Australia-based Red 5 has signed a binding scheme implementation deed to acquire compatriot Silver Lake Resources, enabling the formation of a diversified mid-tier gold company.
The company resulting from this “merger of equals” is expected to produce 445,000oz annually for FY2024, underpinned by ore reserves of four million ounces and a mineral resource inventory of 12.4 million ounces.
It will have four mining hubs in tier 1 gold jurisdictions, located in Western Australia as well as Ontario.
The deal will see Red 5 acquiring all shares of Silver Lake, with Silver Lake shareholders set to receive 3.434 Red 5 shares for each share held.
It will capitalise on the complementary expertise of Red 5 and Silver Lake, enhancing capacity and capability.
The companies expect to implement the merger by June 2024.
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On deal completion, Red 5 shareholders will have a 51.7% stake in the merged entity, while Silver Lake shareholders will hold the balance of 48.3%.
The combined business will be chaired by Russell Clark, with Luke Tonkin taking the helm as managing director and CEO.
Its board will have equal representation from both parties, with four directors from each.
This merger is projected to de-risk shareholder returns via asset diversification and offer opportunities that neither company could achieve independently.
It also positions the combined group for a potential valuation re-rate as it provides both sets of shareholders with the chance to be part of a stronger, unified entity, noted the two miners in a combined statement.
The scheme of arrangement, which will formalise the merger, is anticipated to create a group with a net cash and listed investments position of A$378m ($245m).
Red 5 managing director Mark Williams said: “This transaction represents a logical merger of two leading mid-tier gold companies and represents an exciting inflection point for Red 5 shareholders following the successful development, ramp-up and achieving steady state production at King of the Hills.”
The Silver Lake board has unanimously recommended its shareholders to vote in favour of the deal.
However, this recommendation is contingent on the absence of a better offer and an independent expert conceding that the proposal is in shareholders’ best interests.
Silver Lake managing director Luke Tonkin said: “This transaction represents a highly complementary combination of assets and balance sheets for the mutual benefit of both Silver Lake and Red 5 shareholders.
“Mergers work when each company brings attributes that the other company does not possess, which is undoubtedly the case here.
“The increased scale, diversification and financial strength of the new company that will be formed via this transaction will be primed for continued strong cash flow generation and further growth.”
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