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Shareholders at both Detour Gold Corp. and Kirkland Lake Gold Ltd. voted decisively in favour of Kirkland’s $4.9-billion acquisition of Detour on Tuesday, in a deal that sees the world’s most profitable large gold mining company buy a struggling single-asset producer smack in the middle of a turnaround.

The all-stock acquisition was announced in November and was initially greeted with shock on the part of many of Toronto-based Kirkland Lake’s shareholders, with its stock plummeting by 17 per cent on the day the deal was announced.

Some big stakeholders, such as Eric Sprott, weren’t immediately convinced of the logic of Kirkland, a low cost, high grade miner, buying Detour, a high cost, low grade operator.

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But a big part of the reason Kirkland’s shareholders ultimately warmed up to the deal is that while the company will see its average cost to mine an ounce of gold rise after it integrates Detour, its reserves of gold in the ground will go up materially.

On Tuesday, even after Kirkland shareholders voted 99 per cent in favour of the acquisition, the company’s chief executive, Tony Makuch, said he was sorry for the lacklustre reception the deal had received from the market, and vowed the transaction will turn out to be a winner over the long term. Kirkland Lake’s shares fell 3.9 per cent on Tuesday to close at $54.12. Detour Gold shares fell 3.3 per cent to $23.54.

“We want to apologize both to Detour shareholders, and to Kirkland Lake shareholders, in terms of the negative response that happened in the market, that affected the share price performance over the last two months,“ he said to a crowd of shareholders, after the company’s special meeting in Toronto.

“We don’t take it lightly – the confidence you put in us. And in terms of moving forward, we’re going to work really hard, and we see a lot of opportunity to get that value back, and create more value."

Over the past few years, gold industry money managers have been strongly encouraging single asset miners, such as Detour, to seek out suitors. Singletons are struggling exponentially more than large diversified miners in attracting capital, and are seen as far too risky for many investors. As part of a better capitalized and more widely traded senior, single asset miners generally become a more attractive investment proposition.

But getting this particular deal over the finish line required a lot more than putting up the “For Sale” sign at Detour.

The Detour Lake open pit gold mine in northeastern Ontario went into production in 2013, and for much of its production run has struggled to mine gold for a profit.

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In 2018, the company was the subject of a proxy fight with New York-based hedge fund and Detour shareholder Paulson & Co., which led the charge to toss out much of the company’s legacy management and board members.

Detour’s current chief executive, Mick McMullen, who was appointed after the proxy fight was settled, is credited in part with a big improvement in the company’s operations, making it a much more attractive takeover target.

He moved responsibility for running the Detour Lake mine from the corporate head office in Toronto to the mine site, put in a new team of managers and revamped the incentive structure at the company.

“We held people accountable … and rewarded the people who did well,” Mr. McMullen said in an interview in Toronto on Tuesday.

“Historically at Detour, there was a culture of actually rewarding the wrong behaviour.”

Replacing depleting gold reserves is one of the biggest challenges a gold company faces, and goes a long way to explaining why mergers and acquisitions have recently come roaring back in the gold industry.

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Over the past 18 months, senior gold miners have aggressively started consolidating again, after about seven years of sitting on the sidelines. Barrick Gold Corp. and Newmont Corp. have collectively acquired US$16-billion worth of assets since the fall of 2018.

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