Northgate Minerals (TSX:NGX) has found a new CEO, but it’s going to cost the company US$409 million to get him.
On Wednesday, the Vancouver-based gold producer unveiled plans to buy Toronto’s Primero Mining (TSX:P) in an all-share deal to create a “leading mid-tier” gold producer with mines in Australia and Mexico.
The deal comes just two-and-a-half months after Northgate’s long-time CEO Ken Stowe announced his resignation.
Under the terms of the agreement, Joe Conway, the former president and CEO of mid-tier gold producer IAMGOLD Corp. (TSX:IMG), would replace Stowe as president and CEO.
Northgate’s Vancouver-based chairman Terry Lyons would retain his position following a shareholders meeting to vote on the deal sometime in September. Under the deal, Northgate will exchange 1.5 of its shares for each Primero share, valuing Primero at $4.21 per share, or approximately $370 million.
“Our proposal is driven by the belief that a combination of Northgate and Primero will create a stronger and better positioned company,” commented Lyons.
“We believe the value proposition of the combined company represents a unique opportunity for our respective companies to deliver both immediate and long-term value to our shareholders.”
The deal comes at a critical time for Northgate, which closed its flagship Kemess South gold mine in Northern B.C. in March. (See: “Northgate Minerals says goodbye to the B.C. mine that built the company” – issue 1127; May 31 to June 6.)
The company is shifting its focus to Ontario,
where its long-life Young-Davidson mine is under construction.
Northgate said the combined company would have a market capitalization of approximately $1.2 billion and produce 550,000 ounces of gold annually by 2013.
Primero first hit the market last year with a blockbuster $300 million initial public offering.
The company hit the ground running with Conway’s experience and a producing gold mine, San Dimas, that it bought from Goldcorp (TSX:G) for $500 million.
Goldcorp owns 35.5% of Primero and has endorsed its sale to Northgate, noting that it will hold approximately 11% of Northgate’s outstanding shares once the deal is finalized.
Northgate’s shares were up $0.01 to $2.82 at market close Wednesday, while Primero’s lifted $0.46 to $4.16.
Joel McKay
Twitter:jmckaybiv