Agnico Eagle to Buy O3 Mining in All-Cash CA$204M Deal

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Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE), Canada's largest gold producer and the third-largest in the world, has entered into a friendly transaction to acquire O3 Mining Inc. (TSXV:OIII; OTCQX:OIIIF) for an all-cash deal worth CA$204 million.

The offer price of CA$1.67 per common share represents a premium of 57% to O3's closing price on December 11. Upon the announcement December 12, O3's stock soared 55% from CA$1.06 to CA$1.65.

O3's primary asset is its 100%-owned Marban Alliance property located near Val d'Or in the Abitibi region of Quebec, adjacent to Agnico Eagle's Canadian Malartic complex.

In a release announcing the takeover bid, Agnico Eagle reported possible synergies from the acquisition. The Marban deposit is an advanced exploration project that could support an open-pit mining operation similar to Agnico Eagle's Barnat open-pit operations at the Canadian Malartic complex.

"Consistent with our regional strategy, this transaction is a tuck-in of the Marban deposit to our Canadian Malartic complex," Agnico Eagle President and Chief Executive Officer Ammar Al-Joundi said. "The Marban deposit is expected to be complementary to other 'fill-the-mill' opportunities at Canadian Malartic, further improving the production profile at a long-life, world-class asset."

O3 President and Chief Executive Officer Jose Vizquerra noted, "The all-cash offer at a significant premium to market is an excellent outcome for our shareholders and is validation of the efforts made by the O3 Mining team. Having diligently advanced the Marban Alliance project over the past five years, the timing is right for O3 Mining to sell to a more experienced operator that can efficiently navigate the project through permitting and construction."

O3 has estimated that the Marban pit contains 52.4 million tonnes (Mt) of indicated mineral resources grading 1.03 grams per tonne gold (g/t Au) for 1.7 million ounces (Moz) Au and 1 Mt of inferred mineral resources grading 0.97 g/t Au for 32,000 ounces of gold.

Agnico Eagle the 'Gold Standard'

Agnico Eagle is a Canada-based and Canadian-led senior gold mining company, producing precious metals from operations in Canada, Australia, Finland, and Mexico.

"We believe Agnico Eagle is the gold standard in the precious metals space — it not only has the financial strength and the mining expertise to advance the Marban Alliance project but shares our commitment to work in partnership with stakeholders in a socially responsible manner," Vizquerra said. "Today's offer represents a significant milestone for O3 Mining."

All five targets at Marban are past-producing mines dating back to 1959 and within several kilometers of Wesdome Gold Mines' Kiena Mine, Eldorado Gold's Lamaque Mine, and Agnico's Goldex and Canadian Malartic, according to a report by Blair McBride for Mining.com.

According to that report, SCP Resource Finance Analyst Brandon Gaspar painted the deal as a good outcome for both companies in a Thursday research note.

"(There are) clear synergies to be realized given (O3's) proximity to (Agnico's) mine, mill, and tailings," he wrote, according to McBride.

"Agnico just acquired one of the largest land holdings in Val d'Or," he wrote, and the cost of capital to advance Marban to production would be much cheaper for Agnico than it would be for O3.

Gaspar revised his price to CA$1.65 per share from CA$2.85 and his recommendation to Tender from Buy, the report said.

Largest Shareholder Supports Transaction

O3's largest shareholder, Gold Fields Ltd., has agreed to a lock-up agreement with Agnico to tender its common shares of O3 into Agnico's offer to acquire all of the outstanding common shares.

"Gold Fields owns approximately 17% of the outstanding common shares on a basic basis," O3 said in a release. "Including its lock-up agreement with Gold Fields, Agnico Eagle has now entered into lock-up agreements with O3 Mining shareholders owning an aggregate of approximately 39% of the outstanding common shares on a basic basis, including each of the directors and officers of O3 Mining."

According to another release by Agnico, the company intends to formally commence the offer by mailing a takeover bid circular to O3 Mining shareholders on or about Dec. 19, 2024. O3 Mining's directors' circular is also expected to be mailed to O3 Mining shareholders on or about that date.

The offer will be open for acceptance for a minimum of 35 days following the date of commencement.

The Catalyst: Gold's Bull Market Can Still Climb

According to a report on ActionForex.com, gold prices stabilized Friday after falling almost 1% in the previous session as investors assessed the latest U.S. economic data.

"Investors continue to expect the US Federal Reserve to lower interest rates by 25 basis points next week," the report said. "They also anticipate future rate cuts in 2025, although their magnitude is uncertain."

A rate cut is "a positive signal for Gold," the site said. "As the precious metal does not generate coupon yield, rate reductions lower the opportunity cost of holding Gold, making such investments more attractive for traders."

Many experts agree gold is still in a bear market. FX Empire's A.G. Thorson on Friday predicted a run towards US$3,000-plus by next March or April.

Writing for Money on December 4, Marc Guberti noted that the yellow metal is up by more than 31% in 2024 and has delivered more than an 82% gain over the past five years. "Many big banks believe that gold is set to continue its rally in 2025 and beyond," he wrote.

Research from Goldman Sachs suggests that gold will climb higher as central banks in emerging markets continue to buy more gold, Guberti wrote, noting that Goldman Sachs research analyst Lina Thomas has mentioned lower interest rates as a catalyst for a 2025 gold rally.

Ownership and Share Structure

According to the company's investor presentation, 6.3% of O3 Mining is held by management and insiders, 17% is with strategic investor Gold Fields, Institutions own 30.6% and the rest is retail.

The company has a market cap of CA$180.27 million, 108.7 million shares outstanding, and according to MarketWatch it trades in the 52-week range between CA$0.91 and CA$1.70.

According to Refinitiv, about 0.09% of Agnico Eagle is owned by insiders and management, and about 72.31% is owned by Institutions. The rest, about 27.6%, is retail.

Top shareholders include Van Eck Associates Corp. with 4.3%, The Vanguard Group Inc. with 3.85%, Fidelity Investments Canada ULC with 3.25%, Fidelity Management and Research Co. with 2.95%, and BlackRock Investment Management with 2.32%.

The company has 501.52 million shares outstanding and 501.03 million free-float trading shares. Its market cap is CA$61.1 billion, and it trades in a 52-week range of CA$60.17 and CA$123.86.