of environmental, social and governance. Upon closing of the Merger, the Company is expected to have $2.3 billion of available liquidity, a mineral reserve base of 48 million ounces of gold, (969 million tonnes at 1.53 grams per tonne), which has doubled over the last 10 years, and an extensive pipeline of development and exploration projects to drive sustainable, low-risk growth.
The Merger will create a best-in-class gold mining company operating in one of the world’s leading gold regions, the Abitibi-Greenstone Belt of northeastern Ontario and northwestern Quebec (the “Abitibi”), with superior financial and operating metrics. Consolidation within the Abitibi will also provide the new Agnico Eagle with significant value creation opportunities through synergies and other business improvement initiatives. Additionally, the Company is established uniquely as the only gold producer in Nunavut and well positioned internationally with profitable and prospective assets in Australia, Finland, and Mexico.
The combination of Agnico Eagle and Kirkland Lake Gold combines each company’s strengths by bringing together two industry leaders in growing per share value in key metrics such as production, mineral reserves, cash flow and net asset value. Both companies also share a strong commitment to returning capital to shareholders, with a total of $1.6 billion being returned through dividend payments and share repurchases since the beginning of 2020 (on a pro forma basis).
Under the Merger Agreement, which the Board of Directors of both companies have unanimously approved, the new Agnico Eagle will be led by a combined board and management team of experienced mining and business leaders, bringing together the proven cultures, strengths and capabilities of both companies. The transaction is expected to close in December 2021 or in the first quarter of 2022.
Pursuant to the Merger Agreement, Kirkland Lake Gold shareholders will receive 0.7935 of an Agnico Eagle common share for each Kirkland Lake Gold common share held. The Consideration to Kirkland Lake Gold represents approximately a 1% premium to the 10-day volume weighted average prices on the Toronto Stock Exchange, as at close of trading Friday September 24, 2021 and implies a combined market capitalization of approximately [$24 billion]. Upon closing, existing Agnico Eagle and Kirkland Lake Gold shareholders will own approximately 54% and 46% of the combined company, respectively.
Sean Boyd, Agnico Eagle’s Chief Executive Officer stated, “This merger starts a new chapter in Agnico Eagle’s 64-year history and creates the leading low risk global gold company with growing production, low costs and strong ESG leadership. The transaction creates a company with a strong platform of people, assets and financial resources to continue to build and operate a long term sustainable and self funding business. Kirkland Lake is an excellent cultural fit with Agnico Eagle, and we look forward to working together to further grow our business through exploration, mine development and optimization of our high-quality asset base. Over time, we believe that the gold industry will continue to evolve and consolidate and with this transaction we are well positioned take advantage of high-quality opportunities and be a true Canadian mining champion.”
Tony Makuch, President and CEO of Kirkland Lake Gold, stated, “We are very pleased and excited to be entering into a combination with Agnico Eagle. It is a unique ‘strength-on-strength’ transaction that combines the two global gold producers with the best track records for increasing per share value. The deal creates an industry leader with a dominant position in the Canadian market that is deserving of a premium valuation and is poised to generate superior long-term shareholder value going forward. The transaction represents a true merger of equals, with the business of both companies to benefit from the significant financial strength of the merged company, the extensive pipeline of development and exploration projects to drive future growth, and the potential to realize significant operational and strategic synergies along the Abitibi-Kirkland Lake corridor. It is the right deal for our company and its shareholders, our people, the communities where we operate, and all of our key stakeholder groups.”
Strategic Rationale for the Merger
Key strategic, financial and operational advantages of the combined business include:
Board of Directors’ Recommendations
After consultation with its outside financial and legal advisors, the Board of Directors of Agnico Eagle has unanimously approved the Merger Agreement. The Board of Directors of Agnico Eagle recommends that Agnico Eagle shareholders vote in favour of the Merger.
TD Securities Inc. has provided an opinion to the Agnico Eagle Board of Directors to the effect that, as of the date thereof, and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the Consideration to be paid in the Merger by Agnico Eagle is fair, from a financial point of view, to Agnico Eagle. BofA Securities has provided an opinion to the Agnico Eagle Board of Directors to the effect that, as of the date of such opinion, based upon and subject to the various assumptions, limitations and qualifications set forth in such opinion (which will be described in the joint management information circular of Agnico Eagle and Kirkland Lake Gold that is expected to be mailed to their respective shareholders), the exchange ratio provided for in the Merger Agreement to be paid in the Merger by Agnico Eagle is fair, from a financial point of view, to Agnico Eagle.
Kirkland Lake Gold appointed a special committee of independent directors to consider and make a recommendation with respect to the Merger. Based on the unanimous recommendation of the Kirkland Lake Gold special committee of independent directors, and after consultation with its outside financial and legal advisors, the Board of Directors of Kirkland Lake Gold has unanimously approved the Merger Agreement. The Board of Directors of Kirkland Lake Gold recommends that Kirkland Lake Gold shareholders vote in favour of the Merger.
BMO Capital Markets and Maxit Capital LP have each provided fairness opinions to the Kirkland Lake Gold Board of Directors, and CIBC has provided a fairness opinion to the Kirkland Lake Gold special committee, to the effect that, as of the date thereof, and based upon and subject to the assumptions, limitations and qualifications stated in each such opinion, the exchange ratio is fair, from a financial point of view, to the holders of Kirkland Lake Gold shares.
Transaction Summary and Timing
The Merger will be effected by way of a plan of arrangement of Kirkland Lake Gold under the Business Corporations Act (Ontario). At closing, all Kirkland Lake Gold common shares will be exchanged for the Consideration, being 0.7935 of an Agnico Eagle common share, for each Kirkland Lake Gold common share held. The arrangement will require the approval of at least 66 2/3% of the votes cast by the shareholders of Kirkland Lake Gold voting at a special meeting of Kirkland Lake Gold’s shareholders. The issuance of shares by Agnico Eagle under the Merger is subject to the approval of a simple majority of votes cast by Agnico Eagle shareholders at a special meeting of Agnico Eagle’s shareholders.
The Merger is also subject to closing conditions customary in transactions of this nature, including receipt of Competition Act (Canada) and Foreign Acquisitions and Takeovers Act 1975 (Cth) (Australia) clearance, Ontario court approval and applicable stock exchange approvals. The Merger Agreement includes reciprocal non-solicitation provisions, a reciprocal $450 million termination fee and a $20 million expense reimbursement payable in certain circumstances.
Officers and directors of Agnico Eagle have entered into support and voting agreements with Kirkland Lake Gold, agreeing to vote their shares in favour of the Merger. Officers and directors of Kirkland Lake Gold have entered into support and voting agreements with Agnico Eagle, agreeing to vote their shares in favour of the Merger.
Agnico Eagle and Kirkland Lake Gold have agreed to use their commercially reasonable efforts to complete the merger on or before March 31, 2022.
It is anticipated that both shareholder meetings will take place in the fourth quarter of 2021 and that closing will occur in December 2021 or in the first quarter of 2022 subject to satisfaction of the conditions under the Merger Agreement.
Following completion of the Merger, the shares of the new Agnico Eagle will continue to trade on the Toronto Stock Exchange and the New York Stock Exchange, subject to approval or acceptance of each exchange in respect of the Agnico Eagle shares being issued as part of the Consideration. Kirkland Lake Gold’s shares will be de-listed from the Toronto Stock Exchange, the New York Stock Exchange, and the Australian Securities Exchange following closing.
Governance, Communities, and ESG
On closing, the combined company will continue to be operated under the new Agnico Eagle brand and headquartered at Agnico Eagle’s existing head office, and will be led by a proven leadership team that builds on the strengths and capabilities of both companies. The senior executive team and Board of Directors of Agnico Eagle will be enhanced by the addition of new members from Kirkland Lake Gold who all have a wealth of knowledge and experience to support the combined operations. The Board of Directors of the new Agnico Eagle will consist of 13 directors, comprised of 7 directors of Agnico Eagle and 6 directors from Kirkland Lake Gold. The key senior management team and directors will include:
Agnico Eagle will remain committed to maintaining a strong workforce and culture, robust Indigenous peoples, community and stakeholder relations and investment and, as a leader in ESG matters, driving improved performance and delivering on its vision to continue building and growing a high-quality, low-risk, sustainable business.
Canadian taxable resident shareholders of Kirkland Lake Gold will be able to elect such that they receive common shares in Agnico Eagle free of Canadian income taxes, and other shareholders will generally not be subject to Canadian income tax. It is expected that U.S. resident shareholders of Kirkland Lake Gold will generally receive shares in Agnico Eagle on a tax-deferred basis for U.S. federal income tax purposes.
Advisors and Counsel
Agnico Eagle has engaged TD Securities Inc., BofA Securities and Trinity Advisors Corporation as its financial advisors and Davies Ward Phillips & Vineberg LLP as its legal advisor in connection with the transaction. Kirkland Lake Gold has engaged BMO Capital Markets and Maxit Capital LP as its financial advisors and Cassels Brock & Blackwell LLP as its legal advisor. The Kirkland Lake Gold special committee has engaged CIBC World Markets Inc. as its financial advisor and Fasken Martineau DuMoulin LLP as its legal advisor.
Agnico Eagle and Kirkland Lake Gold will file material change reports in respect of the merger in compliance with Canadian securities laws, as well as copies of the Merger Agreement and forms of support and voting agreements, which will be available under Agnico Eagle’s and Kirkland Lake Gold’s respective SEDAR profiles at www.sedar.com.
Full details of the Merger will be included in a joint management information circular of Agnico Eagle and Kirkland Lake Gold that is expected to be mailed to their respective shareholders in or around October 28, 2021.
About Agnico Eagle Mines Limited
Agnico Eagle is a senior Canadian gold mining company that has produced precious metals since 1957. Its operating mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these countries as well as in the United States and Colombia. Agnico Eagle and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a senior gold producer operating in Canada and Australia that is targeting 1,300,000 – 1,400,000 ounces of production in 2021. The production profile of Kirkland Lake Gold is anchored by three high-quality operations, including the Macassa Mine and Detour Lake Mine, both located in Northern Ontario, and the Fosterville Mine located in the state of Victoria, Australia. Kirkland Lake Gold’s solid base of quality assets is complemented by district scale exploration potential, supported by a strong financial position with extensive management expertise.
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