Gold deal has silver lining

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 02 Oct 2012   Posted by admin


MARKING the start of the annual Diggers and Dealers mining conference in Kalgoorlie last month, two major WA gold producers signed a deal that will see them merge into one of the largest gold mining companies in the state.
The $426 million takeover of Integra Mining by Silver Lake Resources will create a major Australian gold producer with a 6.6 million ounce resource base and a forecast
production rate of 400,000 ounces per annum by 2014.
Under the agreement, Integra shareholders will be offered 1 new Silver Lake share for every 6.28 Integra shares.
The Silver Lake offer values Integra at $0.452 per share.
The transaction offers shareholders of both companies the opportunity to create material value, given the proximity of their operating mines and combined tenement
holdings.
Silver Lake’s assets comprise projects in the highly-prospective Mount Monger goldfield and Murchison regions.
The Mount Monger operation contains the Daisy Milano, Daisy East, Rosemary and Haoma underground mines, and the Wombola open-pit mine, 50km southeast of
Kalgoorlie.
The Murchison assets, which comprise the Tuckabianna, Comet and Moyagee projects, lie between the multi-million ounce gold producing areas of Mount Magnet and Cue, 600km northeast of Perth.
Silver Lake is developing a second mining operation in Murchison; it is under construction and expected to begin production in the March quarter of 2013. Integra’s flagship Randalls gold project, 60km east of Kalgoorlie, began production in September 2010. It has a consolidated gold resource of 27 million tonnes grading 2.4 grams per tonne of gold for 2.1 million contained ounces and a 100,000ozpa production rate.
Silver Lake managing director Les Davis said the transaction, which is subject to conditions including shareholder approval, would further diversify Silver Lake’s asset
portfolio with “increased gold production, enhanced cash flows, near-term organic growth and significant exploration upside”.
“The strategic and financial logic of the combination is clear, driven by the complementary nature of the two companies’ projects and the strong organic growth profile of the combined business,” he said.
Integra has agreed to give typical deal protection to Silver Lake, including payment of a break fee of $4.25 million in agreed circumstances.
Integra managing director Chris Cairns said that while Integra would have had a bright future as an independent company, the reason behind the deal could not be ignored, and would enable Integra shareholders to benefit from being part of a bigger and more diversified company.
“Investors are increasingly attracted to gold mining companies which enjoy the lower risk and economies of scale associated with multiple operations,” he said.  Integra’s directors intend to unanimously recommend to shareholders that, in the absence of a superior proposal, they vote in favour of the deal.


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