SYDNEY, AUSTRALIA: Red 5 Limited and Silver Lake Resources Limited have announced a merger deal that will create a diversified and profitable gold producer with operations in Australia and Canada. The merger will be implemented through a scheme of arrangement, under which Red 5 will acquire all the shares in Silver Lake. Silver Lake shareholders will receive 3.434 Red 5 shares for each Silver Lake share they own, resulting in a 51.7% to 48.3% ownership split between the two groups.

The combined entity will have a strong balance sheet, with a net cash and listed investments position of A$378 million, and a robust production profile of about 445,000 ounces of gold per year. It will also have a significant resource base of 16.4 million ounces of gold, with potential for further growth through exploration and development. The merger will also generate cost savings and synergies by eliminating duplicate functions and leveraging economies of scale.

The new company will be led by Mr Russell Clark as Chairman and Mr Luke Tonkin as Managing Director and CEO, with a balanced board of eight directors from both companies. The management team will have a proven track record of operational excellence and project execution, and will aim to deliver shareholder value through the optimisation and expansion of the four mining hubs in Western Australia and Ontario.

The merger is expected to enhance the market significance of the combined group, with increased trading liquidity and access to capital markets. The companies believe that the merger will position them for a valuation re-rate among the global mid-tier gold sector. The transaction is subject to customary conditions, including shareholder and court approvals, and is expected to be completed in the second quarter of 2024.

Luke Tonkin, Managing Director of Silver Lake said, “This transaction represents a highly complementary combination of assets and balance sheets for the mutual benefit of both Silver Lake and Red 5 shareholders. Mergers work when each company brings attributes that the other company does not possess, which is undoubtedly the case here. The increased scale, diversification and financial strength of the new company that will be formed via this transaction will be primed for continued strong cash flow generation and further growth.”

Mark Williams, Managing Director of Red 5 said, “This transaction represents a logical merger of two leading mid-tier gold companies and represents an exciting inflection point for Red 5 shareholders following the successful development, ramp-up and achieving steady state production at King of the Hills. The merger creates a ~445,000 oz pa diversified gold producer with assets in tier one jurisdictions. With a sector leading balance sheet, the merged entity provides a strong foundation for future growth.”

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