Alamos Gold Inc, AuRico to merge their gold businesses in $1.5-billion friendly deal – by Peter Koven (National Post – April 14, 2015)

The National Post is Canada’s second largest national paper.

TORONTO – The friendly merger between Alamos Gold Inc. and AuRico Gold Inc. fills needs for both companies: Alamos has money and wants a mine, while AuRico has a mine and needs money.

The two Toronto-based gold miners announced a US$1.5 billion transaction on Monday to create a significant mid-tier gold producer. The all-stock deal is a true “merger of equals” with shareholders of each company owning 50 per cent of the new entity (which will retain the Alamos name).

This is one the rare deals that everyone seemed to like, as Alamos shares jumped 6.6 per cent to $7.90 on Monday, while AuRico’s jumped 8.2 per cent to $4.09. It’s a zero-premium merger, so there is a chance an interloper will jump in with a bid for one or both companies. However, hostile bidding wars have been extremely rare in the gold mining space over the last couple of years as prices have been low and companies have been very cautious.

Alamos and AuRico have talked on and off for years, according to an industry source. This turned out to be the ideal time to strike a deal: Their market values are almost identical, and a merger will help them gain scale and lower their cost of capital to help deal with a rough gold market. The combined firm will have production of around 400,000 ounces this year, and is expected to have more than 700,000 ounces in 2018.

The new Alamos will have three operating mines in North America, and a pile of development projects in North America and Turkey. The most important asset is AuRico’s Young-Davidson mine in Ontario, which has 5.6 million ounces of gold resources. Alamos chief executive John McCluskey, who will be CEO of the merged company, has been waiting patiently to land an asset like this.

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