Aris Gold (TSX:ARIS) and GCM Mining have announced a signed merger deal that will make the combined company the largest gold mining company in Colombia. GCM will acquire Aris Gold for all of the remaining shares it does not already own. The company will purchase the remaining outstanding shares at an exchange ratio of 0.5 of a GCM share for every Aris Gold share. The merged company anticipates a balance sheet of $397 million in cash and $260 million in additional committed funding. Once the transaction is completed, it will become a large-scale gold mining company that the companies have said will be “top-of-the-class” among the junior producers in the Americas. The deal is currently scheduled to close following the companies’ shareholder meetings which are scheduled in mid-September 2022.
Once combined, it will also be Colombia’s biggest company and will continue to operate under the Aris Gold name, headquartered in Vancouver, Canada. The total consolidated business will have a mix of exploration, development, and production assets across the Americas and will be led by Neil Woodyer as CEO and director. The company’s project portfolio will ultimately span Soto Norte, Marmato Mine, and Segovia operations in Colombia, the Juby project in Ontario, Canada and in Guyana, the Toroparu project. The final merged company expects to have proven and probable mineral reserves of 3.8Moz of gold and 18.3Moz of measured and indicated mineral resources of gold.
In a press release, Aris Gold chairman Ian Telfer commented: “The combined group creates a top-in-class company with multiple tier one assets. After Aris Gold became the operator of the Soto Norte joint venture, joining forces with GCM became a logical next step. Our increased scale will also broaden our future opportunities to continue building a +1 million ounce (oz) producer over the next few years.”
GCM executive chair Serafino Iacono commented: “Each team has unique strengths with GCM being the Colombian leader for responsible, sustainable mining practices. Together with Aris Gold’s Board and management, the combined group brings a track record of building sizable and successful mining companies; this transaction further diversifies the company’s portfolio and reaffirms Colombia as an area of focus. While I am stepping down from a day-to-day executive role, I will remain a director and adviser on matters in Colombia, as well as an enthusiastic security holder.”
Highlights of the transaction are as follows:
Creates the top-of-the-class company among junior producers and the largest gold company in Colombia, with diversification in Guyana and Canada.
Experienced Board of Directors and management team with a track record of building value in the gold sector
Brings together teams with unmatched experience in Colombia and extensive project development and mine building expertise
Strong financial position to de-risk growth projects, with combined cash and committed funding of US$657 million2 and free cash flow generation from the Segovia Operations (US$84 million on a 12-month trailing basis to March 31, 2022)3
Estimated G&A cost savings of US$10 million per year through the reduction of duplicative public company expenses and rationalizing other expenses
No premium transaction that simplifies the ownership structure within a single company
Substantial long-term re-rating potential, with share price upside from enhanced market visibility, trading liquidity, access to capital, and reduced cost of capital
Segovia Operations (Antioquia, Colombia): a high-grade underground mining district that produced 206,389 ounces of gold in 2021. Operations at Segovia have been ongoing for over 150 years and there is a well-established history of mineral resource and reserve replacement. The Segovia Operations include the purchase of mined material from small-scale miners, which are described in the Segovia Technical Report and represented about 16% of 2021’s gold production, as part of an industry-leading Colombian program for the integration of informal small-scale miners into the supply chain, with added environmental, social and security benefits.
Marmato Mine (Caldas, Colombia): a historic producing underground gold mine currently undergoing a modernization and expansion program, which includes the construction of a new decline, mine workings, 4,000 tpd carbon in pulp processing plant and dry stack tailings facilities. The Pre-Feasibility Study disclosed in the Marmato Technical Report estimates production of 175,000 ounces per year (oz/yr) from the optimized Upper Mine and the Lower Mine expansion project.5
Toroparu Project (Cuyuni-Mazaruni, Guyana): an advanced stage open pit and underground gold project with estimated average gold production of 225,000 oz/yr over a 24-year mine life, as described in the Preliminary Economic Assessment (PEA) disclosed in the Toroparu Technical Report.6 Located approximately 50 kilometres southwest of the recently constructed Aurora gold mine, Toroparu is one of the largest undeveloped gold projects in the Americas and provides the combined company with a foothold in the emerging and highly prospective Central Guiana Shear Zone.5
Soto Norte Project (Santander, Colombia): a large-scale feasibility-stage underground gold project undergoing permitting and licensing. In April 2022, Aris Gold became the operator of the Soto Note joint venture and is leading a new and reframed environmental permitting process. The Feasibility Study disclosed in the Soto Norte Technical Report estimates average gold production of 450,000 oz/yr over the steady state production years. Upon exercising its option to increase its joint venture ownership interest from 20% to 50%, the attributable gold production to Aris Gold would be 225,000 oz/yr.5
Juby Project (Ontario, Canada): an advanced stage gold project with an open pit mineral resource located in the Abitibi greenstone belt.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.