Agnico Eagle's current operations, including Meliadine (pictured above) will be joined by Kirkland Lake Gold's operatons under the newly merged company. (Courtesy of Agnico Eagle Mines)

Gold producers Agnico Eagle Mines and Kirkland Lake Gold are merging.

The combined company will keep the Agnico Eagle Mines Limited name, but the deal to create the new entity was described in a Sept. 28 announcement as “a merger of equals.”

Sean Boyd, Agnico Eagle’s CEO, said, “This merger starts a new chapter in Agnico Eagle’s 64-year history and creates the leading low-risk global gold company with growing production, low costs and strong ESG [environmental, social and governance] leadership. The transaction creates a company with a strong platform of people, assets and financial resources to continue to build and operate a long-term sustainable and self-funding business."

Tony Makuch, president and CEO of Kirkland Lake Gold, said, “It is a unique ‘strength-on-strength’ transaction that combines the two global gold producers with the best track records for increasing per share value.  The deal creates an industry leader with a dominant position in the Canadian market that is deserving of a premium valuation and is poised to generate superior long-term shareholder value going forward.”  

The transaction is expected to close either in December 2021 or in the first quarter of 2022. Upon closing, the company is expected to have $2.3 billion of available liquidity, a mineral reserve base of 969 million tonnes of gold at 1.53 grams per tonne. In 2020, Kirkland Lake Gold produced 1,369,652 ounces of gold with all-in sustaining cost of $800 per ounce, while Agnico Eagle Mines produced 1,736,568 ounces at an  all-in sustaining cost of $1,051 per ounce.

The merger will lead to Agnico Eagle Mines taking a dominant position in one of the world’s leading gold regions, the Abitibi-Greenstone Belt of northeastern Ontario and northwestern Quebec. Kirkland Lake operates the Macassa mine, the Detour Lake mine and the (currently suspended) Holt Complex. Agnico Eagle's Canadian operations are the LaRonde Complex, Hope Bay, Canadian Malartic, Meadowbank Complex, and Meliadine.

Outside of Canada, the two companies have assets in Australia, Finland and Mexico.

According to a jointly released statement, “Both companies also share a strong commitment to returning capital to shareholders, with a total of $1.6 billion being returned through dividend payments and share repurchases since the beginning of 2020 (on a pro forma basis)."

Kirkland Lake shareholders will receive 0.7935 of an Agnico Eagle common share for each Kirkland Lake Gold common share held. This valuation represents approximately a one per cent premium on the 10-day volume weighted average prices of Kirkland Lake shares on the Toronto Stock Exchange, as of close of trading on Friday Sept. 24, 2021. The share valuation figures imply a combined market capitalization of approximately $24 billion. Once the deal has been finalized, Agnico Eagle shareholders will hold approximately 54 per cent of the new company, with Kirkland Lake gold shareholders making up the remaining 46 per cent.

BNN Bloomberg calculates the total value of the transaction to be $13.4 billion (US$10.6 billion).

“It is the right deal for our company and its shareholders, our people, the communities where we operate, and all of our key stakeholder groups," Makuch said.

The board of directors of Kirkland Lake Gold approved the merger after consultation with financial and legal advisors and recommends that Kirkland Lake Gold shareholders vote in favour of the merger. The arrangement will require the approval of at least two-thirds of the votes cast by the shareholders of Kirkland Lake Gold. Agnico Eagle shares under the merger are subject to the approval of a majority of votes cast by Agnico Eagle shareholders at a special meeting.

Upon closing, the company’s headquarters will remain at Agnico Eagle’s existing head office. The board of directors of the new Agnico Eagle will consist of 13 directors: seven directors from Agnico Eagle and six directors from Kirkland Lake Gold.

“Kirkland Lake is an excellent cultural fit with Agnico Eagle, and we look forward to working together to further grow our business through exploration, mine development and optimization of our high-quality asset base.  Over time, we believe that the gold industry will continue to evolve and consolidate and with this transaction we are well-positioned to take advantage of high-quality opportunities and be a true Canadian mining champion," Boyd said.