Australian gold producer and explorer Westgold Resources has announced a definitive arrangement agreement to acquire all shares of Karora Resources, creating a mid-tier gold miner with a market capitalisation of around A$2.2bn ($1.4bn).
The acquisition is set to establish a diversified gold company focused on Western Australia (WA), featuring a comprehensive portfolio of exploration, development and production assets.
The merged entity will have an annual gold production capacity of 400,000oz.
The transaction will be executed through a statutory plan of arrangement under the Canada Business Corporations Act (CBCA).
As per the terms of the agreement, Karora shareholders will receive a multifaceted offer for each share they hold.
The offer includes 2.524 Westgold fully paid ordinary shares, A$0.68 in cash and 0.30 of a share in a new company, SpinCo, which will be demerged from Karora.
Based on Westgold's closing share price of A$2.28 on 5 April 2024, the offer values each Karora share at approximately A$6.60.
SpinCo will inherit a suite of assets from Karora, including a 22.1% stake in Kali Metals, a 1% lithium royalty, rights to a deferred payment from the sale of the Dumont asset and A$6m in cash.
Karora's current shareholders will retain full ownership of SpinCo.
The offer reflects a 10.1% premium over Karora's closing share price on the Toronto Stock Exchange as of 5 April 2024.
Following the transaction's completion, Westgold shareholders will control 50.1% of the merged entity, while former Karora shareholders will hold a 49.9% stake.
The enlarged Westgold entity will manage a portfolio with the capacity to produce more than 400,000oz of gold per annum from its WA assets.
It will also have a clear growth trajectory and substantial financial resources amounting to approximately A$160m.
Both Westgold and Karora's boards have given unanimous approval for the deal, with Karora's board advising shareholders to vote in favour.
Directors and senior management of Karora, who own 1.2% of the outstanding shares, have agreed to vote for the transaction.
Additionally, key institutional shareholders, including Eric Sprott, who collectively hold about 9% of the shares, have either signed voting support agreements or expressed their intention to back the deal.
Westgold managing director and CEO Wayne Bramwell said: "This merger brings Beta Hunt together with Big Bell, the emerging Bluebird and the iconic Great Fingall mine under one Australian management team.
“These assets combined create the foundations of a new Australian gold mining powerhouse that is focused on free cash generation, is internationally relevant and investable and can stand head and shoulders alongside the biggest names in the Australian gold sector.
“The Westgold and Karora teams have independently been structuring our businesses for growth for several years and now is the time to bring these two businesses together. Westgold welcomes the Karora team, shareholders and stakeholders to the Westgold family and looks forward to creating value across two of Western Australia’s most iconic goldfields.”
