OceanaGold to acquire Romarco Minerals for $657m

2 August 2015 (Last Updated August 2nd, 2015 18:30)

OceanaGold has signed an agreement to acquire Romarco Minerals in a deal worth around C$856m ($657m).

OceanaGold has signed an agreement to acquire Romarco Minerals in a deal worth around C$856m ($657m).

Romarco is currently constructing its principal asset, the Haile Gold Mine in South Carolina, US, a high-grade open-pit project.

According to Romarco, the combination of both companies is expected to create the lowest cost gold producer in the market, which is predicted to produce around 540,000oz of gold a year by 2017.

The entity will operate from four operating platforms in three countries and about 75% of gold production is expected to come from New Zealand and the US in 2017.

"The combination of the sector low-cost profile with significant free cash-flow generation, diversified production and a pipeline of organic growth opportunities forms the lowest cost gold producer globally."

The new company will also have better financial flexibility through the combined cash position, OceanaGold's strong free cash-flow generation, as well as access to low-cost credit facilities.

Due to this reason, the cost of capital for the Haile development is expected to come down, the company said.

Following the acquisition, Romarco Shareholders will get exposure to OceanaGold's asset portfolio of operating mines and improved financial position with cash flow from the latter's producing mines.

The Haile mine construction will benefit from the combined OceanaGold and Romarco mine development and operating expertise.

OceanaGold managing director and CEO Mick Wilkes said: "We believe the addition of the low-cost, long-life Haile Gold Mine provides such an opportunity, while underpinning an industry leading business.

"The combination of the sector low-cost profile with significant free cash-flow generation, diversified production and a pipeline of organic growth opportunities forms the lowest cost gold producer globally."

The agreement includes a non-solicitation covenant of Romarco in addition to providing for the payment by Romarco of a C$34m termination fee if it is cancelled in certain conditions.