Proactive Investors - Agnico Eagle Mines Ltd (TSX:TSX:AEM) announced it is acquiring O3 Mining Inc (TSX-V:OIII, OTCQX:OIIIF) in an all-cash deal valued at approximately $204 million.
It will acquire the company for $1.67 per share, representing a 57% premium to the volume-weighted average price of O3 Mining’s shares for the 20 days ending December 11, 2024.
O3 Mining owns the Marban Alliance property near Val d’Or Quebec, adjacent to Agnica Eagle’s Canadian Malartic complex.
The Malban pit is estimated to contain 52.4 million tons of indicated mineral resources with a grade of 1.03 grams per ton (g/t) gold, totaling 1.7 million ounces of gold, and 1 million tons of inferred mineral resources with a grade of 0.97 g/t gold, amounting to 32 thousand ounces of gold.
Agnico Eagle believes the potential integration of the Marban Alliance property into the Canadian Malartic land package will create valuable synergies by utilizing Agnico Eagle's operational expertise and infrastructure, including the Canadian Malartic mill and workforce.
Analysts at Jefferies view the acquisition as a strategic and natural fit for Agnico Eagle, noting the Marban has a similar grade profile to Candidan Malartic.
“Agnico Eagle will look to leverage its regional operational expertise, mill capacity at Canadian Malartic, open-pit workforce, regional and host-community relationships, and equipment fleet to realize synergies from the integration of O3 Mining's properties,” they wrote.
“Both Canadian Malartic and the majority of O3 Mining's deposits are associated with major shear zones, typically hosting gold mineralization associated with disseminated pyrite and fine-grained visible gold within quartz veins and veinlets.”
They noted that while the deal could provide exploration upside in the near term, benefits to cashflow will only start to accrue for Agnico Eagle in approximately 10 years as it expects incremental production of 130,000 ounces per year from Marban by utilizing excess mill capacity and fleet at Canadian Malartic starting in 2033.
There is also a low probability of interloper risk, analysts believe.
“We see the premium over the last trading day price being offered by Agnico Eagle as compelling,” they wrote.
They also cited the all-cash nature of the offer, the strategic fit due to the proximity of O3 Mining’s key assets to Agnico Eagle’s Canadian Malartic, lock-up and support agreements with key shoulders, and a break fee of C$10 payable by O3 Mining.
Jefferies repeated its ‘Hold’ rating and price target of US$85 on Agnico Eagle. The company’s US-listed shares traded down 1.5% at $86 in the early afternoon on Thursday.
O3 Mining’s Toronto-listed shares, on the other hand, had surged 55% to C$1.64.