GCM Mining to acquire Aris to create a leading gold producer in Americas

gcm-mining-to-acquire-aris-to-create-a-leading-gold-producer-in-americas

Expect more consolidation in shrinking gold sector, say industry insiders

The combined company would have proven and probable mineral reserves of 3.8 million ounces of gold.
The combined company would have proven and probable mineral reserves of 3.8 million ounces of gold. Photo by Getty Images

Canadian gold miners GCM Mining Corp. and Aris Gold Corp. inked an all-share deal that would create the largest gold miner in Columbia and one of the bigger producers in the Americas, the latest example of executives seeking to dominate what they say is a shrinking industry.

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The agreement, which the companies said they expect to complete in mid-September after meetings with their respective shareholders, would see Toronto-based GCM acquire all of Vancouver-based Aris Gold’s shares that it doesn’t already own through an exchange at a ratio of 0.5 of a common share of GCM for each common share of Aris Gold.

If the deal closes, GCM would own 74 per cent of the combined company, which will be named Aris Gold Corp.

“I think it (the deal) is very significant. There has been some consolidation (in the gold sector), but investors wish there was more,” Ian Telfer, chair of Aris Gold, said by phone after the agreement was announced on July 25.

Tefler would become chair of the new company, and Aris CEO Neil Woodyer would remain chief executive.

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“The gold industry is really fragmented,” Telfer continued. “Institutional investors have become larger and larger, but the mining companies have stayed the same size, and it (mergers) will continue.”

The gold industry has seen at least eight notable mergers since 2018, when Barrick Gold Corp. and Randgold Resources Ltd. announced an $18-billion, zero-premium, all-share merger. In May, Gold Fields Ltd. said it would acquire all of Canadian miner Yamana Gold Inc.’s shares to create the world’s fourth largest gold producer.

According to Telfer, the combination with GCM Mining, which “came together” in the last two months, will bring together multiple tier one assets with a total proven and probable mineral reserves of 3.8 million ounces of gold.

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In Colombia, the new company would include GCM’s Segovia operations in Antioquia, which produced about 206,389 ounces of gold in 2021; Aris’ Marmato mine in Caldas, currently undergoing an expansion program; and the Soto Norte project in Santander, which according to a feasibility study is expected to produce about 450,000 ounces of gold annually for 14 years.

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The new company would also feature the Toroparu project in Guyana, an advanced gold project that’s expected to produce about 225,000 ounces of gold a year in the future and the Juby project in Ontario.

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“The industry is not growing and large ore bodies are very rare and hard to acquire,” said Telfer. “You have got to get your hands on some large ore bodies if you are going to grow a mining company. At Aris, we have been able to do that with the acquisitions that we made.”

Aris Gold was created in 2020, the result of a spin off from GCM, which at the time wanted to sharpen its focus on the Marmato project. The new deal, which marks a reversal of the 2020 plan, is to ensure GCM gets its hands on the Soto Norte project, which Aris acquired in March this year.

“With Aris’s plan to develop the huge Soto Norte deposit over the next few years, we thought it made sense to combine the cash flowing Segovia asset with the development project,” said Telfer.

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GCM, which owns about 44% of Aris, echoed a similar sentiment. Its executive chairman Serafino Iacono said in a press release that the merger would “further diversify” the company’s portfolio and help it grow.

GCM, which currently owns about 44 per cent of Aris Gold, echoed a similar sentiment. Its executive chairman Serafino Iacono said in a press release that the merger would “further diversify” the company’s portfolio and help it grow.

Shares of both companies rose after the announcement. GCM was trading at about $3.70 per share near the end of the trading day in Toronto, a nine per per cent increase from the end of last week, and within a 52-week trading range of $3.13 and $6.13. Aris Gold was trading at $1.86, a gain of about 13 per cent, within a 52-week trading range of $1.21 and $2.25.

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