Big news for holders of Canadian gold mining stock Equinox Gold (TSE:EQX), as it set up a deal to buy Calibre Mining (CXBMF) in an all-stock deal. But investors did not like the thought of diluting shares that hard, and sent Equinox shares sliding nearly 2% in Monday morning’s trading.
Calibre turned out to be a pretty expensive purchase for Equinox, who offered up $1.8 billion in stock for the miner. Calibre shareholders will land 0.31 shares of Equinox for every one share of Calibre they currently hold. Once complete, Equinox will have 11 assets on hand, with plans to pare that number down a bit and realize some short-term cash as well.
The move comes at a time when gold is on the rise, and by having more mining assets under its control, Equinox will be able to pull, and thus sell, more gold. Equinox plans to put that extra cash promptly to use to pare down its debt load, noted word from CEO Greg Smith. Any layoffs as a result of the move are unclear, but what is known is that, even if there were any, Smith himself would not be on that list, as he will remain CEO.
Good as Gold
The new Equinox will have two major showpieces as part of its roster: the Greenstone Mine and the Valentine Gold Mine, reports note. The both of them together produce approximately 590,000 ounces of gold annually, when they operate at capacity. Those two alone account for over half of Equinox’s projected 2025 mining count, which is expected to come in at about 950,000 ounces. That number swells to 1.2 million once everything gets up and running to its fullest.
But that also explains why Equinox may get rid of a mine or two. Remember there are around 11 mines total, and nine of them produce a cumulative total of less than half the overall total. That suggests a couple, or possibly a few, very minor mines that could be divested for quick cash.
Is Equinox Gold a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:EQX stock based on three Buys and five Holds assigned in the past three months, as indicated by the graphic below. After an 72.23% rally in its share price over the past year, the average TSE:EQX price target of C$11.03 per share implies 15.52% upside potential.
