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Alkane Resources (ASX:ALK) and Mandalay Resources Corporation (TSX:MND) will merge their companies and three operating mines in a bid to see their gold production increase to more than 180,000 ounces next year and push for a market cap above A$1 billion.
The ‘merger of equals’ transaction has been declared through a ‘definitive arrangement agreement’ which will see Alkane acquire all the shares of Mandalay. The name and ASX-listing Alkane Resources will stay and the merged company will seek a new listing on the TSX.
The deal to drive market cap above $1 billion
Under the arrangement, Mandalay shareholders will receive 7.875 shares of Alkane for each Mandalay share held.
The companies reported it was about increasing scale and trading liquidity, with the implied market cap of the combined entity expected to be A$1,013 million. With that, the companies are hoping to make the ASX300.
The initial production goal for this year will be 160,000 g/t.
Alkane trading up on recent intercepts
Prior to this announcement, Alkane had a market cap of $454 million and last closed at 75c – up from 61c since April 7, when it announced it had struck high grade gold intercepts in drilling at Tomingley Caloma and Roswell in Central West NSW.
These grades included 3.1 metres at 196.95g/t from 115m deep, including a metre at 589g/t from 116m down.
Combined entity to be Australia-based
The executive team will be Perth-based, led by Alkane’s Managing Director Nic Earner.
Today’s ASX announcement said the transaction would create ‘a diversified Australian centric gold and antimony producer with a portfolio of three operating mines and a strong balance sheet’.
“Alkane’s established Tomingley gold mine (Australia), currently ramping up after a major capital expansion, will complement the well established and stable production from Mandalay’s Costerfield underground gold/antimony mine (Victoria, Australia) and the Björkdal underground gold mine (Sweden).”
Taking Alkane to a ‘new level’
Alkane’s Nic Earner said the deal would ‘take Alkane to a new level, bringing together two companies with complementary assets and a shared vision for growth’.
“Mandalay’s two high-quality mines match the attributes of Tomingley: a proven history of consistent
production, cash generation and exploration upside,” he said.
“The combination of assets, leadership, and
supportive long-term shareholders enhances our scale and financial strength, and positions us well to continue to pursue additional growth opportunities.”
Mandalay’s CEO and President Frazer Bourchier said the company had the support of its major shareholders.
The combined entity will have a cash balance around A$188 million.
The companies are briefing investors in a call at 9.30am (AEST).
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