Genesis Minerals has agreed to acquire smaller peer Vault Minerals in a deal that would create Australia’s third-largest gold producer with a market capitalisation of around A$12.6 billion ($8.71 billion).
The development, which was announced in a joint statement on Tuesday, follows Regis Resources dropping its pursuit of Vault, stating that the terms required to match Genesis’ offer would not meet its value and return targets.
The rival Genesis bid, unveiled last week, was at a 15.7% premium to Vault’s closing price at the time of the offer and values it at about A$5.6 billion.
The combination, expected to generate an annual production capacity of up to 700,000 ounces, is estimated to yield some A$2 billion in synergies due to the proximity of the firms’ respective operations at Leonora and Bardoc-Mount Monger in Western Australia.
That could help Genesis’ higher-grade ore be milled through Vault’s processing plant rather than requiring it to expand its own.
Genesis shareholders would own around 59.8% of the combined entity, while Vault shareholders would hold the remaining 40.2% stake, with the scheme being unanimously recommended by the Vault board.
The merged entity will have a board comprising four Genesis directors and three Vault directors. Vault non-executive chair Russell Clark will maintain his position at the combined group, while Genesis CEO Matt Nixon will be appointed chief executive of the merged group.
Shares of Vault and Regis were down as much as 2.2% and 2.7%, respectively, in parallel with a around 3% decline in the ASX gold sub-index. Bullion prices dropped 3% on the day as a flare-up in tensions in the Middle East fanned prospects of higher-for-longer U.S. interest rates.
