RESOLUTE Mining is to buy Toro Gold in a $274m cash and shares transaction adding 156,926 ounces of gold annually and signifying an important step in the firm’s strategy of becoming a sizeable gold investment option in its newly adopted London home.
John Welborn, MD of Resolute, told Miningmx on June 18 that in listing on the London Stock Exchange the company had the platform to grow, possibly stepping into the shoes of Randgold Resources, the 1 million oz/year gold producer bought by Barrick Gold.
The transaction also comes amid bullish conditions for the gold price, currently trading at $1,431/oz – a 17% increase on a 12-month basis. Shares in Resolute have increased some 50% since listing in London and are currently trading at 98.5 pence a piece.
As a function of the Toro Gold transaction – which has been virtually been rubber-stamped after 94% of the target’s shareholders provided written consent – Resolute adjusted its full year production upwards to 400,000 oz. Resolute’s largest shareholder, ICM, was said to be “strongly supportive” of the transaction.
Toro Gold’s Senegal mine, Mako Gold Mine, produced 156,926 oz in the firm’s 2018 financial year at an all-in sustaining cost (AISC) of $655/oz. Mako Gold Mine’s incorporation would take Resolute’s AISC to $960/oz.
In addition to Mako Gold, buying Toro Gold adds exploration potential in Senegal as well as Cote d’Ivoire and Guinea. Resolute announced full year production of 305,436 oz on July 30 which it produced at an AISC of $924/oz.
It had guided to full year production of 330,000 oz which included a 270,000 oz contribution from its Mali mine Syama. Resolute also mines gold from Ravenswood in Australia and is hoping to press the button on the development of Bibiani, in Ghana.
The purchase of Toro Gold is expected to be effective from August 2.
Resolute has offered $130m in cash, which has been fully funded through a finance facility provided by Taurus Funds Management, and some 142.5 million in Resolute shares issued at a volume weighted average price of A$1.45/share equating to $144m. On completion of the transaction, Toro Gold shareholders will own 15.8% of Resolute.
Toro Gold generated $180m of revenue and $70m of cash flow from operations. As of June 30, it had a net cash position of $14m comprising $94m of cash and bullion and $80m in debt. Resolute said it intended to refinance the Taurus debt from operational cashflow and through the expansion of the firm’s $150m syndicated loan facility.
“The Mako Gold Mine will be our tenth operating mine and one which forms an important part of our next phase of growth,” said Welborn in a statement. “The acquisition also confirms our commitment to creating a leading African gold producer,” he said.
