Agnico Eagle Mines at the Prospectors and Developers Association of Canada conference in Toronto. The gold miner is bidding $204-million for O3 Mining Inc., which has operations in northern Quebec.CHRIS HELGREN/Reuters
Agnico Eagle Mines Ltd. AEM-T is bidding $204-million for O3 Mining Inc. in a transaction that could see Agnico add life to one of the biggest gold operations in the country.
Toronto-based O3 Mining OIII-X owns the Marban Alliance gold project, which is situated close to Agnico’s existing Canadian Malartic mine in Quebec’s Abitibi region.
If Marban Alliance is developed, it would be able to share infrastructure with Malartic, including the mill, and draw workers from the existing labour force.
Toronto-based Agnico said Thursday that it is willing to pay $1.67 a share to buy O3, which is a 57.5-per-cent premium to Wednesday’s closing price.
“The premium is based on the value that we see in the project, and we think it’s a full and fair price,” Jamie Porter, chief financial officer of Agnico, said in an interview.
Agnico has structured the deal as a tender offer, which does not require a shareholder vote at O3. Two-thirds of the shares that don’t include Agnico’s existing stake in the company must be tendered for the transaction to succeed. Agnico currently owns 0.8 per cent of O3.
The company went with a tender offer, as opposed to the more common plan of arrangement route, because of the continuing strike at Canada Post. In a plan of arrangement, materials would have to be mailed out to O3 shareholders in advance of the vote, something that isn’t necessary with a tender offer, Mr. Porter said.
Mergers and acquisitions activity in the gold sector has ticked higher in recent months amid a robust commodity market environment. Gold bullion hit a record high of more than US$2,800 an ounce earlier this year, in part owing to uncertainty over the U.S. election outcome.
Canada’s Orla Mining Ltd. last month announced it was buying the Musselwhite gold mine in Ontario from Newmont Corp. for up to US$850-million.
South Africa’s Gold Fields Ltd. in August announced the $2.16-billion acquisition of Canada’s Osisko Mining Inc.
Gold Fields also owns a 16.8-per-cent stake in O3, which it inherited after acquiring Osisko. Gold Fields is among a group of shareholders representing about 40 per cent of the outstanding shares that has agreed to tender to the Agnico bid.
Josh Wolfson, analyst with RBC Dominion Securities Inc., said in a note to clients on Thursday that the likelihood of a competing bid for O3 is low.
The biggest hurdle that Agnico will face in moving O3’s Marban Alliance project ahead is permitting, he said.
Shares in O3 rose by 54.7 per cent in trading on the TSX Venture Exchange on Thursday to close a few pennies below the offer price.
Agnico Eagle has made several acquisitions over the past few years that have helped it climb up the charts considerably in the gold sector.
In 2022, it bought Kirkland Lake Gold Ltd., a deal that brought the Detour Lake mine in Ontario into its portfolio. In 2023, it snapped up Yamana Gold Inc., which saw it land the 50 per cent of Canadian Malartic it didn’t already own.
Malartic is Canada’s second-biggest gold mine, after Detour Lake. This year Malartic is on track to produce about 630,000 ounces of gold.
Agnico earlier this year bypassed Barrick Gold Corp. ABX-T to become the biggest gold company in Canada by market value, and the second biggest in the world after Newmont Corp.
“Agnico has generally delivered on expectations and has been exposed to fewer risks,” RBC’s Mr. Wolfson said in an interview. “Barrick has not delivered on its expectations or its guidance, and it’s been exposed to much higher risk.”
Despite being in a position to potentially acquire its competitor, Agnico says it has no intention of buying Barrick. Mr. Porter said that Barrick doesn’t fit with Agnico’s regional growth focus that sees it about 85 per cent concentrated in Canada.
“We need to have the geologic potential, and we need to have the low level of political risk where the rule of law exists and we’re comfortable that we’ll be able to operate for decades,” he said.