Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF) has announced the acquisition of Boroo Gold LLC in an all-share transaction that is designed to create Mongolia's largest gold producer.
As a result of the merger, Steppe’s production profile is forecast to rise to 90,000 ounces (oz) of gold per year – up from 30,000oz.
Significantly, the combined company’s growth projections see production volumes reach some 160,000oz by 2026 and rise further to 200,000oz as Phase 2 of the ATO Gold project is delivered.
The improved run-rate, meanwhile, is expected to bolster the company’s financing capabilities to support upcoming projects.
"The Boroo Gold acquisition will establish Steppe Gold as Mongolia's largest and leading gold producer,” Steppe Gold chief executive Bataa Tumur-Ochir said in a statement.
“Our production is expected to triple over the next two years to 90,000 ounces and 160,000 ounces by 2026, increasing our financial strength to repay the non-dilutive US$150M project financing for the ATO Gold Mine Phase 2 Expansion and to advance our exploration portfolio.
“It also provides shareholders with improved optionality at our Tres Cruces gold project in Peru while maintaining our focus on growing our production profile in Mongolia."
The acquisition agreement sees Steppe acquire all Boroo Gold’s common shares in a paper transaction that will result in the Boroo’s beneficial shareholders owning some 58.8% of the enlarged company.
The deal will include customary equity lock-up arrangements for the shares issued in the transaction.
Premier gold producer in Mongolia
The deal had been in the works for a while, Steppe Gold’s executive vice president Aneel Waraich told Proactive.
“It's a project we are intimately familiar with, currently in immediate production for the past three years, with an additional production life expectancy of about six and a half to seven years,” Waraich said.
“This development is transformative for us because, at present, we function as a 30,000-ounce producer. However, while constructing our fully funded phase that will elevate us to over 100,000 ounces, we may not be perceived as particularly attractive in the market, with minimal cash flow on the existing 30,000 ounces.”
With the acquisition in Mongolia, Steppe is now positioned as a 90,000-ounce producer at an approximate cost of $1,000 all in. It’s a strategic move to propel its production profile to well over 150,000 ounces within just two years, Waraich noted.
“This immediate addition of cash flow and scale, along with evident synergies, demonstrates our unwavering focus on Mongolia, where we are consolidating our presence and poised to become the largest gold producer in the region.”
--Updated with additional comments--