Agnico Eagle resumes fact gathering into De Grey

Canada-based Agnico Eagle owns the Fosterville mine which is the largest producer of gold in Victoria, Australia. Picture: AFP

Speculation has again surfaced about Agnico Eagle’s interest in De Grey Mining with the Canadian listed group said to have picked up the pace of gathering information on the $2.6bn Western Australia gold miner.

De Grey has been the subject of potential takeover activity for more than a year, but its recent $600m equity raising to fund the development of its lucrative Hemi gold deposit was thought to have put to rest any suggestion it was embarking on any merger or acquisition talks.

Although sources close to the company argue that now would not be the time for a buyer to strike, others believe now is exactly the right time and a takeover makes sense.

If another miner wants to be involved in the project, 85km from Port Hedland, the best time to buy De Grey is before project construction hits full steam so that they can assert control over the project’s direction – and the company is only on the cusp of doing that.

Multiple sources have reported heightened interest from Agnico of late, and one suggestion is it had been carrying out a lot of work. The Canadian group has been linked to the target as a suitor for at least a year.

A De Grey Mining spokesman declined to comment when approached by DataRoom, although a company source has indicated it had not received any approaches.

De Grey’s shares are cheaper than they were a year ago even though the gold price hit a record in May of about $US2400 an ounce.

Its market value is $2.6bn and shares price $1.07 after trading at a three-year high at more than $1.60 in April.

Any buyout proposal would create a major dilemma for Gold Road Resources, which owns a 17.3 per cent stake.

The stake is a valuable part of Gold Road, and a strategic Gold Road buyer or merger partner such as Regis Resources would potentially be drawn to the opportunity to have a seat at the table over what happens to the sought-after De Grey.

One possibility is that Agnico Eagle buys both De Grey and the $1.8bn Gold Road.

There’s been suggestions that Northern Star may have some interest in De Grey in the future – but not yet – along with Barrick Gold and Gold Road itself, so there’s plenty of potential candidates which could turn up at the negotiating table.

Agnico Eagle is a Canada-based gold producer that owns Fosterville mine, the largest producer of gold in Victoria, Australia.

It inherited the asset when it merged with Kirkland Lake Gold and it likes to acquire assets of scale.

De Grey’s mining deposit is of a particularly high grade. The Hemi gold discovery in Western Australia’s Pilbara, is capable of producing 10.6 million ounces of gold with capital spending requirements of close to $1bn.