Next billion dollar deal: Kirkland Lake Gold buys Detour Gold

Kirkland with giant takeover

The higher gold price also increases the appetite for takeovers. And so the next big deal followed on Monday. Kirkland Lake Gold offered a total of 4.9 billion Canadian dollars (CAD) for Detour Gold. However, it was not paid in cash, but in shares. Each Detour shareholder is to receive 0.4343 shares in Kirkland. 73 percent of the shares of the new company will then be in the hands of the Kirkland owners. With this deal, Kirkland Lake Gold, which already operates the most cost-effective mine in the western world with the Australian Fosterville, buys an annual production of 600,000 ounces of gold.

 

Kirkland Becomes the Focus

That sounds good at first: a capital-saving takeover with which you can significantly increase your production. However, Kirkland Lake has been operating underground mines so far, while Detour is bringing an opencast mine into the marriage. And in addition, there have always been technical problems on Detour Lake. In addition, the costs here at 1000 US dollars per ounce are significantly higher than those of KIrkland Lake. So the buyer still has a lot to do here, but also has potential. You can work on the costs, and the gold reserves are more than 15.4 million ounces. As usual, the Kirkland Lake share should give way after this deal. For Detour owners, on the other hand, there will be a premium of around a quarter.

 

2020: Year of takeovers?

With this transaction, Kirkland Lake is ringing in the next round of takeovers in the industry. The Detour purchase will turn the company into a heavyweight in the gold sector. One of the hottest takeover candidates is Corvus Gold. The Canadians are developing the Mother Lode / North Bullfrog dual project in Nevada and already have a resource of 3.6 million ounces of gold. With AgnloGold Ashanti, a large gold producer has already bought its way into the market.