G Mining to buy Reunion Gold for C$875M

G Mining Ventures (GMIN) has agreed to acquire Reunion Gold in a C$875 million stock transaction to create an intermediate Americas-focused gold producer.

The GMIN team, including through the Gignac family-owned G Mining Services has built a number of mines in the Guiana Shield region, including Newmont's Merian mine in Surinam. The company is developing the Tocantinzinho gold mine in Para, Brazil, which is due to commence commercial production in the second half of 2024.

"Oko West has all the key attributes GMIN is looking for in its next leg of growth. We are well-positioned to accelerate value creation at Oko West leveraging our unique expertise in building and operating mines on schedule and on budget in the Guiana Shield, deep knowledge of and network in the region, and over US$480 million anticipated near-term free cash flow from Tocantinzinho," said G Mining Ventures chief executive Louis-Pierre Gignac.

"We believe that this transaction not only delivers our shareholders an attractive upfront premium, but also the ability to participate with significant ongoing ownership in the combined company, having the opportunity to participate in an expected future re-rating as Oko West is advanced towards production," said Reunion Gold chief executive Rick Howes.

Reunion shareholders will 65c per share in shares equivalent to being issued 0.285 GMIN shares for each Reunion share, with the transaction valued at C$875 million, a 29% premium. Upon completion, existing GMIN and Reunion shareholders will own 57% and 43% of the combined company.

Reunion shareholders will also receive shares in a newly created gold explorer that will hold all of Reunion's assets other than Oko West. It will focus on acquiring and exploring gold properties in Guyana outside of a 20km area of interest surrounding Oko West, and in Suriname. GMIN has agreed to fund $15 million and will obtain a 19.9% interest.

GMIN also aims to undertake a concurrent US$50 million equity financing supported by La Mancha and Franco-Nevada, funding 50% of this each. La Mancha's also intends to purchase up to US$10 million of GMIN shares in the open market. Following completion of the transaction, La Mancha's shareholding will decrease from 25% to 18.7%. Franco-Nevada's shareholding will decrease from 9.9% to 7.2%.

Oko West

In February, Reunion announced an updated resource estimate at Oko West to bring the total open pit and underground indicated resource to 64.6Mt grading 2.05gpt containing 4.3Moz. Oko West also hosts 1.6Moz in inferred resources. A preliminary economic assessment is underway and was due to be released in the coming months.

GMIN plans to accelerate development and move quickly through technical studies to a construction decision, using cashflow from Tocantinzinho to build it, to reach commercial production within three or four years of completing the transaction.

Tocantinzinho is 87% complete and will produce ~200,000ozpa for the first five years. Some $433 million has been spent on the development to date, 95% of project the total.

A 2022 feasibility study for Tocantinzinho study estimated total gold production of 1.8Moz over a 10.5-year life of the mine, averaging annual gold production of 174,700ozpa. 

Not over yet?

The announcement of the transaction could precipitate other offers or transactions given that Oko West is adjacent to G2 Goldfields' Oko gold project, which earlier this month also reported a resource update, increasing total contained gold by 69% to 2Moz, within which the indicated resource increased by 320% to 922,000oz. 

The combined open pit and underground resource at the Oko Main Zone (OMZ) is now 2.36Mt grading 9.03gpt in the indicated category for 686,000oz contained, with an additional 495,000oz in inferred resources contained within 2.41Mt grading 6.38gpt. The combined open pit and underground resource at Ghanie is now 3.34Mt grading 2.2gpt containing 236,000oz in the indicated category, with an additional 604,000oz of inferred resources contained within 12.22Mt grading 1.54gpt

Between them, G2 and Reunion have advanced a district with at least 10Moz of potential resources. With Guyana investing in infrastructure to diversify its economy from oil and gas while continuing to seek foreign direct investment, it is perceived as an attractive jurisdiction for gold mine development.

The GMIN-Reunion deal includes a breakup fee equivalent to 3.5% of the equity value of the transaction.

Shares in G Mining Ventures closed Friday at C$2.27, valuing the company at C$1 billion.

Shares in Reunion Gold closed Friday at 50c, valuing the company at C$604 million.

Shares in Gr Golffields closed Friday at C$1.17, valuing the company at C$243 million.