Evolution Mining Ltd. is offering $343-million to buy Battle North Gold Corp. in a friendly transaction that would see the Australian miner double down on Ontario’s Red Lake gold district.
Melbourne-based Evolution is offering $2.65 a share in cash for Battle North, a 45-per-cent premium to Friday’s close. Battle North is urging its investors to vote for the deal in a coming shareholder vote, saying the acquisition reduces the execution risk of getting its Bateman gold mine into production.
Toronto-based Battle North has spent the past few years resurrecting an underground gold project with a notorious past. About five years ago, a previous iteration of the company, Rubicon Minerals Corp., rushed the project into production, with only a preliminary engineering study in hand. When Rubicon tried to mine the deposit, the gold wasn’t there and about a billion dollars of shareholder money went up in smoke.
Eventually, a new management team led by veteran mining turnaround executive George Ogilvie took over Rubicon while it was in creditor protection. This time around, Battle North has done far more due diligence, including conducting a full feasibility study, confirming both the presence and location of the gold in the ground. Battle North is aiming to put the mine back into operation, albeit on a smaller scale than Rubicon had envisaged.
“George and his team have done a very good job,” Evolution chief executive officer Jake Klein said in a statement on Sunday. “This is an ideal window to consolidate the properties ahead of the construction of the Bateman mine.”
A relative newcomer to Red Lake, Evolution has lately laid down big bets in the historic Northern Ontario gold region. Last year, Evolution paid US$475-million for a suite of gold mines previously owned by Canada’s Goldcorp Inc. The company has invested hundreds of millions to modernize, tweak and reduce costs at the mines, which had fallen on hard times.
Evolution hopes to increase its Red Lake production to more than 300,000 ounces of gold a year and get its costs down to around US$1,000 an ounce. Buying Battle North should help Evolution hit those objectives faster. The Bateman mine is projected to run for eight years and produce about 74,000 ounces of gold per annum, at costs of US$865 an ounce.
After close to a decade of decay, the Red Lake gold region is enjoying a renaissance at the moment, owing in part to a revival in the price of gold bullion over the past few years. Just after Christmas, Vancouver-based Pure Gold Mining Inc. poured its first gold at the Madsen mine, which holds one million ounces of high grade gold in reserves. As the company ramps up to full production, it plans to eventually employ about 350 people, almost all of them from the local community in Red Lake, Ont.
Meantime, Great Bear Resources Ltd., also of Vancouver, has attained a stock market valuation in excess of $880-million owing to the discovery of a major new gold find in Red Lake. While Great Bear is still at a very early stage, analysts have speculated its Dixie project could contain at least five million ounces of gold.
There have been some gold sector mergers and acquisitions (M&A) announced during the COVID-19 pandemic, but the size and pace of transactions have generally slowed. Many of the deals that have been announced, such as Agnico Eagle Mines Ltd.’s acquisition of TMAC Resources Inc., and Newmont Corp.’s purchase of GT Gold Corp., featured transactions where on-site diligence had largely been conducted ahead of the pandemic. Deal making is expected to take off again as travel restrictions are expected to be lifted in the next few months.
“It’s difficult to do the diligence you need,” Chris Gratias, mining banker with CIBC World Market Inc., said at a panel discussion at last week’s Prospectors & Developers Association of Canada (PDAC) conference. “There is a real pent-up demand in the M&A markets that will eventually come, once things settle down.”
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