Regis Resources swoops on IGO’s Tropicana mine stake in $903m deal
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“The transaction, along with the recent investment in Tianqi Lithium assets in Australia, solidifies IGO’s position of becoming a globally relevant pure-play battery minerals producer and developer, uniquely exposed to tier-one nickel, copper and lithium,” IGO managing director, Peter Bradford, said.
Tropicana is Australia’s fifth largest gold mine with annual production of between 450,000 and 500,000 ounces and covers a tenement of 2,600sqkm located 330km from Kalgoorlie.
The Tropicana sale proceeds will go toward IGO’s investment in its Australian lithium assets including its Tianqi Lithium subsidiary acquired for $1.4bn in December.
IGO announced last September it was carrying out a strategic review of its stake in the Tropicana gold mine that included the option of selling the equity interest.
A global sales process for the Tropicana interest attracted “very strong interest and has resulted in the decision to sell IGO’s interest in Tropicana to Regis”, said IGO.
The divestment to Regis releases cash to IGO which is focused on developing its projects for lithium to service the growing clean energy and battery industries.
“While IGO continues to believe that Tropicana is a high quality tier-one gold asset with strong upside potential, it is no longer aligned with our focus on commodities critical to clean energy,” said Bradford.
The Tropicana acquisition will push Regis Resources to the position of fourth largest ASX gold producer ahead of St Barbara (ASX:SBM), but behind Newcrest Mining (ASX:NCM), Northern Star (ASX:NST) and Evolution Mining.
“This is a genuinely transformational transaction for Regis and one that delivers on our strategic objectives to grow as a safe, responsible, reliable long life, low cost gold producer, generating strong financial returns,” said Regis Resources managing director, Jim Beyer.
Regis Resources has its main gold operations at its Duketon project in WA’s Eastern Goldfields, plus its McPhillamys gold project in western NSW.
The company will increase its production profile to 491,000 ounces and lower its all-in sustaining cash costs to $1,225 per ounce.
The deal also increases Regis Resources’ reserves to 4.4 million ounces and its resources to 10 million ounces, according to a company presentation.
“Regis is looking forward to working with AngloGold Ashanti, a proven global gold mine operator, to continue delivering a world class operation at Tropicana for many years into the future,” added Beyer.
Regis Resources aims to raise $650m in an equity raising in the form of a $200m institutional share placement, and a one for 3.08 pro rata entitlement offer to existing shareholders to raise $450m.
The offer price for the capital raising is $2.70 per share, representing a 14.8 per cent discount to the company’s last traded share price of $3.17 on April 12.
The gold company has also secured a $350m line of credit from Bank of America in Australia in the form of a term facility with a three-year maturity date to partially fund the deal.
IGO discovered Tropicana in 2005 and has developed the asset with its partner AngloGold Ashanti which retains its 70 per cent stake in the gold mine.
“We are extremely pleased with the outcome of the transaction and the assistance of AngloGold Ashanti teams throughout the sales process,” said Bradford.
AngloGold Ashanti has still to waive its right of last refusal over the Tropicana transaction which is valid for a 60-day period and lapses before June.
This could mean that IGO instead disposes of its 30 per cent stake to AngloGold Ashanti at the same price and on the same terms as the deal with Regis Resources.
Evolution Mining announced in March it had acquired Toronto-listed gold company Battle North which is developing the Bateman gold project in Ontario’s Red Lake gold district.
The tenements run concurrent to Evolution Mining’s Red Lake assets in Ontario for which the company is targeting production of 300,000 ounces per year with the addition of the Bateman project.
“Both Evolution and Battle North started the negotiation with a clear alignment that a consolidation of the properties would create value that would not be available if they were developed and operated separately,” said Evolution Mining chairman, Jake Klein.
The deal was worth $C343m ($358m) and Battle North also has a gold exploration tenement on the Long Canyon gold trend on the border of the US states of Nevada and Utah.
At an offer price of $C2.65 per share, Evolution Mining paid a 54 per cent premium in the takeover based on the volume-weighted 20-day average value of Battle North shares before the acquisition on March 12.
Gold Road Resources said Monday that it had submitted a final offer for the Tropicana mine stake at the end of March, but stressed this had since expired without any agreement.
“As stated repeatedly in various investor updates, Gold Road will, from time to time, assess potential opportunities that align with its strategy,” said the company in a statement.