The proposed ‘merger of equals’ between Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Kirkland Lake Gold (TSX: KL; NYSE: KL; ASX: KLA) have received a second proxy advisory firm recommendation to proceed, the companies announced on Monday.
The all-scrip deal, announced In late September, is expected to create the largest Canadian gold miner with an implied market capitalization of around $24 billion.
Glass, Lewis & Co recommends that Agnico-Eagle shareholders vote for the issuance of shares to Kirkland Lake Gold shareholders as part of the merger.
“The arrangement will combine two large, efficient gold operators primarily exposed to a selection of low-risk mining jurisdictions, with the arrangement ultimately expected to create the largest gold producer in Canada,” Agnico quoted Glass Lewis as saying.
According to Kirkland Lake, the merger will establish the new Agnico Eagle as the gold industry’s highest-quality senior producer, with the lowest unit costs, highest margins, most favourable risk profile and industry-leading best practices in critical areas of environmental, social and governance.
Glass Lewis believes the tie-up will unlock substantial synergy opportunities, both in terms of geographic compatibility and standard scale and procurement architecture. “This enhanced operational efficiency is expected to be utilized to advance a combined pipeline of development opportunities within the existing properties of [Agnico Eagle] and [Kirkland Lake Gold], prospectively unlocking additional value over the long term. In short, we believe this framework is very compelling and fairly straightforward,” said Glass Lewis.
The merger is expected to create a best-in-class gold mining company operating in one of the world’s most prolific gold regions, the Abitibi-Greenstone Belt of northeastern Ontario and northwestern Quebec, with high-quality financial and operating metrics.
Upon closing, the company is expected to have $2.3 billion of available liquidity and a mineral reserve base of 48 million ounces of gold (969 million tonnes at 1.53 grams per tonne), which has doubled over the last 10 years. The company will also have an extensive pipeline of development and exploration projects to drive sustainable, low-risk growth.
Glass Lewis joins Institutional Shareholder Services in its opinion, which last week also concluded that the proposed arrangement is a strategically compelling merger.
Kirkland Lake shareholders of record, as of October 13, will vote on the proposed merger on November 26.