Right sector- right country- right gold price- right tenements and potential is hugeeee
"Kirkland Lake CEO sees no need to raise Detour Gold bid after stock tops purchase priceBY **RIEL FRIEDMANORIGINALLY PUBLISHED: DEC 10, 2019Workers at Detour Gold pour metal.Detour GoldEmail Twitter Facebook Pinterest Google+ LinkedinToronto-based Kirkland Lake Gold Ltd. chief executive Anthony Makuch said on Monday his company is not interested in raising or changing the offer it made last month to purchase Detour Gold Corp., after one analyst speculated that a new bidder may emerge.In November, Kirkland announced an all-stock buyout that valued Detour shares at $27.50, or about a 24 per cent premium to its prior closing price, and pegged the entire transaction at about $4.89 billion.Both companies operate gold mines in eastern Ontario, but have had starkly different trajectories over the past three years. Kirkland operates two high grade underground mines, including one in Australia, that produce gold at some of the lowest costs in the sector, and has been one of the best performing stocks on the TSX during that time.Eric Sprott explains what investors are getting wrong about Kirkland’s all-stock Detour Gold dealContinental Gold takes all-cash offer as gold mining space continues to heat upNext up for precious metals: An IPO for a company that funds mining projectsDetour, which operates a single lower-grade, open pit mine, at some of the highest costs in the sector, faced an activist battle with one of its largest shareholders, U.S. hedge fund billionaire John Paulson in the second half of 2018, who waged a successful campaign to oust the board of directors and management on the basis that the company had failed to perform.Since the deal was announced, however, Kirkland’s stock has declined by 15 per cent to $53.77 and Detour’s stock has risen 9.5 per cent, closing at $24.34 Monday. The opposing investor reactions to the deal not only erased any premium for Detour shareholders, but also lifted Detour shares above the deal’s proposed .4343 to 1 exchange rate for Kirkland shares, or about $23.35.“We made a very good offer to Detour,” Makuch told the Financial Post. “We have been the top performing company on the TSX in the past few years, (so) we don’t see a need or a want to increase or change our offer to detour shareholders.”He spent part of last week in New York meeting with investors and explaining why the deal makes sense for Kirkland shareholders.According to a presentation he has given, the combined company would have about $700 million in annual free cash flows, and about $15 billion market capitalization.The presentation shows a favourable ranking with peers. For example, Barrick Gold Corp. has about $1 billion in free cash flow, but more than twice as much in market capitalization at $39.5 billion.“We’re not doing this because we needed to do something, because we had to hide something,” said Makuch. “Fundamentally, this is a value creating transaction.”Still, Mike Parkin, an analyst with National Bank Financial who covers Detour, wrote in a note Monday that the market is signalling that Detour needs a better buyout offer.He suggested Kirkland may put forward a better offer; or shareholders may reject the deal; or the market is expecting a third party bidder.“Based on our discussions with various market participants over the last several days, we see good potential for either scenario to play out,” he wrote in a note that upgraded Detour Gold from Underperform to Sector Perform, raising the price target from $21.72 to $27.00.But Makuch threw cold water on that idea and said a lot of shareholders, such as billionaire Eric Sprott, who stepped down as chairman earlier this year, remains supportive of the deal.Indeed, Sprott told the Financial Post on Monday that he plans to vote his shares, around six per cent of Kirkland, in favour of the transaction, saying that Detour’s cost of operations could “go down remarkably” under Kirkland’s management.Makuch said, “The feedback I got from our shareholders is we don’t see the need to change it — we made Detour a really really good offer.”The moves comes as merger activity in Canada’s mining sector heats up, with China’s Zijin Mining Group Co. making a $1.4 billion bid last week to purchase Toronto-based Continental Gold; Canada-listed Endeavour Mining Corp. last week also made an unsolicited offer to purchase Centamin Plc, in a transaction valued at around $2.5 billion.Some investors have suggested that Kirkland could have pursued another single-asset gold mining company such as Pretium Resources Inc., which last year produced 376,000 ounces of gold at its Brucejack mine in British Columbia and is projecting all-in sustaining costs of US$900 to $US950 per ounce at the mine this year.Detour, which has production target of around 600,000 ounces of gold, is projecting all-in sustaining costs of US$1,100- US$1,175 per ounce whereas Kirkland’s estimated one million ounces of gold comes to around US$520 to $560 per ounce.“Pretium is a great company and a great asset,” said Makuch, “but they haven’t really expressed an interest in wanting to do something.”He added that Detour operates right “in our backyard,” with its mine several hundred kilometres away from Kirkland’s Macassa mine, which means the company has an understanding of the regional geology, the exploration upside, and knows the people.“We’re going to roll up our sleeves and show people how good Kirkland
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