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KIRKLAND L
Mega-merger of equals with Agnico Eagle Mines
MINING | KIRKLAND LAKE GOLD
LAKE GOLD
s set to create world’s third largest gold company
On September 28, 2021, Kirkland Lake Gold and Agnico Eagle Mines announced to the world a US$10.68 billion merger of equals, creating a Canadian gold mining giant with a reserve base of 48 million ounces of gold and an extensive pipeline of development and exploration projects around the world. The deal, which ostensibly looks like the largest merger in the gold sector since the $10 billion Newmont-Goldcorp tie-up in January 2020, will establish the new company as the gold industry’s highest quality senior producer, with the lowest unit costs, highest margins, most favourable risk profile and industry-leading ESG practices, according to both parties. “Logically speaking, these are the only two companies that a merger of equals make sense for, from our perspective,” says Kirkland Lake’s president and CEO Tony Makuch, who has been appointed to the same position in the merged entity, which will operate under the Agnico Eagle moniker after the deal is completed, either in December or early in 2022. “Both companies have been industry leaders in growing share value,” Makuch continues.
Kirkland Lake has delivered shareholder value from rapid production growth and lower unit costs over the last four years following timely acquisitions and investments in exploration at its three gold mining operations, in Ontario, Canada (Macassa, Detour Lake) and Victoria, Australia (Fosterville). Meanwhile, Agnico Eagle has continued to hold its position as one of Canada’s senior gold miners with a precious metals production history dating back to 1957. Today, the company’s operations can be found across Canada as well as in miningfriendly Mexico and Finland.
Merging neighbourhoods Of the many synergies between the two businesses, perhaps the most apparent – certainly from a geographical perspective – is the opportunity for the new company to establish a dominant position in one of the world’s leading gold regions; the Abitibi-Greenstone Belts
CANADIAN MALARTIC - AGNICO EAGLE’S
S JV OPEN PIT GOLD MINE IN NORTHWESTERN QUÉBEC
MINING | KIRKLAND LAKE GOLD
of Northeastern Ontario and
at Kirkland Lake’s Macassa
A Kirkland Lake crew is
Northwestern Québec.
mine and its shuttered Holt
currently in the process of
mill in Ontario.
sinking the No. 4 shaft at
Combined, the company will
the Macassa mine. Makuch
produce almost 2 million
In the Kirkland Lake region
says that same crew can be
ounces (Moz) of gold per
of Ontario, the companies
readily deployed to assist in
annum from the region, with
have a unique opportunity
the development of the Agnico
over 16 Moz in reserves, along
to combine the Macassa
Eagle projects.
with a platform for exploration
and Holt operations with
and development projects
Agnico’s nearby Amalgamated
“We have also built surface
and existing infrastructure,
Kirkland, Upper Beaver and
ramps at Macassa down to 300
including mills at Agnico’s
Upper Canada gold projects,
metres, which can be used to
LaRonde and Goldex mines in
in what is one of the biggest
create exploration platforms
Québec and processing plants
single value drivers for the
at the Amalgamated Kirkland
merger.
MINING | KIRKLAND LAKE GOLD
property, adjacent to Macassa.
particularly with regards
provides an opportunity to
Then you have then chance
to underground mining
leverage each other’s expertise
to grow a 250-350,000 ounces
strategies.
in areas where one company is
per annum new business in
more advanced than the other.
Kirkland Lake, leveraging
“We talk about a ‘cultural fit’
the existing mills and tailings
and one example of this is that
Makuch added: “Agnico are
facilities.”
both companies have a strong
leaders in terms of innovation
focus on underground mining
at their mines, specifically in
This is a great example of the
and have been underground
relation to automation and
merger being able to create a
miners for a long time,”
digitalisation underground at
larger platform encompassing
Makuch explains. In fact, both
LaRonde. We are doing this
multiple operations in a single
companies are widely regarded
at Macassa now and we will
region and the opportunity
as world-leaders in deep
be able to implement these
to cross-pollenate ideas,
underground mining, which
changes quicker because
MINING | KIRKLAND LAKE GOLD
Agnico has the technology in place and the working platform.”
Eyes on exploration Further evidence of the aforementioned cultural fit is provided by both partners’ focus on exploration as a key value driver. Investors in Kirkland Lake can attest to the company’s significant exploration success across its three cornerstone assets.
“We’ve spent almost $190 million in exploration this year, and we see the same culture and fit with Agnico in terms of their focus on exploration. I see some significant exploration upside in Agnico’s portfolio in Northwestern Québec and Northeastern Ontario, plus at other assets around the world” – Tony Makuch, Kirkland Lake Gold president and CEO
At Fosterville in Australia, Kirkland Lake has achieved year-on-year exploration success since acquiring the mine in 2016. In the same time frame, the company has more than doubled reserves at Macassa. Meanwhile at Detour Lake, a 10 Moz increase in measured and indicated mineral resources (exclusive of mineral reserves) was recently announced after over a year of significant exploration success.
K IR K L AND L AK E G O L D AT A G L A N C E
STOCK TICKER: TSX:KL, NYSE:KL, ASX:KLA MARKET CAPITALISATION: US$12.04 billion (as of October 20, 2021) aj
MINING | KIRKLAND LAKE GOLD
The Company’s extensive drilling programme is continuing, and Makuch believes that there remains considerable potential for additional growth in mineral reserves and mineral resources at Detour Lake, given the project’s 1,000 km2 land position in very favourable geology in the Abitibi region. “We’ll spent almost $190 million on exploration at our three key assets, and we see
AGN I CO EAGL E MI N ES AT A G L A N C E
STOCK TICKER: TSX:AEM, NYSE:AEM MARKET CAPITALISATION: US$13.9 billion (as of October 20, 2021) aj
the same culture and fit with Agnico in terms of their focus on this crucial part of the gold mining business. I see some significant exploration upside in Agnico’s portfolio in Northwestern Québec and Northeastern Ontario, plus at other assets around the world.” For example, Agnico’s Kittilä mine in Finland is the largest primary gold producer in Europe, with a significant resource and reserve currently in place. However, Agnico has drilled holes down to 2,000 metres that are showing significantly higher grades and widths than what is currently being mined closer to surface. “It’s an area that is wide open for exploration. There are other juniors in the region that are exploring and having success. It’s also similar geology to what we see in the Abitibi, so we’re pretty excited about what can happen there,” Makuch says.
TONY MAKUCH, KIRKLAND LAKE GOLD PRESIDENT AND CEO
MINING | KIRKLAND LAKE GOLD
Over in Nunavut – where Agnico has the distinction of being the only gold producer in the entire territory – the companies believe that the giant Meliadine mine has significant exploration upside, while the Amaruq satellite project has the ability to replace and grow reserves from the open pit Meadowbank mine 50 km away. Then there is the Northernmost Hope Bay project, which is in its infancy and set to become a source of new gold reserves for years to come with the right amount of investment in aggressive exploration. Finally, Agnico is working on a couple of exploration properties in Mexico – an unfamiliar jurisdiction to Kirkland Lake, but one that excites Makuch nonetheless. “We both know that to unlock value through exploration you need to spend money on drill holes. We’ve been doing that
companies see themselves
areas where we can have a
Combining ESG values
significant impact in terms of
Additional synergies lie
stewards in the regions they
extensions of known systems
within Kirkland Lake and
operate, which has brought
and new discoveries that can
Agnico Eagle’s unwavering
about commitments to net
create new value, similar to
commitment to creating value
zero emissions by 2050 or
what we’ve done at Fosterville,
through responsible mining
sooner.
at Macassa and what we’re
and sustainable development,
currently doing at Detour
which are ensconced in the
“Kirkland Lake and Agnico
Lake.”
overarching ESG concept. Both
are both very focused on what
and continue to focus on key
as long-term environmental
MINING | KIRKLAND LAKE GOLD
needs to be done to achieve
From a social standpoint, both
A full description of both
this goal, in terms of looking
companies have developed
companies’ ESG commitments
at alternative fuels for how
strong working relations
can be found in their annual
we operate equipment at our
with local indigenous groups.
sustainability reports,
mines, alternative ways to
These relationships are built
which are becoming thicker
extract gold and better ways
on the premise of respect
documents by the year.
to treat the land and the water
and recognition of the need
Makuch recognises the
that we use.”
to partner with all regional
importance of ESG reporting
stakeholders.
and acknowledges that Kirkland Lake can learn
MINING | KIRKLAND LAKE GOLD
from Agnico Eagle’s more
operational, financial and ESG
Makuch concludes: “We
comprehensive style of
point of view.
have a strong track record
sustainability disclosure.
for achieving operational As always, one of the key
excellence and delivery
On a personal note, Makuch
focus areas for Kirkland Lake
of strong financial results
cannot wait to get started
in 2021 has been improving
that create value for our
in his position at the helm
the workplace for its people,
shareholders, our people and
of the combined company,
promoting health and safety
our communities. We see
which will bring together
and reducing workplace
similar strong performance
two very talented teams. “My
injuries. According to Makuch:
and results coming out of
experience is in mining and
“As a company we aim to
Agnico.
is focused on people; you see
provide a safe workplace and
that same focus on people at
all workers are committed to
“What that demonstrates is
Agnico,” he said.
working safely for themselves
that our merger is creating
and others. We’ve made
a true industry leader in
“I’m excited to start working
significant improvements but
the gold sector, one that
with some really good people
still have a long way to go.
warrants a premium valuation
and be able to build ideas
Fundamentally we don’t want
and is well positioned to
for how we take our assets
anybody hurt on the job. That’s
generate superior long-term
to the next level, which will
a big part of what we’re trying
shareholder value. We also
definitely involve the prism of
to accomplish in 2021 and
both return significant capital
automation, digitisation and
2022.”
to shareholders through
new innovations.”
dividends - in the case of On the operational side,
Kirkland Lake, our share
Kirkland Lake expects to
repurchase programme - and
achieve the top half of its full-
with the combined company’s
While the takeover countdown
year 2021 production guidance
substantial financial strength,
has begun in earnest, it
of 1.3–1.4 Moz. The company
it will be very exciting to
remains business as usual
is also targeting the best unit
see where that goes moving
for Kirkland Lake as it moves
cost performance among
forward.”
through the final quarter
senior producers, with all-in
of what has already been
sustaining costs expected to
a successful year from an
average $790 – $810 per ounce
Business as usual
sold in 2021.
Published by Anderson Murray Media Ltd
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