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Australia’s Alkane Resources Ltd. is buying Canada’s Mandalay Resources Corp. in a US$358-million transaction driven by the contention that bigger is better in the gold industry. Perth-based Alkane and Toronto-based Mandalay hope that, by combining operations, investors will reward the combined company with a “rerate” – a higher stock-market multiple.
Despite record-high bullion prices, many gold miners continue to have difficulty attracting investors. That’s partly owing to the industry’s poor track record, but also the ease at which investors can gain exposure to gold through exchange-traded funds.
Mandalay investors will receive 7.875 Alkane shares for each share held, the companies said in a joint news release on Monday. The premium is only 2 per cent compared with Mandalay’s Friday closing price. The transaction effectively amounts to a reverse takeover, as Alkane is the smaller company by market value, worth roughly US$301-million compared with Mandalay’s US$350-million.
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