Steppe Gold, a precious metals company based in Mongolia, has signed a binding term sheet for the acquisition of all issued and outstanding common shares of compatriot Boroo Gold.
The all-share deal is poised to result in the formation of Mongolia’s largest gold producer.
Under the agreed terms, Steppe Gold will issue shares that will result in Boroo PL, the beneficial shareholder of Boroo Gold, holding a 58.8% interest in Steppe Gold upon completion of the proposed transaction.
Additionally, Steppe Gold has agreed to grant Boroo PL certain registration rights.
The transaction is contingent upon the negotiation of definitive agreements, which are to be finalised during an exclusivity period ending on 18 March 2024.
Conditions for the execution include satisfactory due diligence, the absence of any material adverse change, and the approval of the boards of directors of both Steppe Gold and Boroo PL.
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Additionally, the completion of the proposed transaction also hinges on obtaining all necessary regulatory, stock exchange, court approvals and the endorsement of the shareholders of both Steppe Gold and Boroo PL.
Steppe Gold has indicated that the acquisition may be executed directly or through a wholly owned subsidiary.
The acquisition is expected to bring substantial benefits to Steppe Gold shareholders, including an increase in annual production from 30,000oz to 90,000oz in 2024 and 2025, and further to 160,000oz by 2026.
The deal is also anticipated to generate strong cash flow and bolster financial capacity to service the ATO Gold Mine Phase 2 Expansion debt and project financing.
Moreover, the transaction will support funding for exploration programmes and further acquisition opportunities in Mongolia.
It will also enhance optionality for the Tres Cruces gold project in Peru. Upon completion of the deal, Steppe Gold will become the sole shareholder of Boroo Gold.
Steppe Gold chairman and CEO Bataa Tumur-Ochir said: “The Boroo Gold acquisition will establish Steppe Gold as Mongolia’s largest and leading gold producer.
“Our production is expected to triple over the next two years to 90,000oz and 160,000oz by 2026, increasing our financial strength to repay the non-dilutive $150m project financing for the ATO Gold Mine Phase 2 Expansion and to advance our exploration portfolio.
“It also provides shareholders with improved optionality at our Tres Cruces gold project in Peru while maintaining our focus on growing our production profile in Mongolia.”