Alamos Gold (TSX:AGI,NYSE:AGI) has announced plans to acquire Argonaut Gold (TSX:AR,OTC Pink:ARNGF) for about US$325 million. The deal involves Alamos acquiring all the issued and outstanding shares of Argonaut.
Central to the acquisition is Argonaut’s Magino mine, which lies adjacent to Alamos’ Island Gold mine in Ontario. The integration of these two operations aims to create one of Canada’s largest and most cost-efficient gold operations.
Alamos estimates immediate and long-term synergies of approximately US$515 million from this consolidation.
The combined annual gold production from the Magino and Island Gold mines is projected to exceed 600,000 ounces annually, with the potential for an expansion to over 900,000 ounces.
Concurrently, Argonaut’s assets in the US and Mexico will be spun out into a newly formed junior gold producer. This includes the Florida Canyon mine in the US and several other operations in Mexico.
John A. McCluskey, president and CEO of Alamos Gold, spoke positively about the yields the deal will bring.
“This is a logical and attractive transaction for both companies. The combination of the adjacent Island Gold and Magino mines will immediately unlock tremendous value, with significant longer-term upside through further optimizations of the combined operation, and ongoing exploration success,” he said in a March 27 press release.
“Both assets complement each other well with large Mineral Reserve and Resource bases, long mine lives, and existing infrastructure that can support the bright future for the larger combined operation. Together, Island Gold and Magino will create one of the largest and most profitable mines in Canada, further enhancing our leading position as a Canadian focused intermediate gold producer,’ McCluskey added in the statement.
Upon completion, Alamos shareholders are expected to own approximately 95 percent of the combined company, with Argonaut shareholders owning the remaining 5 percent of shares.
‘This transaction provides a unique opportunity to place Magino in the hands of a well-capitalized and well-run company. We believe with adequate capital and an optimal expansion at Magino, the mine will deliver significant value to all stakeholders,’ remarked Richard Young, president and CEO of Argonaut Gold.
“We are grateful to our team at Magino for their significant contribution and hard work during mine and mill ramp-up. Similarly, we thank our exceptional teams in Mexico and Nevada for their continued hard work throughout the years.’
More gold M&A expected in 2024
Alamos’ acquisition of Argonaut reflects an ongoing trend of mergers and acquisitions (M&A) in the gold sector.
In a recent report, EY notes that although the number of completed gold deals fell from 133 in 2021 to 118 in 2022, overall deal value jumped by 58 percent year-on-year to come in at US$21.5 billion in 2022.
The firm expects more M&A activity this year. ‘With slight moderation in inflation rates compared to the previous year and changes in interest rates in 2023, mid-cap gold miners are aiming to scale up and capitalize on operational synergies, banking on high gold prices and robust margins,’ it states in the document.
Last year brought Newmont’s (TSX:NGT,NYSE:NEM,ASX:NEM) blockbuster acquisition of Newcrest Mining for US$19 billion, the biggest gold merger to date. EY also highlights Pan American Silver (TSX:PAAS,NASDAQ:PAAS) and Agnico Eagle Mines’ (TSX:AEM,NYSE:AEM) joint acquisition of Yamana Gold.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.