Canadian company handed massive gold field in Guyana, sells 57% of its shares for US$638M days after inking agreement with Govt.

Apr 25, 2024 News

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Kaieteur News – Days after disclosing the signing of a US$1 million Mineral Agreement with the Government of Guyana (GoG), Canada-based mining company Reunion Gold Corporation announced that it sold 57% shares of its Guyana gold project for some US$638 million (C$875 million).

On April 18, Reunion announced the signing of an agreement with government and the Guyana Geology and Mines Commission (GGMC), which paves the way for the exploration and development of the Oko West gold project located in Region Seven (Cuyuni-Mazaruni), Guyana. Under the terms of the Mineral Agreement, Reunion Gold is granted stable fiscal and operational conditions throughout the project’s lifespan.

With hopes of establishing its presence in South America, Montreal-based, G Mining Ventures Corporation (GMIN) is set to acquire the majority share of Reunion’s Gold Oko West project. According to Monday’s announcement, the Canadian companies entered into a definitive agreement to combine the two companies, with hopes of setting the stage for the creation of a leading intermediate gold producer, particularly in the Guiana Shield region. The all-share deal, is valued at a substantial US$638 million. The acquisition represents a 29% premium to Friday’s closing share prices of Reunion, underlining the strategic importance of Oko West to G Mining’s expansion strategy.

“Through the transaction, GMIN will acquire RGD’s [Reunion] flagship Oko West Project located in Guyana, within the Guiana Shield region, one of the most attractive mining jurisdictions in South America. Oko West has emerged as a globally significant gold discovery over the last few years, with excellent potential to become a top tier deposit that could support a large, long-life mine complex to accelerate GMIN’s vision of building a leading intermediate gold producer,” it was stated.

To this end, it was explained that the GMIN team including through the Gignac Family-owned G Mining Services (GMS), has an impressive track-record of executing world-class projects in the Guiana Shield region to generate industry leading returns for its stakeholders. GMIN says it plans to move Oko West quickly through technical studies to a construction decision, leveraging the considerable amount of exploration, development, and permitting work that has already been completed by Reunion, supported by the expected free cash flow from the Tocantinzinho Gold Project in Para state, Brazil which is on schedule and on budget for commercial production in the second half of 2024.

Upon completion of the transaction, GMIN will hold the majority stake in a new combined entity, with a 57% ownership, while Reunion shareholders will retain a 43% stake on a fully-diluted in-the-money basis; prior to the concurrent US$50 million equity financing. Notably, the number of common shares issued by New GMIN to GMIN and Reunion shareholders will be equivalent to the combined company undergoing a 4-to-1 share consolidation upon closing of the transaction. In addition, Reunion shareholders will receive common shares in a newly created gold explorer (SpinCo) that will hold all of Reunion’s assets other than Oko West. Notably GMIN has agreed to fund SpinCo with C$15 million.

Louis-Pierre Gignac, Chief Executive Officer (CEO), President of GMIN, stated: “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$480M anticipated near-term free cash flow from Tocantinzinho. The acquisition of Oko West is the second step towards our vision of becoming a leading intermediate gold producer, building on the team’s success at Tocantinzinho. We look forward to continuing to advance our Buy. Build. Operate strategy to create and unlock further value for GMIN shareholders.”

Rick Howes, Chief Executive Officer (CEO) and President of Reunion stated: “We are very pleased to announce this Transaction today, which we believe is a testament to the outstanding work our team has done rapidly discovering and advancing Oko West over the last few years. 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.”

He continued, “The transaction significantly de-risks the advancement of Oko West given the financial strength, free cash flow, and development capabilities that GMIN brings to the table. Importantly, we believe this is a great outcome for the country of Guyana, with Oko West being taken forward by a company that will be a great steward of the asset for the benefit of the country and its communities.”

Moreover, the transaction is expected to be completed in Q3 2024, subject to the receipt of required securityholder, court and Toronto Stock Exchange (TSX) approvals and other closing conditions customary in transactions of this nature.  Also, the agreement includes reciprocal deal protections and a reciprocal C$31.2 million termination fee payable under certain circumstances.

As the deal awaits approval from both sets of shareholders, the market has already responded positively to the news, with Reunion’s stock rising by 8% and G Mining’s stock, albeit experiencing a slight decline initially. Kaieteur News had reported that Reunion Gold is actively considering both open-pit and underground mining. The company aims to reach a construction decision by 2025, marking another crucial milestone in its journey toward operational readiness in Guyana’s gold industry.

The Canadian mining company has firmly set its eyes on reaching gold production at its Oko West Gold Project by 2027. The company has an estimated 4.2 million ounces of gold. In February 2024, Reunion announced an updated Mineral Resource Estimate (MRE) containing a total of 4.3 M oz. of gold in Indicated Resources grading 2.05 g/t and 1.6 M oz. of gold in Inferred Resources grading 2.59 g/t. The February 2024 MRE includes an underground Resource containing 1.1 M oz. of gold at a grade of 3.12 g/t Au in the Inferred category.

China’s Zijin Mining said on Friday, it would acquire Guyana Goldfields for C$323 million ($238 million), bringing an end to a protracted takeover battle for the Canada-listed gold miner.

Toronto-based Guyana Goldfields announced on June 3 that it had received a binding proposal from an unnamed overseas-based miner to acquire the company, valuing it around 35% higher than a previously accepted offer from Silvercorp Metals.

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• agreement, Canadian, company, Guyana, Shares

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