The enlarged entity will have four established mining hubs of scale in tier 1 gold jurisdictions of Western Australia and Ontario, Canada
Red 5 and Silver Lake Resources announce merger deal to create a diversified, mid-tier gold company. (Credit: Thomas from Pixabay)
Australian gold producer Red 5 has agreed to acquire rival Silver Lake Resources in an all-stock deal to create a diversified, mid-tier gold company with an annual production of around 445,000 ounces per annum.
The enlarged company is estimated to have a pro-forma market capitalisation of over A$2.2bn ($1.43bn). It will have four established mining hubs of scale in tier 1 gold jurisdictions of Western Australia and Ontario, Canada.
Under the terms of the binding scheme implementation deed agreed by the parties, Red 5 will take full ownership of the shares in Silver Lake. Each Silver Lake shareholder will be issued 3.434 Red 5 shares for each of the Silver Lake’s shares held.
Upon the completion of the deal, shareholders of Red 5 will hold 51.7% of the merged entity and Silver Lake’s shareholders will own the remaining 48.3%.
Currently, Silver Lake owns nearly 411.7 million ordinary shares in Red 5 or about 11.9% of the latter’s issued share capital.
Silver Lake managing director Luke Tonkin said: “This transaction represents a highly complementary combination of assets and balance sheets for the mutual benefit of both Silver Lake and Red 5 shareholders.
“Mergers work when each company brings attributes that the other company does not possess, which is undoubtedly the case here.”
According to the parties, the merged entity will have a net cash and listed investments position of A$378m ($245.72m). It will also have a strong near-term cash flow generation and a long mine life asset to ensure sustainable production through the cycle.
Red 5 operates the King of the Hills and the Darlot Satellite gold mines in Western Australia. Silver Lake Resources’ projects include Mount Monger and Deflector gold copper mine in Western Australia, and the Sugar Zone mine in Ontario.
Red 5 managing director Mark Williams said: “This transaction represents a logical merger of two leading mid-tier gold companies and represents an exciting inflection point for Red 5 shareholders following the successful development, ramp-up and achieving steady state production at King of the Hills.”
Red 5 and Silver Lake intend to implement the merger by June this year. It will be subject to Silver Lake’s shareholder approval, court approval, and other conditions.
Gresham has been appointed by Red 5 as its financial adviser for the proposed merger, with legal counsel provided by Herbert Smith Freehills in Australia and Davies Ward Phillips & Vineberg in Canada.
On the other hand, Silver Lake has enlisted RBC Capital Markets as its financial adviser for the proposed merger, with EurozHartleys serving as its capital markets adviser, and legal advice being provided by Corrs Chambers Westgarth.