Westgold Resources (ASX: WGX) is on the cusp of completing its planned merger with Karora Resources (TSX: KRR) after the latter’s shareholders voted a near-unanimous 99 per cent in favour of creating the unhedged 400,000 gold-ounce producer at a special meeting last Friday.
Easily surpassing the required 66.66 per cent vote threshold, the transaction is now set to be rubber-stamped at the beginning of next month following court approval and the new entity is likely to attract global interest. Given the current strong gold price – trading today at $36.12 an ounce and near all-time highs – the timing could not be better as Westgold looks to leverage its increased scale and index weighting.
As part of the merger plans, the combined entity expects to dual-list on both the Australian and Canadian stock exchanges, hoping to trigger a significant re-rating by the market and provide a higher profile for Westgold. The Canadian TSX, based in Toronto, is the world’s 10th-biggest trading exchange by market capitalisation.
The overwhelming support for this merger from Karora shareholders underscores the verified value and compelling commercial logic behind this transaction. The integration of Karora’s assets positions Westgold as a formidable force across Western Australia’s goldfields, enhancing our focus on free cash generation and shareholder returns.
Westgold Resources managing director and CEO Wayne Bramwell
Previously, management has highlighted the substantial cost benefits that will be eked out as a result of the union between the two companies, with corporate overhead and operational cost savings expected to be $281 million and $209 million, respectively, within the next 10 years. The merger will bring renowned gold projects Big Bell, Beta Hunt, the emerging Bluebird mine and the Great Fingall mine all under the one ownership umbrella as it moves towards its target of pushing out 400,000 ounces a year in 2025.
As an interesting side investment, shareholders – as part of the combined entity – will also pocket shares in a newly-formed and to-be-listed entity, SpinCo, which will hold Karora’s existing 22.1 per cent interest in Kali Metals, a 1 per cent lithium royalty on specified Kali mining interests, deferred consideration payments related to the sale of Karora’s Dumont nickel asset and $6 million in cash.
With almost all conditions precedent for the merger now met, the final step is approval from the Ontario Superior Court of Justice, which is expected to land on Wednesday. Once the final order is received, the company will begin the exercise of welcoming Karora’s shareholders, stakeholders and team into its fold for what should be the beginning of a bold new chapter.
The merger of Westgold and Karora is a good example of being in the right place at the right time. As the price of the yellow metal continues to flirt with all-time highs and investment interest in the sector hots up, the deal appears set to deliver a new, mid-tier unhedged producer that seems likely to attract a broad range of global investors.
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