Agnico Eagle to Buy Kirkland Lake Gold

Agnico Eagle Mines Limited (AEM) and Kirkland Lake Gold (KL) announced Tuesday they have signed a deal to merge. Toronto-based Agnico has mines in Canada, Finland, and Mexico, as well as exploration and development activities in these countries and in the United States and Colombia.

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Kirkland Lake Gold owns the Macassa mine and the Detour Lake mine, both in northern Ontario, and the Fosterville mine in Australia.

Agnico Eagle will buy rival Kirkland Lake Gold in an all-stock transaction valued at $10.7 billion (C$13.5 billion), creating the gold industry’s highest-quality senior producer.

Investors will receive 0.7935 of an Agnico Eagle common share for each Kirkland Lake Gold common share held. The deal values each Kirkland share at C$50.63, a 9% discount from the share’s close on Monday. The combined miner will have a market cap of around $24 billion. (See Agnico Eagle Mines stock charts on TipRanks)

Agnico Eagle CEO Sean Boyd said, “This merger starts a new chapter in Agnico Eagle’s 64-year history and creates the leading low risk global gold company with growing production, low costs and strong ESG leadership. …

“Kirkland Lake is an excellent cultural fit with Agnico Eagle, and we look forward to working together to further grow our business through exploration, mine development and optimization of our high-quality asset base. Over time, we believe that the gold industry will continue to evolve and consolidate and with this transaction we are well-positioned to take advantage of high-quality opportunities and be a true Canadian mining champion.”

On September 10, National Bank analyst Mike Parkin downgraded AEM to Hold from Buy, with a price target of $90 (C$113.68). This implies 79.4% upside potential. Parkin downgraded the stock due to its valuation. He said that Agnico Eagle continues to have a “robust” portfolio of projects, but the next phase of growth is “a few years away at this point.”

The rest of the Street is cautiously optimistic about AEM, with a Moderate Buy consensus rating based on four Buys and four Holds. The average Agnico Eagle Mines price target of C$104.85 implies an upside potential of 64.5% to current levels.