The St Barbara Ltd (ASX: SBM) share price won't be going anywhere today after the gold producer requested a trading halt this morning.
Why are St Barbara's shares in a trading halt?
St Barbara requested the trading halt whilst it undertakes an acquisition and an associated capital raising comprising an underwritten pro rata accelerated non-renounceable entitlement offer.
According to the release, St Barbara has entered into an agreement to acquire Canada based and TSX-listed low-cost gold producer Atlantic Gold Corporation for an all cash offer price of C$2.90 per share.
This implies a total equity value of C$722 million (A$768 million) and a total enterprise value of C$802 million (A$854 million).
What is Atlantic Gold Corporation?
Atlantic Gold Corporation is the owner and operator of Moose River Consolidated in Nova Scotia, Canada.
The release explains that Moose River comprises one producing open-pit and three others in development. It declared commercial production in March 2018 and produced 91,000 ounces of gold in calendar year 2018 from its Touquoy pit at an all-in sustaining cost (AISC) of C$731 an ounce (A$761 an ounce).
Once the other three pits are developed, its production is expected to expand to over 200,000 ounces per annum. Moose River has mineral resources of 2.4 Moz inclusive of mineral reserves of 1.9 Moz.
What now?
Atlantic Gold Corporation's directors control 32% of the share register and have entered into a lock-up agreement to vote all shares they hold in favour of the transaction. A C$25 million termination fee is payable if a condition precedent is not satisfied due to an action by either party or if either party ceases to support the transaction.
St Barbara intends to raise approximately A$490 million through an underwritten pro-rata accelerated non-renounceable entitlement offer at A$2.89 per new share to partly fund the transaction. The balance will be funded via St Barbara's existing cash reserves.
In addition to this, the company has secured a new committed A$200 million three-year revolving loan facility with Westpac Banking Corp (ASX: WBC) to support the combined company.
Management believes the transaction "demonstrates St Barbara's disciplined approach to executing inorganic growth and the Company's ability to deliver on its strategic plan."
Fellow gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) have dropped lower today after the gold price gave back some of its recent gains overnight.
