Ann: LSX: Takeover Offer for EganStreet by Silver Lake Resources, page-69

Financial Review article

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Gold M&A heats up amid price rally

Peter Ker

Resources reporter

Jul 31, 2019 — 5.24pm

Resolute Gold and Silver Lake Resources have reinforced the gold sector’s reputation as the most acquisitive part of the mining industry, with both companies buying smaller rivals this week.

Resolute has deepened its focus on African gold assets, lobbing a $US274 million ($398 million) cash and scrip offer to privately held Toro Gold on Wednesday.

Toro has an operating mine in Senegal, and Resolute hopes it will complement its flagship Syama gold mine in Mali, and its Bibiani development project in Ghana.

Resolute will pay $US130 million in cash, with the help of a loan from Taurus funds management, while the rest will be funded through issuing Resolute shares.

The scrip aspect of the deal will bring three private equity investors, including the Angolan sovereign wealth fund, onto Resolute’s share register, but none of the Toro shareholders will hold more than 5 per cent of Resolute after the deal is executed.

About 94 per cent of Toro shareholders are supportive of the deal, which continues a trend for ASX-listed gold miners to buy foreign assets.

Northern Star, Newcrest Mining and St Barbara have all bought assets in North America in 2019, seizing on strong gold prices.

Gold prices have rallied from just above $US1300 per ounce in early January to $US1445 per ounce on Wednesday.

Cash to spend

The rally has been even more lucrative for miners with Australian assets, as a weak local currency has driven the Australian-denominated gold price to record highs.

That has given Australian gold miners cash to spend on mergers and acquisitions, and Resolute boss John Welborn said there was no escaping risk with a deal like the purchase of Toro.

“It is always a risky time to do M&A, most M&A destroys value, but we have looked at this asset for two years,” he said.

“At no point in the last two years did we think we could have acquired this asset for less cash and less equity than we are issuing right now.

“It is an absolute screamer of a deal.”

The Toro deal comes a day after Silver Lake Resources announced a $52 million scrip deal to buy the 94 per cent of gold junior Egan Street Resources that it did not already own.

The deal will give Silver Lake control of Egan Street’s Rothsay underground project, which is located within 85 kilometres of Silver Lake’s deflector mine and processing hub in Western Australia.

The acquisition has been supported by Egan Street’s significant shareholder, Lion Selection Group.

Silver Lake shareholders will be hoping the Egan Street acquisition fares better than its 2012 merger with Integra Mining.