Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s miner Eldorado Gold (TSX:ELD) (NYSE:EGO) has taken over Integra Gold (TSX-V:ICG) in a move that helps it strengthen its position in the home country, particularly around the gold-rich Eastern Abitibi region, in Quebec.
The deal, worth about Cdn$590 million (US$457 at today’s rates), was approved by Integra shareholders and the Supreme Court of British Columbia last week.
Acquisition gives Eldorado full ownership of the Lamaque project near Val-d’Or, Quebec, which is expected to produce 123,000 ounces of gold over 10 years.
The transaction gives Integra shareholders about Cdn$129 million cash and 77 million common shares of Eldorado, for all the issued common shares of Integra that the company did not already own. That represents roughly 10% of the total issued common shares of Eldorado, post-completion of the arrangement, the company said in the statement.
Integra will now be a wholly-owned subsidiary of Eldorado and its shares will be delisted from the TSX-V, the firm noted.
The acquisition comes after Eldorado said last month it was likely to miss its 2017 guidance by as much as 25% due to leaching problems at its Kışladağ mine in Turkey, one of its largest operations.
It also follows fresh troubles at its operations in Greece, where the government has said it would take the miner to an arbitration court to settle ongoing differences over contracts.
The possible arbitration case would be the last in a string of challenges Eldorado has had to overcome in the European country, where it has one operating mine and three projects.
Eldorado has slowly reduced its international footprint in the last 18 months, beginning by the sale of all its Chinese assets in 2016 and this year’s decision to indefinitely shelve expansion plans for Kışladağ mine.
The miner also deferred recently a decision on developing a project in Brazil, citing low gold prices, and went through some leadership changes, with the appointment of one of Goldcorp’s top executives as CEO.
Absorbing Integra gives Eldorado full ownership of the Lamaque project near Val-d’Or, Quebec, seen as a more stable jurisdiction to operate than the other regions where the company has projects and mines.
The proposed mine is expected to become an underground gold operation with an annual output of 123,000 ounces of the precious metal at all-in sustaining costs of US$634 per ounce over 10 years.
Surface work at Integra Gold’s Lamaque gold project in Val-d’Or, Quebec. (Image courtesy of Integra Gold.)
