Sean Boyd, the chief executive officer of Agnico Eagle Mines Ltd. , says he’s confident Agnico’s multibillion-dollar bid to acquire Kirkland Lake Gold Ltd. will succeed, even if he has little idea whether a competing offer will emerge.
Toronto-based Agnico last month reached a friendly agreement to acquire Kirkland in an all-stock, no-premium takeover valued at more than $13-billion. If it closes, the transaction will see Agnico emerge as the third-biggest gold company in the world, with a portfolio of mines based mainly in Canada and Australia. The deal is the biggest M&A transaction ever attempted by Agnico, and one of the biggest ever in the Canadian gold sector.
While the transaction has been warmly received by Agnico shareholders, some have questioned whether Toronto-based Kirkland is selling itself for too low a price. Mining blog IKN reported last month that several other large mining companies, including Barrick Gold Corp., Newmont Corp. and Newcrest Mining Ltd. were also in the running to buy Kirkland. Barrick in particular has been vocal about wanting to increase its footprint in Canada, where it has only one mine.
When asked in an interview what the odds are of a competitor topping Agnico’s bid, Mr. Boyd replied that he has “no idea.” But either way, he thinks the deal in its current format is a winner.
“This has resonated very well,” he said. “We think that this gets to the vote on the 26th of November, and it gets approved by both sets of shareholders.”
Mr. Boyd sees even more room for consolidation in the global gold sector over the next few years. He’s a fan of deals where there are potential regional cost savings on the table. Consolidation of geographic areas has been a big theme over the past few years. Britain’s Endeavour Mining Corp. last year purchased two West Africa-focused Canadian gold miners, Semafo Inc. and Teranga Gold Corp. The Red Lake region of Northern Ontario has also been heavily consolidated, with Australia’s Evolution Mining Ltd. acquiring assets in the region from Newmont in 2020, as well as purchasing junior Red Lake miner Battle North Gold Corp. earlier this year.
Mr. Boyd became CEO of Agnico in 1998, making him by far the longest-serving CEO of a large Canadian gold company. After the acquisition of Kirkland, Mr. Boyd is slated to move to the executive chair, where he’ll have responsibility over strategy and culture. Analysts have pointed out that there are subtle culture differences between Agnico and Kirkland, with the former known for being more conservative, and the latter more entrepreneurial. But Mr. Boyd doesn’t anticipate much trouble in integrating the two companies. Both already have a heavy mine footprint in Canada. Both operate deep underground mines, as well as giant open pits. And the two companies spend more on exploration, compared with their competitors. “From an integration perspective, from a manageability perspective, from a culture perspective, there’s a lot of similarities,” he said.
Indeed, higher costs may be more of an issue at Agnico over the medium term than cultural concerns. Earlier this year, the company flagged that it was starting to see inflation creeping into its supply chain, and on Wednesday, with the release of its third-quarter results, Agnico warned that the trend is becoming more pronounced. Next year, Agnico predicts it will be paying as much as 7 per cent more for some of its consumables. Inflation is being felt across the global mining industry, in part because of well-documented pressure on supply chains. Earlier this week, Canada’s biggest base metals miner, Teck Resources Ltd., said it is paying more for everything from crude oil, to steel to diesel to freight.
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