Equinox-Calibre Deal a ‘No-Brainer’
‘When you have conviction on assets, you can't really control the timing of when they become available’
Equinox Mining (TSX: EQX) chief financial officer Peter Hardie says the company’s proposed merger with Calibre Mining Corp (TSX: CXB) was too good an opportunity to pass up.
The deal, announced in February, will create Canada’s second-largest gold producer by combining two flagship operations, Equinox’s Greenstone mine in Ontario, which achieved commercial production in November, and Calibre’s Valentine project in Newfoundland & Labrador, which is under construction.
The two cornerstone assets are expected to produce 590,000 ounces of gold per year once at full capacity.
Speaking at the Mining Forum Europe in Zurich on Tuesday, Hardie said Equinox often got asked ‘why now?’ regarding the deal.
Hardie said the two management teams had known each other for decades and were very friendly.
“In June of last year, they were having lunch and, keeping in mind that we had just consolidated the ownership of the Greenstone mine, the subject of, ‘hey, what would combine these two great Canadian assets?’” he said.
At the time, Equinox chairman Ross Beaty acknowledged the merits of a combination, but said the company was still trying to digest the Greenstone consolidation and construction.
The two companies caught up again later in the Canadian summer.
“And [Calibre] said, ‘by the way, we did some desktop work on this, we actually think it holds up, it looks good, but why don't you take a look at it and see what you think?’” Hardie said.
“Ross took the information and thought, ‘okay, I guess it is interesting, but again, not the right time perhaps for Equinox right now’.”
The two companies agreed to reciprocal site visits so the Calibre team visited Greenstone and Beaty went to Valentine.
“He came away really, really blown away by the prospectivity of the mine there, so on his return, he spoke with our CEO, Greg Smith, and things progressed,” Hardie said.
“And I think it's fair to say, on the management side, we were digesting things still, but the more that we looked at this on the management side, the more we looked at things, the more they made sense for us on the economic side.”
Hardie said the consolidation of Greenstone also wasn’t ideal timing.
“I think that the moral to the story is, when you have conviction on assets, you can't really control the timing of when they become available,” he said.
“But from both sides, there's been a real willingness to do something, and this will be a step change for both companies, frankly, moving us out of a fairly crowded mid-tier space and into a pretty small, we'll call it junior-senior or major producer space.”
Bloomberg reported last month that Calibre’s largest shareholder, Van Eck Associates, opposed the deal on the grounds that it was dilutive and Calibre was poised for a re-rate.
The Calibre shareholder vote is due to be held in Vancouver on April 24.
“I can appreciate that Calibre shareholders might be saying ‘hey, you should have waited longer’, but at the same time, we were told the exact same thing on Greenstone did not like that transaction,” Hardie said.
“When we acquired Premier [Gold Mines], the market really didn't like that transaction, but we don't build companies for the next quarter, we don't build them for the next year. We build them for the long term.
“We knew that 5-10 years down the road that having Greenstone in the Equinox portfolio would absolutely be the best thing for Equinox shareholders longer term, and we believe that's the same here.”
