Canada’s SSR Mining Inc. is buying Denver-based miner Alacer Gold Corp. in an all-stock, zero premium transaction worth $2.4-billion, the latest big mining deal aimed at trying to win back the interest of institutional investors.
Vancouver-based SSR operates precious metals mines in Canada, the United States and Argentina. Alacer’s chief asset is the Copler gold mine in Turkey.
SSR is paying 0.3246 of its shares for each Alacer share, equivalent to $8.19 a share, the same level Alacer closed at on Friday.
Michael Anglin retains his position as SSR’s chairman, while Alacer chief executive Rod Antal will assume that role at the combined company. SSR’s head office will move from Vancouver to Denver; Vancouver will retain a branch office.
With the acquisition, SSR is expected to produce about 780,000 ounces of gold, not quite the rarefied air of the million ounce-plus producers, but enough production to distance itself from a horde of smaller producers.
The company hopes to benefit from increased trading liquidity, garner more analyst coverage and ultimately attract large investors.
“The new SSR significantly improves scale and liquidity for both sets of shareholders," Paul Benson, outgoing CEO of SSR, said in a conference call with analysts.
“We’re very excited to be creating a larger, more globally relevant gold company.”
For years, large institutional money managers, such as Joe Foster with Van Eck Associates Corp. have called for increased consolidation in the gold industry, arguing that there are far too many small companies chasing a diminishing pool of capital.
By teaming up, companies can also reduce general and administrative (G&A) expenses, by closing head offices and paying less in executive compensation. While SSR’s acquisition of Alacer will deliver some of those benefits, it also potentially introduces some unwanted complications.
Some analysts are worried that SSR is taking on unnecessary new risk by diversifying out of the Americas and buying an asset in Turkey, which is seen as a much dicier mining jurisdiction.
“It’s almost contrary to what attracted your SSR investor,” Chris Thompson, head of mining research at PI Financial, said in an interview.
In the past few years, Mr. Thompson has been impressed by how much SSR has grown through smart acquisitions in North America, and its ability to grow its reserve base. But now he’s concerned that progress could be stymied.
“It’s a bit frustrating," he said.
Shares in SSR fell by 4.7 per cent Monday on the Toronto Stock Exchange to close at $24.05 apiece. Alacer’s stock lost 3.9 per cent of its value to close at $7.87.
SSR has a long history in Canada. Incorporated in 1946, its original British Columbia silver mine, called Silver Standard, operated for decades. After the mine depleted, the company was forced to start again, almost from zero, in the 2000s.
Existing management took a calculated bet on gold, buying the Marigold mine in Nevada from Barrick Gold Corp. in 2014, and the Seabee gold mine in Saskatchewan, through the acquisition of Claude Resources Inc., in 2016. With gold prices vastly outperforming silver over the past decade, the decision turned out to be a smart one. With most of its production coming from bullion, the company changed its name to SSR Mining from Silver Standard Resources in 2017.
The deal comes after a flurry of activity in the Canadian gold sector that has seen at least three other gold deals announced in the past few months.
On Friday, China’s Shandong Gold Mining Co. Ltd. announced its intention to buy TMAC Resources Inc., which operates in the Arctic.
In March, Endeavour Mining Corp. tabled a takeover offer for Semafo Inc.
In April, Silvercorp Metals Inc. offered to buy Guyana Goldfields Inc. On Monday, a competing offer arose with Gran Colombia Gold Corp. tabling a bid for Guyana.
The latest round of M&A has come as gold bullion has rallied in recent months to multiyear highs. On Monday, gold traded around US$1,700 an ounce.
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