NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.
TORONTO, ONTARIO–(Marketwired – Nov. 16, 2015) – Kirkland Lake Gold Inc. (“Kirkland Lake” ) (TSX:KGI) and St Andrew Goldfields Ltd. (“St Andrew”) (TSX:SAS)(OTCQX:STADF) are pleased to announce that they have entered into a binding definitive agreement (the “Agreement”) whereby Kirkland Lake will acquire all of the outstanding common shares of St Andrew pursuant to a plan of arrangement (the “Transaction”) to create a multi-asset, Ontario-focused, intermediate gold producer.
Under the terms of the Agreement, common shareholders of St Andrew will receive 0.0906 of one common share of Kirkland Lake (the “Exchange Ratio”) for each St Andrew common share held. The Exchange Ratio represents the equivalent of C$0.47 per St Andrew common share, based on the closing price of Kirkland Lake on November 16, 2015. The Exchange Ratio implies a 46% premium based on both companies’ 20-day volume-weighted average prices and a 25% premium to St Andrew’s closing price, both as at November 16, 2015 on the Toronto Stock Exchange. The Exchange Ratio implies a total equity value of approximately C$178 million on a fully diluted in-the-money basis.
Upon completion of the proposed Transaction, existing Kirkland Lake and St Andrew shareholders will own approximately 71% and 29% of the combined company, respectively.
Highlights of the Combined Company
- Diversified production base – Combined entity will operate four mines and two mills in Ontario’s southern Abitibi greenstone belt, one of the world’s most attractive mining jurisdictions;
- Strong financial position and flexibility – Combined entity will have increased financial flexibility through the aggregated positive cash position and anticipated free cash flow;
- Enhanced scale and capital markets profile – Expected to increase analyst coverage, enhance share trading liquidity and appeal to a larger shareholder base;
- Strong production growth profile – Combined entity is expected to produce 260-310 koz gold in 2016 with attractive cash costs between US$600-690/oz gold;
- Exploration opportunity – Combines two companies with significant exploration upside in two historically prolific and underexplored camps, close to existing mine infrastructure;
- Re-valuation opportunity – Combined entity will have diversified production and cash flow, a strong balance sheet, and substantial prospects for significant growth driven by a proven management team, which creates the opportunity for a re-rating more in line with other mid-tier gold producers.
George Ogilvie, President & CEO of Kirkland Lake, stated: “This transaction adds high quality assets and ounces to our existing operations and is immediately accretive to our production, net asset value and cash flow on a per share basis. With this acquisition we continue to focus on gold production in proven and safe mining jurisdictions. We believe this creates both financial and operational synergies which will contribute greatly to our continued success.”
Duncan Middlemiss, President & CEO of St Andrew, stated: “We are pleased to be combining with another established producer to create a leading intermediate gold producer focused in Canada. St Andrew shareholders will have the opportunity to benefit from the promising potential of the combined company, with greater trading liquidity and capital markets exposure to drive shareholder value. Both St Andrew Goldfields and Kirkland Lake Gold are pleased to bring forth a consolidated Abitibi focused company, as we all believe in the huge potential of our assets.”
Benefits to Kirkland Lake Shareholders
- The acquisition is accretive to Kirkland Lake shareholders based on net asset value, production and cash flow per share
- Over 50% increase in proven & probable gold reserves to a combined 2.3 Moz Au, and over 100% increase in measured & indicated gold resources, supporting long-term sustainable production profile
- Production from four mines and two mills with expected production of 260 – 310 koz in 2016
- Exploration potential on the St Andrew properties across 120km of strike length situated along the Porcupine-Destor Fault Zone
Benefits to St Andrew Shareholders
- Immediate premium to St Andrew shareholders of 46% based on the 20-day volume-weighted average closing prices of both companies and a 25% premium to St Andrew’s closing price on November 16, 2015
- Enhanced financial position with free cash flow from Kirkland Lake’s high-quality Macassa mine
- Ongoing exposure to St Andrew’s producing mines and exploration portfolio through an all-share transaction
- Exposure to financial and operational synergies of combining the two companies
- Significantly improved trading liquidity and capital markets exposure
Transaction Summary
The Transaction will be carried out by way of a court approved plan of arrangement and will require the approval of at least 66 2/3% of the votes cast by the shareholders of St Andrew at a special meeting of St Andrew shareholders expected to be held in January 2016. The issuance of shares by Kirkland Lake under the Arrangement is also subject to the approval of a majority of the votes cast by the shareholders of Kirkland Lake at a special meeting of Kirkland Lake shareholders expected to be held in January 2016.
The directors and senior officers of St Andrew, representing approximately 5% of the outstanding St Andrew common shares, have entered into support agreements pursuant to which they have agreed to vote in favour of the proposed transaction. Other shareholders of St Andrew have entered into support agreements pursuant to which they have agreed to vote approximately 29% of St Andrew’s outstanding shares in favour of the proposed transaction.
The directors and senior officers of Kirkland Lake, representing approximately 10% of the outstanding Kirkland Lake common shares, have entered into support agreements pursuant to which they have agreed to vote both their Kirkland Lake Gold shares and their St Andrew shares, if any, in favour of the proposed Transaction.
In addition to the requisite shareholder and court approvals, the proposed Transaction will be subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary for a transaction of this nature. The Arrangement includes customary deal protections, including mutual covenants not to solicit other acquisition proposals, a right to match provision for Kirkland Lake, a reciprocal break fee payable in an amount of C$7.1 million and a reciprocal expense reimbursement fee of C$1.0 million payable by one party to the other party in certain circumstances if the Transaction is not completed.
Both Kirkland Lake and St Andrew have formed special committees of independent directors to review and approve the proposed Transaction. Based on the respective recommendations of the special committees, the Agreement has been unanimously approved by the Boards of Directors of each of Kirkland Lake and St Andrew. Each of the Kirkland Lake and St Andrew Boards of Directors will recommend that their respective shareholders vote in favour of the proposed Transaction and have determined that the proposed Transaction is in the best interest of their respective shareholders based on a number of factors, including fairness opinions received from their respective financial advisors.
The special committee of independent directors of Kirkland Lake has received an opinion that based upon and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration to be paid by Kirkland Lake pursuant to Transaction is fair, from a financial point of view, to Kirkland Lake. The special committee of independent directors of St Andrew has received an opinion that based upon and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration to be received by St Andrew shareholders pursuant to the Transaction is fair, from a financial point of view to St Andrew shareholders.
Upon completion of the Transaction, one mutually acceptable nominee of St Andrew will be appointed to the Board of Directors of Kirkland Lake, with the existing 7 directors of Kirkland Lake continuing as directors.
Upon completion of the Transaction, Kirkland Lake will have approximately 117.6 million common shares issued and outstanding.
Meeting materials with respect to the Transaction are expected to be mailed to the respective shareholders of Kirkland Lake and St Andrew in December 2015, with closing of the Transaction to occur as soon as reasonably practicable following the respective shareholder votes and receipt of regulatory and court approvals.
A copy of the Agreement, the meeting materials and related documents will be filed under the SEDAR profile of both Kirkland Lake and St Andrew at www.sedar.com.
Advisors and Counsel
The financial and legal advisors to Kirkland Lake and its Board of Directors are Macquarie Capital Markets Canada Ltd. and Stikeman Elliott LLP, respectively. The financial advisor of the special committee of Kirkland Lake is CIBC World Markets Inc.
The financial and legal advisors to St Andrew are BMO Capital Markets and McMillan LLP, respectively.
Qualified Persons
Messrs. George Ogilvie, P.Eng, Christopher Stewart, P.Eng. and Stewart Carmichael, P.Geo, of Kirkland Lake, are all Qualified Persons as defined under National Instrument 43-101 (“NI 43-101”). All of the scientific and technical disclosure contained in this news release regarding the Kirkland Lake project was reviewed and approved by Mr. Ogilvie, Mr. Stewart and Mr. Carmichael. As the Chief Executive Officer, VP Operations and Manager of Exploration of Kirkland Lake, respectively, neither Mr. Ogilvie, Mr. Stewart or Mr. Carmichael are considered independent.
Messrs. Duncan Middlemiss, P.Eng., Marc-Andre Pelletier, P.Eng. and Doug Cater, P. Geo. of St Andrew, are all Qualified Persons as defined under National Instrument 43-101. All of the scientific and technical disclosure contained in this news release regarding the St Andrew properties was reviewed and approved by Mr. Middlemiss, Mr. Pelletier and Mr. Cater. As the Chief Executive Officer, VP and General Manager of Operations and VP Exploration of St Andrew, respectively, neither Mr. Middlemiss, Mr. Pelletier or Mr. Cater are considered independent.
Conference Call and Webcast
Kirkland Lake and St Andrew will host a joint conference call on Tuesday, November 17, 2015 at 8:30 a.m. Eastern Standard Time. You are invited to participate via teleconference using the details below. Participants may also join the call via webcast at www.sasgoldmines.com. A playback of the conference call will be available via the website and will be posted within 24 hours of the call.
Participant dial-in numbers:
Toll-free North America: 1 (888) 886-7786
Toll-free United Kingdom: 0-800-652-2435
International: +1 416 764 8658
About Kirkland Lake Gold Inc.
Kirkland Lake Gold Inc. is a gold producer with assets in Kirkland Lake, northeastern Ontario. Current gold production is in excess of 150,000 ounces per year and is expected to grow to over 180,000 ounces per year in the next three years as exploration and development work continue. The exploration program is aimed at maintaining a property wide reserve and resource base sufficient to sustain a mine life of more than ten years, with the current mine life estimated at between ten to fourteen years of production in a high grade gold camp.
Kirkland Lake Gold Inc. is committed to building a sustainable mining company that is recognized as a safe and responsible gold producer. Kirkland Lake Gold plans to evolve into an intermediate gold mining company centered in the historically robust Kirkland Lake gold camp, while evaluating opportunities for growth in other safe mining jurisdictions.
About St Andrew Goldfields Ltd.
St Andrew Goldfields Ltd. is a gold mining and exploration company with an extensive land package in the Timmins mining district, north-eastern Ontario, which lies within the Abitibi greenstone belt, the most important host of historical gold production in Canada. St Andrew will produce approximately 105,000 ounces of Au this year with 2016 production growth potentially up to 140,000 ounces of Au. St Andrew owns and operates the Holt, Holloway, and Taylor mines. In addition, St Andrew is also conducting a targeted exploration program across 120km of land straddling the Porcupine Destor Fault Zone.
For Cautionary Statement on Forward-Looking Information, click here: http://www.juniorminingnetwork.com/junior-miner-news/press-releases/709-tsx/kgi/13747-kirkland-lake-gold-creates-an-ontario-focused-intermediate-gold-producer-with-the-acquisition-of-st-andrew.html
Cash Costs
“Cash costs” per ounce figures is a non-GAAP measure. This data is furnished to provide additional information and is a non-IFRS measure. Cash costs presented do not have a standardized meaning under IFRS and may not be comparable to similar measures presented by other mining companies. It should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS.
This announcement is for informational purposes only and does not constitute an offer to purchase, a solicitation of an offer to sell the share or a solicitation of a proxy.
Kirkland Lake Gold Inc.
Toll Free: 1-866-384-2924
www.klgold.com
Kirkland Lake Gold Inc.
George Ogilvie, P.Eng
Chief Executive Officer
+1 416-840-7884
ogilvie@klgold.com
Kirkland Lake Gold Inc.
Suzette N. Ramcharan, CPIR
Director of Investor Relations
Direct: +1 647-361-0200; Mobile: +1 647-284-5315
sramcharan@klgold.com
Kirkland Lake Gold Inc.
Jennifer Wagner, LL.B
Corporate Legal Counsel
+1 647-361-0198
jwagner@klgold.com
St Andrew Goldfields Ltd.
Toll Free: 1-800-463-5139
www.sasgoldmines.com
St Andrew Goldfields Ltd.
Duncan Middlemiss, P.Eng
Chief Executive Officer
+1 416-815-9855
dmiddlemiss@sasgoldmines.com
St Andrew Goldfields Ltd.
Keyvan Salehi, P.Eng, MBA
VP Corporate Development and Technical Services
+1 416-815-9855
ksalehi@sasgoldmines.com