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Friday, November 18, 2016 Derek Macpherson

KLG-NMI Merger Being Completed Now Highly Likely

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On Friday, Silver Standard Resources Inc. (TSX:SSO, NASDAQ:SSRI) and Gold Fields Ltd. (JSE:GFI, NYSE:GFI) announced they have withdrawn the latest version of the joint offer. In our view, this suggests that the planned merger between Kirkland Lake and Newmarket is likely to be completed as planned (~90% likelihood), while there remains a small chance that investors of one or both companies do not vote in favour of the deal (~10% likelihood), with the hope that a better deal can be struck with Silver Standard and Gold Fields in the future. With these odds and that Newmarket is trading at a ~6.2% discount to Kirkland Lake based on the exchange ratio, Newmarket likely represents the most attractive value.  read more


Sunday, November 13, 2016 Derek Macpherson

KLG Turns Down Offer, Continues with Planned Merger

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On Friday, Kirkland Lake Gold (TSX:KLG), in response to rumors, announced that it had turned down a C$1.44 billion dollar combined offer from Silver Standard Resources Inc. (TSX:SSO, NASDAQ:SSRI) and Goldfields Ltd. (JSE:GFI, NYSE:GFI). This offer represents more than a 50% premium to Thursday’s close. Our understanding is that this proposed offer would stop the planned merger with Newmarket Gold (TSX:NMI). While this offer is a substantial premium to Kirkland Lake’s current share price, Kirkland Lake’s board and financial advisors, see superior value in the merger with Newmarket being completed. In our view there are three possible outcomes. First and most likely, considering board, management and shareholder support, is that the merger between Kirkland Lake and Newmarket is completed as announced (~70% likelihood). The second is that because of a board conflict which supports the planned merger, Silver Standard and Goldfields make a hostile offer for Kirkland Lake and are successful (~25% likelihood). The last and probably least likely is that shareholders (of one or both companies) do not vote in favour of the merger (~5%). With these odds and that Newmarket is trading at a ~13.6% discount to Kirkland Lake based on the exchange ratio, likely represents the most attractive value. However, should Silver Standard and Goldfields continue to pursue Kirkland Lake it could provide higher near-term return, but with higher risk.  read more


Thursday, September 29, 2016 Derek Macpherson

KLG & NMI to Merge, Creating a Mid-Tier Producer

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This morning Kirkland Lake Gold (TSX:KLG) and Newmarket Gold (TSX:NMI) announced they have entered into an agreement to merge the two companies. As consideration for the transaction, each Kirkland Lake shareholder would receive 2.1053 Newmarket shares, implying a 9.3% premium for Newmarket in the transaction. We view the merger positively, for both KLG and NMI shareholders as the companies increased scale is likely to warrant a premium valuation. It is also likely to be beneficial for other junior producers as the merger continues to highlight the scarcity of quality assets in good jurisdictions.  read more


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