SSR Mining and Alacer Gold to merge in all-share deal

Executives at SSR Mining (TSX: SSRM; NASDAQ: SSRM) and Alacer Gold (TSX: ARR; ASX: AQG) started talking about a possible merger of the two companies in November 2019, and completed all of the site visits required and much of the due diligence to make a decision on a transaction before COVID-19-related travel restrictions put an end to international travel.

The business combination the two companies announced today will create an intermediate gold producer, whose mines in the U.S. (Marigold), Canada (Seabee) and Turkey (Copler) will produce 780,000 gold-equivalent oz. per year over the next three years at all-in sustaining costs (AISCs) of US$900 per oz., generating about US$450 million of free cash flow annually — well above the peer group’s annual average of US$275 million, the companies said.

“At a time when investors are looking for exposure to rising gold prices, we’re very excited to be creating a larger and more globally relevant company for our current and future shareholders,” Paul Benson, president and CEO of SSR Mining, said on a conference call.

“Based on analyst consensus estimates, the combined portfolio is forecast to generate an average of US$450 million of free cash flow annually over the next three years, well ahead of the intermediate peer-set average and in line with several-million ounce producing seniors,” he added. “This cash flow, combined with the approximately US$700 million of cash and marketable securities we have on a pro forma basis, provides us with exceptional financial strength, which will allow us to continue growing and delivering on our share track record of industry-leading shareholder returns.”

The new company will have a US$4 billion market cap and retain the SSR Mining name. Under the transaction, which is supported by the boards of both companies, Alacer shareholders will receive 0.3246 SSR Mining shares for each Alacer share they hold, valuing Alacer’s shares at $8.19 apiece. Once completed, SRR Mining and Alacer shareholders will collectively own 57% and 43% of the new company, respectively. Rod Antal, Alacer’s president and CEO, will lead the merged company.

“Having worked closely with Rod and his team throughout this process, including mutual site visits earlier this year, I’m confident that we’re bringing together two of the best management teams in the business,” Benson told analysts and investors on the conference call. “Each team has a track record of creating shareholder value through exploration, construction and operation of high-quality mining assets globally.”

SSR Mining has three operations: the Marigold mine in Nevada; the Seabee gold operation in Saskatchewan, and the Puna operations in Argentina, which consist of the Chinchillas mine and the Pirquitas property. It also has feasibility stage projects and a portfolio of exploration properties in North and South America. Alacer’s cornerstone asset is its Copler gold mine in Turkey, 1,100 km southeast of Istanbul and 550 km east of Ankara. The Copler mine produced 391,213 oz. gold in 2019. Alacer also holds the Cakmaktepe project, 5 km from the mine, as well as a number of regional exploration projects.

Benson noted that the new company will have “wide-ranging operational skill sets, including expertise in open pit, underground, pressure oxidation, heap leach and flotation operations,” and that the transaction “allows shareholders to participate in a larger, more diversified and more liquid free-cash flow-focused gold producer,” with a portfolio of greenfield and brownfield projects.

Alacer’s Antal pointed to the “complimentary nature of the assets” and “the close cultural alignment” of the two companies, as well as the combined team’s “ability to tackle most types of deposits in the world.”

“This transaction is, frankly, transformational for both sets of shareholders,” Antal said on the conference call. “It creates a leading intermediate gold producer with high-quality, long-life operating mines across four mining-friendly jurisdictions. Alacer shareholders gain instant diversification and exposure to a stable and attractive portfolio of operations in the Americas, and SSR shareholders benefit from exposure to a tier-one, long-life, low-cost mine, with a material organic growth potential.”

Antal noted that Alacer has been in Turkey “in some shape or fashion for the best part of 20 years,” and has operated there for a decade. “We know the landscape really well and know how to operate,” he said, adding that the company has a very large land package with its joint-venture partner, not only surrounding the mine but also across the country, with a lot of other exploration projects going on.

When asked during the question and answer portion of the conference call whether SSR Mining was comfortable with operating in Turkey, Benson responded with an emphatic yes, noting that not only is it a member of the G20, but the country also has incredibly good infrastructure.

“I’ve been doing this for over 30 years and worked in all parts of the globe, really, and you understand that it’s very hard to understand a country until you go and look at it,” he said. “It is an emerging economy, but they have some amazing infrastructure that would put a lot of North America to shame.”

Special shareholder meetings of both companies are expected to be held in July 2020.