Westgold to merge with Karora

Westgold Resources has announced it will merge with Toronto-listed Karora Resources, resulting in a market capitalisation value of approximately $2.2 billion.

Wayne Bramwell-led Westgold is confident the combined portfolio can produce around 400,000 ounces of gold per annum. 

Last month, fellow Western Australian gold producer Ramelius Resources said it was in discussions with Karora surrounding a potential merger, however, on March 28 it announced it wouldn't pursue the matter further.

A few hours following the update, Karora told its shareholders that talks with another third party had begun, however, the company wouldn't make public comment until a definitive arrangement had been reached.

Under the Karora deal, subject to shareholder approval, Karora shareholders will be issued 2.524 Westgold fully-paid ordinary shares, 68 cents per share in cash, along with 30 cents in the new entity that has been de-merged from the Canadian company.

As part of the transaction, Westgold has appointed Thomson Geer and Strikeman Elliot as its respective Australian and Canadian legal advisers, along with Argonaut as its financial adviser. 

In addition to its listing on the Australian Securities Exchange, Enlarged Westgold will also list on the Toronto Stock Exchange. 

Mr Bramwell will be the managing director and chief executive officer of enlarged Westgold, while Cheryl Edwardes has been appointed chair. Karora's chair and CEO Paul Huet will remain in an advisory position with Enlarged Westgold until January 2025. 

Once the transaction is finalised on July 19, Westgold shareholders will control 50.1 per cent of the company. 

Mr Bramwell said he was upbeat with the acquisition, which includes Karora's Beta Hunt underground mine, located near Kambalda in the Goldfields.

“The prize here is Beta Hunt’s gold potential," he said.

"Rarely do you find a gold asset of the quality and potential of Beta Hunt hiding in a nickel belt and drilling is expected to further unlock value at this mine.

"This merger brings Beta Hunt together with Big Bell, the emerging Bluebird and the iconic Great Fingall mine under one Australian management team. These assets combined create the foundations of a new Australian goldmining powerhouse that is focused on free cash generation, is internationally relevant and investable and can stand head and shoulders alongside the biggest names in the Australian gold sector.

"The Westgold and Karora teams have independently been structuring our businesses for growth for several years and now is the time to bring these two businesses together."

These sentiments were echoed by Mr Huet.

"“For the last two years, Karora has watched Mr Bramwell and the team consistently unlock material value for shareholders at Westgold," Mr Huet said.

"One of the more unique aspects of this transaction is a very strong cultural fit between both companies, which will serve shareholders of the enlarged company well for a very long time.

"The merger is estimated to unlock approximately $490 million of operational, G&A and capex synergies while shareholders will become proud owners of the largest unhedged gold producer in Australia at completion of the transaction: certainly a compelling opportunity in the current gold price environment.

Westgold last traded at $2.34 per share, up 3 per cent, as of 10.39am AWST.