(Reuters) - Canadian precious metals producer SSR Mining said it would to buy Alacer Gold in an all-stock deal valued at C$2.41 billion ($1.72 billion), adding heft as gold prices surge due to demand for the yellow metal in an uncertain economy.
Gold miners have benefited from a 12% jump in prices this year as investors seek safer assets to shield themselves from the damaging impact of the coronavirus outbreak on the global economy.
The move also comes on the back of a record year of mergers and acquisitions in the sector, including some of of the biggest deals in a decade in 2019.
The new company, which will be headquartered in Denver, Colorado, will have operational mines in four countries and will be led by Alacer Chief Executive Officer Rodney Antal, the two companies said on Monday.
“The combination ... vaults us into the upper echelon in the peer group in terms of free cash flow generation,” Antal said in a conference call with analysts.
Alacer has focused over the past several years on free cash flow generation, and this merger allows the miner to continue this strategy while diversifying its single operating asset exposure, Antal said.
SSR Mining has operations in Nevada, United States, Saskatchewan, Canada and Jujuy, Argentina, while Alacer is a low-cost gold producer focused on its cornerstone Çöpler Gold Mine in Turkey.
The “zero-premium” merger is expected to generate annual free cash flow of about $450 million and produce about 780,000 gold equivalent ounces over the next three years based on analysts’ estimates, according to the companies.
As part of the deal, Alacer shareholders will receive 0.3246 SSR Mining shares for each share held, implying a value of C$8.19 per Alacer share.
Shareholders of SSR Mining and Alacer will own about 57% and 43% of the new company, respectively, with the new board consisting of five directors from each of the miners’ existing boards.
The deal includes a $70 million termination fee payable under certain circumstances, the companies said.
National Bank Financial acted as financial adviser to SSR Mining, while McCarthy Tétrault LLP and Lawson Lundell LLP acted as legal counsel to the miner.
Earlier in the day, Gran Colombia said it had proposed to merge with Guyana Goldfields and Gold X, while Shandong, one of China’s biggest gold producers, said last week it would buy TMAC Resources.
Shares of SSR Mining were trading down about 8% in morning trade, while Alacer climbed nearly 2.5%.
($1 = 1.4007 Canadian dollars)
Reporting by Arundhati Sarkar in Bengaluru; Editing by Aditya Soni and Saumyadeb Chakrabarty
Our Standards: The Thomson Reuters Trust Principles.