Silver Lake And Doray Minerals Agree On Gold Merger Deal

By Glenn Dyer | More Articles by Glenn Dyer

Doray Minerals has agreed to merge with Silver Lake Resources in a $421 million all paper deal that is yet another example of consolidation in the West Australian gold sector.

The deal will combine Doray’s Deflector and Silver Lake’s Mt Monger underground operations, which collectively are expected to generate 240,000 ounces (oz) of gold sales in the 2018-19 financial year.

It follows Ramelius’ recent bid for Explaurum (the $59 million paper offer was boosted by nearly half this week) and Spitfire Materials recent takeovers of both Aphrodite Gold and Excelsior Gold.

The deal values Doray at about $160 million and will see Silver Lake emerge as a multi-asset, mid-tier gold producer based in WA

A different deal was the $150 million cash offer from Northern Star Resources to joint venture partners that if successful would give it full control of the East Kundana gold mine near Kalgoorlie.

Still to come a much bigger deal with Barrick/Newmont looking to sell part or both their shareholdings in the Superpit at Kalgoorlie, a deal that will be in the hundreds of millions of dollars and mostly cash.

The latest marriage partners, Silver Lake, and Doray justify their combining by saying the deal will reduce the quarterly production and earnings volatility associated with single asset companies and offer multiple in-mine and near mine exploration opportunities to the combined entity.

The merged company would have $119 million in cash and equivalents, hold 800,000oz in gold reserves and 4.6 million oz in resources.

Under the terms of the deal, Doray shareholders will receive 0.6772 new Silver Lake shares for every share they hold. Existing Doray shareholders will hold approximately 37.3% and existing Silver Lake shareholders will control around 62.7%of the merged group.

Silver Lake managing director Luke Tonkin said in yesterday’s statement the combination of the complementary Silver Lake and Doray assets was being done for the right reasons at the right time and created a stronger company in a low-risk jurisdiction with financial strength and further growth opportunities.

Doray managing director Leigh Junk described the deal as a compelling transaction for the company and provided the financial strength to fully unlock the value of the Deflector operation.

“Both companies have recognised the challenges of being a significant producer in the gold business and this transaction puts us in a position to not only compete, but to be a sustainable and relevant player in the global gold industry,” he said.

“Doray has taken great care to find a partner with aligned growth ambitions and a strong operating culture, and Silver Lake fits that bill.

The deal is subject to the usual – an independent expert’s opinion, Doray shareholder approval, court approval, and no materially adverse changes.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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