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Westgold and Karora merge to create A$2.2bn Australian gold miner

8th April 2024

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online

     

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Australia’s Westgold Resources on Monday announced its acquisition of Toronto-listed Karora Resources in a deal valued at about A$1.23-billion.

The acquisition, structured as a cash-and-stock transaction, underscores Westgold’s endeavour to bolster its gold assets in Western Australia.

Upon completion of the deal, the enlarged Westgold is poised to emerge as a midtier gold miner with estimated production of about 400 000 oz/y and a market capitalisation of about A$2.2-billion.

Under the terms of the agreement, Karora shareholders are set to receive 2.524 Westgold shares, complemented by A$0.68 a share in cash and 0.30 a share in a new company to be spun off from Karora. This new entity will incorporate Karora’s shareholding in lithium explorer Kali Metals and a 1% lithium royalty on specified mining interests.

The offer consideration represents about A$6.60 a Karora share, based on Westgold’s closing price on the ASX of A$2.28 on Friday. The consideration is a 10% premium to Karora’s closing share price on the TSX of A$5.995, or C$5.36, on Friday.

The cornerstone of the merger is the consolidation of prized assets, notably Beta Hunt.

“Rarely do you find a gold asset of the quality and potential of Beta Hunt hiding in a nickel belt and drilling is expected to further unlock value at this mine,” commented Westgold MD and CEO Wayne Bramwell.

Bramwell said the consolidation of Beta Hunt with other assets, such as the Big Bell expansion at the Murchison operations, the emerging Bluebird and iconic Great Fingall mine, under one Australian management, laid the groundwork for a new powerhouse in the gold mining landscape.

“The expanded business will have several large mines, be well funded, fully leveraged to the gold price and have optionality over an enviable selection of growth opportunities. Importantly, the business will have expanded human and physical resources to extend mine lives and production scale rapidly,” he said.

Echoing Bramwell’s sentiment, Karora chairperson and CEO Paul Huet hailed the synergies between the two entities as a key driver of shareholder value. He projected substantial operational synergies, estimating about A$490-million in savings across operational, general administrative, and capital expenditure realms.

“The prospects for the combined company are tremendous, with over 13-million ounces in gold resources fuelling production of circa 400 000 oz/y, 3 200 km2 of combined exploration tenements in Australia’s most prospective gold mining regions coupled with a significantly enhanced balance sheet poised and ready to deploy into a highly compelling combined growth and exploration strategy,” said Huet.

Upon completion of the transaction, Westgold shareholders will own 50.1% of the combined company and former Karora shareholders will own 49.9%.

The enlarged Westgold intends to apply for a secondary listing on the TSX.

The board will comprise the current directors of Westgold and two directors from Karora. Cheryl Edwardes will be the chairperson and Bramwell will MD and CEO.

Leigh Junk and Shirley In’t Veld will represent Karora shareholders on the enlarged Westgold board.

Huet will continue with enlarged Westgold in a special advisory role for six months post-completion of the transaction.

Edited by Creamer Media Reporter

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