Ein sehr interessantes Video. Mittlerweile habe ich es mir auch angeschaut. Grundsätzlich ist der Herr positiv gestimmt was unsere Kirkland angeht, jedoch gibt es auch hier 2 Baustellen: Einmal die niedrigen Reserven und dann dass begrenzte Wachstumsprofil, für die nächsten Jahre. Ich bin aber mittlerweile positiv gestimmt, dass es durch Exploration und Erweiterungen in Macassa und Australien, diese ausgeweitet werden können, was Produktion und Reserven angeht. Außerdem hoffe ich das Sie noch eine gute Lösung für Taylor und co finden. Aktuell ist es noch nicht zufriedenstellend gelöst. Ein weitere Ounkt wäre Übetnahme einer laufenden Mine, oder einer Explorationsgesellschaft. Daneben sind wir noch an aussichtsreichen Explorers und Entwickler ( Bonterra, Osisko, De grey, Nobo Resources) beteiligt. Sollte hier weiterhin alles reibungslos verlaufen und der Goldpreis stabil bis leicht steigend sein, sollten in den nächsten Monaten neue Hochs erklommen werden. Aktuell liegen wir im 4 Quartal, über den 1474 US-Dollar pro Unze, vom 3 Quartal. Dazu hat ja noch KL eine kleine Dividende und das Aktienrückkaufprogramm in der Hinterhand!
Kirkland Lake Gold Ltd. (?Kirkland Lake Gold?, the ?Company? or ?KL?) (TSX:KL) (NYSE:KL) (ASX:KLA) and Detour Gold Corp. (TSX: DGC) (?Detour Gold?) are pleased to announce that they have entered into a definitive agreement (the ?Arrangement Agreement?) whereby Kirkland Lake Gold will acquire all of the issued and outstanding securities of Detour Gold pursuant to a plan of arrangement (the ?Transaction?).
Under the terms of the Transaction, all of the issued and outstanding common shares of Detour Gold will be exchanged at a ratio of 0.4343 of a Kirkland Lake Gold common share for each Detour Gold common share. Upon completion of the Transaction, existing Kirkland Lake Gold and Detour Gold shareholders will own approximately 73% and 27% of the pro forma company, respectively.
The exchange ratio implies consideration of C$27.50 per Detour Gold common share based on the closing price of the Kirkland Lake Gold common shares on the Toronto Stock Exchange (?TSX?) on November 22, 2019, representing a 24% premium to the closing price of the Detour Gold shares on the TSX on November 22, 2019. Based on the 20-day volume weighted average price of the Kirkland Lake Gold shares and the Detour Gold shares on the TSX for the period ending November 22, 2019, the exchange ratio implies a premium of 29% to Detour Gold shareholders. The implied equity value of the Transaction is equal to approximately C$4.9 billion.
Adds a Long-Life, High-Quality Asset in a Low-Risk Jurisdiction: Detour Lake is a uniquely large-scale, long-life Canadian mine, with current production of ~600 koz per year and substantial growth potential. Solidifies Kirkland Lake Gold?s Position as a Senior Gold Producer with Industry-Leading Free Cash Flow: Enhanced scale with pro forma 2019 production targeted at +1.5 Moz and analyst consensus 2019 free cash flow of almost US$700 million. Bolsters Financial Strength and Capital Markets Profile: Combined net cash balance of US$630 million (as at September 30, 2019), with increased public float, liquidity, and access to capital, provides greater capacity to pursue further growth and return capital to shareholders. Increases Kirkland Lake Gold?s Mineral Reserve Base and Complements Existing Operating Profile: Transaction adds 15.41 Moz to Kirkland Lake Gold?s mineral reserve base and extends reserve life index2 by 8 years. Enables Value-Creation through Continued Optimization and Potential Expansion of Detour Lake: Financial strength and technical expertise of the combined company is expected to support the continued optimization and potential expansion of Detour Lake; opportunities exist to significantly increase production at improved unit costs and to expand current mineral reserves and mineral resources. Provides Attractive Exploration Upside: Detour Gold?s land position covers 1,040 km2 along northernmost sections of the prolific Abitibi Greenstone Belt (including 646 km2 on existing Detour Lake property); combination of free cash flow generating operations, significant in-mine growth potential, and considerable regional exploration upside is a common feature among Detour Lake and Macassa in Canada and Fosterville in Australia. Potential to Deliver Synergies: Expected pre-tax synergies of approximately US$75 ? US$100 million per year.
Tony Makuch, President and Chief Executive Officer of Kirkland Lake Gold, commented: ?The acquisition of Detour Gold is an excellent fit for Kirkland Lake Gold. We have already taken two mining operations, Macassa and Fosterville, and transformed them into high-quality assets that generate industry-leading earnings and free cash flow. The addition of Detour Lake provides an opportunity to add a third cornerstone asset that is located in our back yard in Northern Ontario. Detour Lake will provide the pro forma company with a 20-plus year mine life which provides unparalleled optionality and excellent growth potential for the benefit of all shareholders. The management team at Detour Gold has done an exceptional job in making improvements and building momentum at the mine. Once the Transaction is completed, we will continue efforts to optimize current operations and commence engineering work to evaluate expansion opportunities at Detour Lake, which we anticipate could lead to significant production growth, improved unit costs and higher levels of mineral reserves and mineral resources.
?Turning to exploration, we are planning extensive drilling at highly prospective exploration targets within the 1,040 km2 Detour Gold land position, where we believe there is considerable potential for new discoveries to support future mineral resource growth. The work we are planning around Detour Lake will be a key component of our corporate exploration program going forward. Other anticipated components of this program include ongoing drilling at Macassa to grow the South Mine Complex and identifying high-grade gold zones along the Amalgamated Break, as well as continued extensive exploration at Fosterville and Northern Territory.
Mick McMullen, President and Chief Executive Officer of Detour Gold, commented: ?This Transaction recognizes the improvements we have made to re-engineer Detour Gold?s operations and business practices, while providing our shareholders with an immediate premium and a unique opportunity to gain exposure to a diversified portfolio of low-cost, high-grade mines in prolific and low-risk mining jurisdictions. Our significant mineral resource base, exploration potential, and long-life production profile are a great addition to the Kirkland Lake Gold portfolio, and we are excited that we can share in the growth opportunities that exist going forward. Importantly, Kirkland Lake Gold?s strong balance sheet and cash generating capabilities will support additional investment in the exploration of Detour Lake to help unlock further growth potential.?
BENEFITS TO DETOUR GOLD SHAREHOLDERS
Provides an immediate and significant premium of 29% based on the 20-day volume weighted average price of the Kirkland Lake Gold shares and Detour Gold shares on the TSX for the period ending November 22, 2019, and 24% to the closing price of the Detour Gold shares of C$22.21 per share on the TSX on November 22, 2019. Diversifies portfolio and eliminates single asset risk, while maintaining exposure to Detour Lake and provides opportunity to participate in future upside through Kirkland Lake Gold?s continued optimization, and potential expansion, of Detour Lake, and its plan to extensively explore the 1,040 km2 Detour Gold land position. Provides exposure to Kirkland Lake Gold?s high-quality portfolio of low-cost, high-grade mines, in low-risk jurisdictions with further upside from district-scale exploration potential and organic mineral reserve growth. Significantly enhances financial strength, free cash flow generation, and trading liquidity for Detour Gold shareholders. Allows Detour Gold shareholders to participate in Kirkland Lake Gold?s capital return program, including its attractive quarterly dividend, currently set at US$0.06 per share, and its ongoing normal course issuer bid. Participation in the potential synergies identified by Kirkland Lake Gold.
BENEFITS TO KIRKLAND LAKE GOLD SHAREHOLDERS
Addition of a third cornerstone asset with ~600 koz current production and potential for significant growth. Enhances financial strength with combined net cash of US$630 million (as at September 30, 2019), and analyst consensus 2019 free cash flow of almost US$700 million from assets in Australia and Canada. Grows mineral reserves via addition of 15.41 Moz to mineral reserves base, while growing mineral reserve life index2 by 8 years. Opportunity for value creation through continued optimization and expansion of current production, mineral reserves and mineral resources, and mine life at Detour Lake. Provides attractive exploration upside from highly prospective targets on the 1,040 km2 Detour Gold land position within the prolific Abitibi Greenstone Belt. Expected to deliver immediate cash flow per share and net asset value per share accretion. Potential to realize expected pre-tax synergies of approximately US$75 ? US$100 million per year.
The Transaction will be effected by way of a court-approved plan of arrangement under the Canada Business Corporations Act, requiring the approval of at least 66 2/3% of the votes cast by the shareholders of Detour Gold voting in person or represented by proxy at a special shareholders? meeting to consider the Transaction. The issuance of shares by Kirkland Lake Gold in connection with the Transaction is subject to the approval of a majority of the votes cast by the shareholders of Kirkland Lake Gold voting in person or represented by proxy at a special shareholders? meeting.
Officers and directors of Kirkland Lake Gold have entered into voting support agreements pursuant to which they have agreed, among other things, to vote their Kirkland Lake Gold shares in favour of the Transaction. Officers and directors of Detour Gold have entered into voting support agreements pursuant to which they have agreed, among other things, to vote their Detour Gold shares in favour of the Transaction.
In addition to shareholder and court approvals, the Transaction is subject to applicable regulatory approvals including, but not limited to, TSX approval and approval under the Competition Act (Canada) and the satisfaction of certain other closing conditions customary in transactions of this nature. The Arrangement Agreement contains customary provisions including reciprocal non-solicitation, ?fiduciary out? and ?right to match? provisions, as well as a US$148 million termination fee payable to Kirkland Lake Gold under certain circumstances and a US$202 million termination fee payable to Detour Gold under certain circumstances.
Upon completion of the Transaction, management of the combined company will feature proven and experienced mining and business leaders at both the Board of Directors and executive team levels, along with diverse, high-performing teams at the combined company's regional and operating sites. Full details of the Transaction will be included in the respective management information circulars of Kirkland Lake Gold and Detour Gold, expected to be mailed to shareholders in December 2019. Both shareholder meetings and closing of the Transaction are expected by the end of January 2020.
BOARDS OF DIRECTORS? RECOMMENDATIONS
The Arrangement Agreement has been unanimously approved by the Board of Directors of each of Kirkland Lake Gold and Detour Gold, including, in the case of Detour Gold, following the unanimous recommendation of a special committee of independent directors of Detour Gold. Both Boards of Directors unanimously recommend that their respective shareholders vote in favour of the Transaction.
RBC Capital Markets has provided a fairness opinion to the Board of Directors of Kirkland Lake Gold stating that, as of the date of such opinion, and based upon and subject to the assumptions, limitations and qualifications stated in such opinion, the consideration to be paid under the Transaction is fair, from a financial point of view, to Kirkland Lake Gold.
Each of BMO Capital Markets and Citi provided the Detour Gold special committee and Board of Directors with an opinion, dated November 24, 2019, to the effect that, as of the date of such opinion, the consideration provided for in the Transaction was fair, from a financial point of view to holders of Detour Gold common shares (other than, as applicable, Kirkland Lake Gold and its affiliates), in each case, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinions.
None of the securities to be issued pursuant to the Transaction have been or will be registered under the United States Securities Act of 1933, as amended (the ?U.S. Securities Act?), or any state securities laws, and any securities issuable in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.
ADVISORS AND COUNSEL
RBC Capital Markets is acting as financial advisor to Kirkland Lake Gold and Cassels Brock & Blackwell LLP and Dorsey Whitney LLP are acting as Kirkland Lake Gold?s legal advisors.
BMO Capital Markets is acting as financial advisor to Detour Gold in connection with the Transaction. Citi has acted as financial advisor to the Detour Gold special committee in connection with the Transaction. Stikeman Elliott LLP, Jones Day and Squire Patton Boggs are acting as Detour Gold?s legal advisors.
Kirkland Lake Gold and Detour Gold will host a joint conference call today, Monday, November 25, 2019, at 8:30 am ET, for members of the investment community to discuss the Transaction. Call-in information is provided below. The call will also be webcast and accessible on the Kirkland Lake Gold and Detour Gold websites at www.klgold.com and www.detourgold.com, respectively.
A copy of the investor presentation is also available, and an audio recording of the conference call will be made available shortly after the call, on the Kirkland Lake Gold and Detour Gold websites.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a growing gold producer operating in Canada and Australia that produced 723,701 ounces in 2018 and is on track to achieve significant production growth over the next three years, including target production of 950,000 ? 1,000,000 ounces in 2019, 930,000 ? 1,010,000 ounces in 2020 and 995,000 ? 1,055,000 ounces in 2021. The production profile of the Company is anchored by two high-grade, low-cost operations, including the Macassa Mine located in Northern Ontario and the Fosterville Mine located in the state of Victoria, Australia. Kirkland Lake Gold?s solid base of quality assets is complemented by district scale exploration potential, supported by a strong financial position with extensive management and operational expertise. The Company?s shares trade on the Toronto, New York and Australian Stock Exchanges under the trading symbol KL.
About Detour Gold Corporation
Detour Gold is a mid-tier gold producer in Canada that holds a 100% interest in Detour Lake, a long-life, large-scale open pit operation. Detour Gold?s shares trade on the Toronto Stock Exchange under the trading symbol DGC.
The Toronto Stock Exchange has neither reviewed nor accepts responsibility for the adequacy or accuracy of this news release.
Also ich finde die Übernahme positiv. Der Aufschlag ist in Ordnung würde ich sagen. Beträgt ja ca. 29 % . Dazu bekommen wir eine große Mine mit einer langen Laufzeit dazu, in einer sicheren Region. Dadurch das der Kauf mit Aktien getätigt werden wird, bleibt die Firma weiterhin schuldenfrei. Das ist ganz wichtig. Die Barreserven werden dazu erhöht. Wermutstropfen ist natürlich die Verwässerung. Das Umtauschverhätnis wird 0,4343 für eine Kirkland Aktie sein. Das bedeutet wir werden in Zukunft 91.15957 Aktien dazu bekommen, wenn ich richtig gerechnet habe. Da bin ich gespannt wie der Markt bei Kirkland reagieren wird. Normalerweise gibt der Übernehmer ab und das übernommene Unternehmen legt zu. Endlich gibt es eine signifikante Mineral Reserven Steigerung auf über 15 Mio oz. Dazu sollen sich die Synergien jährlich auf ca. 75-100 Mio US Dollar belaufen. Was auch wichtig ist, ist das große Landpaket von Detour. Jetzt können Sie weiter Gas geben bezüglich Exploration. Dadurch das beide Parteien diesen Deal wollen, wird dieser höchstwarscheinlich statt finden. Ich würde mal behaupten hier ist denen ein Coup geglückt. Ich muss mir mal die Produktionskosten und die Grades bei Detour anschauen.
Wenn das alles hier reibungslos über die Bühne gehen sollte, werden wir auf den Spuren von Agnico wandeln. Wir werden dann ein großer Produzent sein, mit ausschlieslich Minen in sicheren Abbauregionen. Außerdem wird viel Risiko rausgenommen, da ja bei Fosterville nicht ewig diese hohen Grades vorhanden sein werden. Die Geschichte wird hier immer interessanter. Auch stimmt das Verhältnis finde ich. Die Produktionssteigerungen werden hier höher sein prozentual gesehen, als die Verwässerung. Das ist ein guter und wichtiger Punkt wie ich finde.
Ich war zwar im ersten Moment positiv gestimmt, jedoch finde ich die Grades und die Gesamtkosten im Vergleich zur Kirkland schlecht. Passt ja so nicht ins Profil. Allerdings habe ich mir jetzt die Präsentation von Detour angeschaut und da muss ich Nebelparder recht geben. Auf mittlere bis längerfristige Sicht gibt es enorm viel Potenzial was Unzen und die Gesamtkosten angeht.
Detour hat aktuell 5,7 Mio oz Mineral Resourcen + 15,4 Mio oz Mineral Reserven. Das ist schon enorm im Vergleich zu Kirkland, auch wenn die Grades durchweg unter 1 gramm sind. Bisher haben die nur eine kleine High Grade Zone 58N mit ?ca. 670000 Unzen mit 4,35 - 5,80 gramm.
Die neuen Aktien die dazu kommen werden belaufen sich bei 174 Mio. Aktien auf 75.568,200 Aktien. Ich habe mit dem falschen Wert gerechnet.
Die Reservelaufzeit beträgt satte 22 Jahre, dazu ist der Reservepreis mit 1100 Cad/pro Unze deutlich unter dem aktuellen Goldpreis in Canada in Höhe von über 1900 Cad.
80% Institutionelle Investoren davon 13 % van eck
5 % Resolute(ob die jetzt verkaufen werden? kann den Kurs kurzfristig zusätzlich schaden)
5 % Dimensione
Minenlaufzeit beträgt 20 Jahre aktuell bei Detour. Das ist auch schon sehr lange für heutige Verhältnisse.
Im Vergleich zur Konkurrenz von Detour hat man hohe Reserven. Aktuelles Medianverhältnis ist bei der peer group 5,6 Mio Unzen Gold.
Synergien laut Kirkland zwischen 75-100 Mio Dollar im Jahr. Das ist ein guter Wert, wenn dieser so umgesetzt werden kann.
Operating costs sollen von 2019 bis 2021 von 808 Dollar auf bis zu 640 US Dollar fallen. Gesamtkosten sollen von 1275 US Dollar auf bis zu 1000 US Dollar fallen. Danach soll es weiter bis auf unter 900 US Dollar Gesamtkosten fallen(2023).
Credit Facility undrawn 270,1 Mio US Dollar
Outstanding debt im Jahre 2020 sind 199,7 Mio US Dollar
Die TMA Costs sollen von aktuell ca. 80 Mio auf unter 20 Mio US Dollar im Jahr 2022 fallen.
Detour Gold P/NAV 0,99. Der Medianwert ist hier 1,23
P/2020E CAF 8,1. Der Medianwert ist hier 5,2
EV/2020E EBITDA 8,4. Der Medianwert ist hier 6,0. Die Werte beziehen sich auf die Peer Group von Detour Gold.
Dazu hat man noch ein riesiges Explorationspotenzial und die Minen von beiden Unternehmen sind in einem Umkreis von 200 km entfernt.
Da die meisten mit einem High Grade Projekt gerechnet haben und nicht mit einem Low Grade Projekt, gehe ich erstmal von sinkenden Kursen aus. Das ist ärgerlich, da ich im umgekehrten Fall von steigenden Kursen ausgegangen bin. Mittel-langfristig bin ich aber hier weiterhin positiv gestimmt. Man sieht das, dass Management auf Masse statt auf Klasse hier gesetzt hat. Die Zeit wird es zeigen ob die Entscheidung richtig war.
Eric Sprott explains what investors are getting wrong about Kirkland's all-stock Detour Gold deal 'The more I reflect on Detour, I think we?re ?stealing value? ? value that the market?s not seeing,' Sprott told the Financial Post
Toronto-based Kirkland Lake Gold Ltd. on Monday announced a multibillion dollar acquisition of Detour Gold Corp., a deal that would elevate it into a major gold miner and could attract new institutional investors.
But investors weren?t impressed, with the stock declining 16 per cent by mid-afternoon to $40 on the Toronto Stock Exchange. Detour rose 3.6 per cent to $23.
The combination marries two near opposites: Kirkland Lake operates two high grade underground mines at some of the lowest cash costs in the sector, whereas Detour operates a single, low grade bulk tonnage open pit mine at comparatively higher costs.
An historic gold mine in a tiny Ontario town could be the epicentre of Canada?s next great gold rush Sprott CEO hunting for bargains among beaten-up gold companies Mining in Canada is shrinking, and a wave of impassioned community opposition is partly to blame
The acquisition would boost Kirkland?s annual gold production by about one-third to more than 1.5 million ounces per year, but its costs are also expected to rise.
The value of the all-stock deal was somewhat uncertain as of Monday, initially pegged at $4.9 billion but falling with Kirkland?s stock. If some investors expressed initial skepticism, one of the biggest and perhaps most important investors in Kirkland, billionaire Eric Sprott, who stepped down as chairman earlier this year, said he would support the deal.
?The more I reflect on Detour, I think we?re ?stealing value? ? value that the market?s not seeing,? Sprott told the Financial Post.
Detour reported all-in sustaining costs of $1,198 in the third quarter whereas Kirkland reported all-in sustaining costs of $562, about half of that. Eric Sprott in October 2019. Peter J. Thompson/National Post
Nonetheless, Sprott said he had been studying Detour: With gold prices rising ? about 15 per cent since June to US$1467 per ounce ? higher cost producers can catch momentum more quickly than lower cost producers because they?re starting from a lower profit base.
For example, Detour reported revenue from mining operations of US$59.8 million in the third quarter ? compared to about US$15 million in the same quarter one year earlier. It said in its report that it had sold its gold for US$222 per ounce more on average during the quarter than the prior period.
Sprott also said he was encouraged by signs that Detour looks like it?s bringing costs down to around US$1,100 per ounce, and that could increase its gold production beyond the 621,000 ounces produced in 2018.
?I think we?re on the cusp of something really special,? he said. ?I think a lot of good things will happen at that property.?
Tony Makuch, chief executive of Kirkland Lake, said his company was attracted to Detour Lake by its sheer size. It provides the company with 15.4 million ounces of proven reserves, roughly triple what the company holds between its two underground mines, with Fosterville in Australia at about 2.7 million ounces, and Macassa, in Ontario at 2.2 million ounces.
I think we?re on the cusp of something really special Eric Sprott
Plus, he said Detour is already lowering its costs, and its production has been rising on track to produce more than 600,000 ounces for a second straight year.
?You can see potential to get this up to well over 800,000 ounces per year production,? he said, adding that the company had spent only about $40 million on exploration during the past five years ? which Kirkland will look to increase.
Makuch said his company had long been interested in the mine, dating back to 2018 when Detour investor, John Paulson, a billionaire, successfully ousted the board and replaced the management, citing poor performance. A spokesman for Paulson & Co. declined to comment on the proposed merger.
He said initial discussions began in August, but didn?t really pick up speed until last Thursday.
?It came together fairly quickly,? said Makuch.
Both Detour?s Lake mine and Kirkland?s Macassa underground mine are located on Ontario?s Abitibi Greenstone belt, about several hundred kilometres away from each other, and Kirkland Lake said it expects about $75 to $100 million in pre-tax synergies. A gold pour at a Kirkland Lake Gold site. Handout/Kirkland Lake Gold.
The management of both companies declined to provide any details of how that would be achieved during a conference call on Monday morning.
Kerry Smith, an analyst at Haywood Securities who covers Detour, said he thinks the combined company, which would have a market valuation of around US$14 billion, could attract new institutional investors who want a gold stock in their portfolio, but who viewed Kirkland and Detour as too small or lacking in liquidity.
?All of a sudden you?re getting another company that could be a name these investors gravitate to,? he said.
David Neuhauser, managing director of a Illinois-based hedge fund, Livermore Partners, was ecstatic about the deal: In 2018, during the activist campaign launched by Paulson, he bought into Detour at around $11 per share.
In recent months, he had started to sell down his position as Detour?s stock soared above $24.
He predicted more consolidation in the gold space. Since 2018, there have been at least two other megamergers, with Barrick Gold Corp. swallowing Randgold Resources Ltd. in a US$6-billion deal and Newmont Gold Corp. merging with Goldcorp Inc. in a US$10-billion deal.
Under the deal, Kirkland agreed to exchange 0.43 of its shares for each Detour share, which give Detour shareholders approximately 27 per cent of the newly combined entity.
Before the deal was announced, Kirkland had been trading at $63.33, one of the best performing stocks on the TSX during the past two years, rising 228.5 per cent in that time.
Having dropped 16 per cent, to $53.24, that meant the deal still valued Detour?s shares at approximately $22.89 apiece ? slightly less than the $27.50 announced by the companies. A November 2013 handout photo of Detour Gold?s Detour Lake open pit mining. Handout/Detour Gold
Smith noted Kirkland trades at 12 times its cash flow whereas Detour trades at 8 times. The difference in the trading multiple of their net asset value is more stark, he added, calculating Kirkland trades at 2.1 times whereas Detour is 0.9.
?Undoubtedly, (Detour) is higher cost, so investors are wondering what?s going to happen to the multiple,? Smith said.
Kirkland was smart to move while its stock had a high valuation, and could be used as a currency, Smith noted.
It was a point that Sprott, who owns approximately 14 million shares of Kirkland, according to one recent estimate, raised too: Kirkland is not taking any debt to complete the deal.
He compared the market reaction to Kirkland Lake?s acquisition of the Fosterville mine in 2016, which Sprott helped engineer, and which the market initially disliked. Yet after more exploration, Fosterville emerged as one of the highest grade gold mines in the world and helped give Kirkland one of the highest trading multiples of any of its peers.
Eric Sprott explains what investors are getting wrong about Kirkland's all-stock Detour Gold deal 'The more I reflect on Detour, I think we?re ?stealing value? ? value that the market?s not seeing,' Sprott told the Financial Post
?When Kirkland bought Fostervile, everyone hated it, well, the market did,? Sprott said. ?And the market was wrong.?
Makuch said given the exploration potential at Detour Gold?s property it was similar to Fosterville in that it has the potential to provide a big contribution to Kirkland Lake?s bottom line.
?We got to recognize that Fosterville is a special asset, and we may not find another of those in the world, even though we keep looking,? said Makuch. ?And Detour is a very special asset too.?
The deal must be approved by two-thirds of shareholders and is not expected to close until next year.
NEW YORK ? Kirkland Lake Gold CEO Tony Makuch was quick to assuage investors that the planned C$4.9-billion acquisition of Detour Gold Corp. won?t boost the company?s cost after shares tumbled.
Shares of Canada?s Kirkland Lake slumped 16%, poised for the biggest decline since July 2015, after announcing an all-share deal to buy Detour Gold, which operates the Detour Lake mine in Ontario. Detour Lake is expected to produce for more than 20 years and can generate 600,000 ounces a year.
Gold mining acquisitions have surged since 2018 after Barrick Gold?s takeover of Randgold Resources, and Newmont Mining?s acquisition of Goldcorp. Consolidating the projects after the mergers hasn?t been easy for Newmont, which inherited a company saddled by growing pains as it integrates Goldcorp assets.
In the case of Kirkland?s deal, the company will take on Detour Lake, whose cost is double that of the acquiring miner.
?There?s significant benefit in terms of maintaining or reducing costs from current levels,? Makuch said in a telephone interview. ?This is definitely a long-life asset that has potential to grow production and continue to be a long-life asset.?
Kirkland has managed to cut its all-in sustaining cost or the cost to keep its mines in business by almost half to $562/oz in the third quarter, from three years earlier. That compares with a 15% gain in Detour?s cost of $1,198.
Kirkland?s stock price has surged in the three years through Friday, climbing eight-fold, as profits soared. That has put the company in a strong position to expand. The Detour Lake gold mine is about the same size as Kirkland?s biggest project, the Fosterville mine in Australia.
The acquisition ?will increase Kirkland Lake?s overall cost profile", Fahad Tariq, an analyst at Credit Suisse Group AG said in a note before trading started Monday. ?It also raises concerns about potentially weaker exploration updates coming at Fosterville.?
Detour shareholders will receive 0.4343 share of Kirkland, according to the statement. After the deal is completed, existing Kirkland shareholders will own 73% of the new company, with Detour owners holding the rest. The agreement values Detour at C$27.50 a share, a 24% premium to the closing price on Friday, Kirkland said in a statement.
After Kirkland shares plunged Monday, the value of the offer has fallen to C$23. Detour shares advanced 3.3% to C$22.94 in Toronto.
Detour shares have doubled this year, helped by a rally in gold prices. Paulson & Co. led an overthrow of the board in 2018 after a bitter proxy battle, in which he called for the company to put itself up for sale.
The new entity would have gold production of about 1.5-million ounces in 2019 and free cash flow of $700-million, Kirkland said.
Kirkland Lake Buys Detour: How The Acqusition Stacks Up Against Prior Takeovers Nov. 25, 2019 12:56 PM ET| 57 comments | About: Kirkland Lake Gold Ltd. (KL) Taylor Dart Taylor Dart Long/short equity, momentum, gold & precious metals Taylor Dart (16,569 followers) Summary
Kirkland Lake Gold announced this week that they are acquiring Detour Gold Corporation in all all-share deal valued at $3.68 billion US.
The deal will transform Kirkland Lake into a 1.6 million-ounce producer, but will likely take away the company's premium it's enjoyed for its industry-leading cost profile.
On a comparative basis to prior deals, the deal looks quite expensive.
It's been a relatively quiet couple of months on the M&A front in the resource sector, given the excitement around precious metals prices since rate-cut season started in July. The most recent two acquisitions were a takeover of private Russian company N-Mining by Kinross Gold and the Barkerville acquisition by Osisko Gold Royalties (OR). However, as of this morning, we've got the first whiff of animal spirits back in the sector following Kirkland Lake Gold's (KL) acquisition of Detour Gold (OTCPK:DRGDF). This is the largest acquisition we've seen since the Goldcorp (GG) takeover by Newmont (NEM), and a massive deal for Kirkland Lake as this works out to nearly 35% of their current market cap. While the 60% bump in total annual production that Kirkland Lake will enjoy is undoubtedly a positive, I would be highly surprised if the stock did not see a decent hit to its multiple after changing its stripes. Given the $240.00~/oz. paid for the deal, I see the acquisition as expensive, especially given that it will affect Kirkland Lake Gold's multiple going forward.
(Source: Author's Photo)
As we can see from the above image examining the most recent acquisition of Detour Gold by Kirkland Lake, Kirkland Lake has added significantly to its reserve base, more than tripling this figure on a company-wide basis. Kirkland Lake Gold's two flagship projects, Macassa and Fosterville, currently hold a reserve base of roughly 5 million ounces, and Detour Lake has a 15.4 million ounce resource. While this is a massive increase to Kirkland Lake Gold's mine life and allows them to continue to grow production, I would argue that not all reserves are the same. Kirkland Lake Gold's reserve grades before the deal were over 25 grams per ton gold on a consolidated basis, and Detour Gold's reserve grade is 0.96 grams per ton gold. Therefore, the company is transitioning from an ultra-low-cost, high-grade producer, to a larger producer but with higher costs and lower grades on a consolidated basis.
(Source: Company Presentation)
(Source: Detour Gold Company Presentation)
Many investors likely realized that an acquisition by Kirkland Lake Gold was inevitable, but I don't think that Detour Gold was at the top of anyone's list. Not only is the company was one of the highest cost producers in the sector, but it's also an open-pit mine vs. the underground operations that Kirkland Lake Gold has generally specialized in. Given that Kirkland Lake Gold's annual production growth was tapering off, a deal had to be done. However, I'm not elated with the deal, nor the price that was paid to acquire Detour Gold. Let's take a closer look at past acquisitions below:
As we can see from the below table I've built of past acquisitions of gold producers under $5 billion market caps, we can see that the average price paid per ounce was $133.71/oz. It's certainly worth pointing out that most of these deals were done at lower gold prices, and the most recent and applicable comparable was the Atlantic Gold (OTCPK:SPVEF) acquisition by St. Barbara Mines earlier this year at a price tag of $239.13/oz. However, St. Barbara was getting a world-class asset by acquiring Atlantic Gold's Moose River Project in Nova Scotia, as the trailing-twelve-month all-in sustaining costs at the project were below $600/oz. Therefore, while it may have looked like St. Barbara was paying an arm and a leg to acquire Atlantic Gold, it was getting the 2nd lowest cost producer in a tier-1 jurisdiction in the mining sector at the time.
(Source: Author's Table)
(Source: Author's Table)
If we take a look at the Kirkland Lake acquisition of Detour Gold, we've got the same price paid per ounce, but Atlantic Gold's costs were half what Detour Gold's costs are. Detour Gold's all-in sustaining costs on a trailing-twelve-month basis are $1,121/oz, more than double Atlantic Gold's costs of $550/oz. Therefore, while Kirkland Lake Gold is paying a deserved premium for an asset in a tier-1 jurisdiction, this should be discounted by the fact that they are buying a cost-leader. Whether Kirkland Lake Gold believes they can get all-in sustaining costs down below $900/oz. long-term is irrelevant, as they are paying for what Detour is today, and I think they overpaid on this basis. Thus far, the market seems to agree with me, with Kirkland Lake Gold tumbling 15% in early trade.
So what is the good news about the acquisition? Let's take a look:
As we can see from the below table of Kirkland Lake Gold's annual production and guidance, the company has squeezed just about as much of the juice out of its current assets as was possible. This is why production growth had tapered on near 1.0 - 1.1 million ounces in FY-2020 and FY-2021, and it wasn't likely to increase past this without a new discovery. The company has transformed Fosterville from an average mine to a world-class asset, and Macassa continues to fire on all cylinders with annual gold production up 30% the past three years and expected to reach 400,000 ounces by 2022 (up from 240,000 ounces this year). Therefore, the decision to acquire Detour Gold allows the company to continue to grow annual production by nearly 60%, and to make a move into the gold major space as the next 1.5 plus million-ounce producer. The deal also allows them to retain their status as a tier-1 producer, with operations all contained to Canada and Australia. If there's one massive silver lining to this deal, it's that Kirkland Lake Gold recognized that it has received a premium for its exceptional jurisdictions, and stayed within its core competency here. An acquisition in a tier-2 jurisdiction would have seen the market throwing the book at Kirkland Lake Gold.
(Source: Kirkland Lake Gold Presentation) (Source: Company Presentation)
In addition to the growth in annual production and maintaining the company's status in tier-1 jurisdictions, Detour Gold may not be the unattractive asset that it looks like on paper. In the conference call, both Kirkland Lake and Detour Gold management discussed that costs should improve considerably at Detour Lake, and we've seen some evidence of operational improvements already in the most recent quarter. As the below chart shows, gold recoveries are up trending up over the past two years, albeit slightly, and all-in sustaining costs are trending down. While this trend down in all-in sustaining costs is already from exorbitantly high levels, it is a step in the right direction.
Ultimately, I see the potential for Detour Lake to produce at below $1,000/oz. all-in sustaining costs, but this is still quite a drag on Kirkland Lake Gold's currently all-in sustaining costs of $584/oz. for the first nine months of 2019. If we apply a weighted average assuming production at Detour Lake is 40% of Kirkland Lake Gold's total output, that leaves us with a current consolidated all-in sustaining cost of $798/oz. for the pro-forma company. Assuming Kirkland Lake Gold can help to drive costs down to $1,000/oz. at Detour Lake, this would give the company a consolidated all-in sustaining cost profile of $750/oz. This is still a nearly 30% jump from the company's current cost basis and justifies a contraction in Kirkland Lake Gold's premium multiple it has enjoyed in the past. I see it as highly unlikely that the market is going to value Kirkland Lake at the same multiple when it's transitioning from the cost-leader in the industry to a slightly better than average cost producer.
(Source: Company Presentation)
The other benefit worth noting, and discussed on the conference call, is the $100 million in synergies the company expects it can achieve on an annual basis. It's worth noting that these synergies should take a minimum of 18 months to realize, but this is significant and indeed a benefit to long-term shareholders if correct.
There are both positives and negatives to the deal, but one must realize that an acquisition of some sort was required to boost Kirkland Lake Gold's reserve life. This reserve life was already dwindling down with only 5 million ounces in reserves left, and a 1-million ounce annual production profile. However, I am not enamored with this acquisition choice, and also believe they overpaid on a relative basis to past acquisitions. For this reason, some short-term turbulence and the market's disapproval is not surprising. Long-term, however, I believe we can give credit to Kirkland Lake Gold CEO Tony Makuch that he made the right choice. The team at Kirkland Lake Gold clearly has a past of under-promising and over-delivering, and I expect that they can drive costs down at Detour Lake while also increasing throughput to the 85,000 - 90,000 ton per day goal at the Detour Lake Mine. It's important to note, though, that these synergies and optimizations are not going to show up overnight. Instead, they should take at least 18 months to play out, and Kirkland Lake Gold is undoubtedly playing the long game.
While Kirkland Lake Gold can now continue its growth strategy given the bump in annual production and 8-year increase in reserve life, this has come at a cost to the company's premium multiple it's received in the past. In addition, the deal has come at a cost to diluting the company's average reserve grade and the company's all-in sustaining cost margins from $580~/oz. to likely $750/oz. at a minimum. In summary, I do not hate the Detour Gold acquisition by Kirkland Lake, but I do think they overpaid and could have got a better price. Based on this, some punishment from the market is not surprising, but long-term shareholders should be fine here if they can sit through some short to medium-term turbulence.
Bin nun auch drin! In meinen Augen ein richtig gutes Invest. Der Deal ist langfristig sehr stark. Goldpreisentwicklung spielt sicher auch eine Rolle. Es war klar, dass es erstmal einen Rücksetzer gibt bei dem Deal, der war da. Jetzt ist in meinen Augen ein guter Einstiegspunkt. Erstes Ziel: 50 USD
Wie lange seid ihr schon dabei? Performance des letzten Jahres ist natürlich sehr stark. Aber ich denke, es ist auch jetzt nicht zu spät.
Nein zu spät ist es nicht. Sind Sie den unter 36 Euro rein ? Allerdings hat Kirkland die größte Performance schon hinter sich. Sollte Kirkland sich aber weiterhin gut entwickeln, vor allem in Bezug auf die Mine von Detour( Produktionserweiterung bis zu 900000 Unzen und die Kostensenkungen bis auf unter 900 US Dollar pro Unze Gesamtkosten in den nächsten 3 Jahren, sowie die erfolgreiche Erweiterung auf Macassa und die Reserveerhöhung auf Fosterville. Hier wird es ganz wichtig sein, ob man die hohen noch Grades weiterhin halten kann). Wenn dies so eintreffen sollte, +weiterhin ein stabiler + leicht steigender Goldpreis vorherrschen sollte, steht einer positiven Aktienentwicklung nichts entgegen.
ja ich bin etwas unter 36 reingekommen. Aktuell knapp 6% Plus. Ich bin gespannt was kommt. Ich kann mir durchaus vorstellen, dass es recht zügig noch einmal in die Region geht, vor dem Deal. Bleibt spannend.
Bin selbst überrascht. Wenige Invests von mir, legen direkt nach dem Kauf um so viel zu. Wann bist du denn rein? Ziehst du deinen VK Preis nach? Welche Ziele hast du bei dem Invest? (gerne auch per PN, um das Forum nicht zuzuspammen)
bin auch heute mit 500St . eingestiegen unter 37?. Gold wird ab Januar wieder massiv steigen und der Deal wird sich für Kirkland sehr gut rechnen. Dann wird das nur eine kleine Kursdelle sein jetzt. Auf so eine Chance hatte ich gewartet.