Steppe Gold Ltd (TSX:STGO, OTCQX:STPGF) announced that it has entered into a share purchase agreement to acquire leading Mongolian gold producer Boroo Gold.
Additionally, it said that it would sell the Tres Cruces oxide project located in Peru to Boroo Singapore for approximately C$12 million in cash.
Steppe Gold believes this divestment is to likely the highest value buyer and allows it to have a singular focus on Mongolia.
The company is 100% owner of the ATO gold mine and the Uudam Khundii project in Mongolia.
The company said the acquisition of Boroo Gold will bring “immediate and strong cashflows.”
Boroo Gold's projected annual production for 2024, 2024 and 2026 is 60,000 ounces of gold.
In 2023, it produced 67,315 ounces of gold at an all-in cost of $847 per ounce with an average achieved gold price of $1,957 per ounce.
Following the acquisition, Steppe Gold expects combined gold production in 2024 of 90,000, which is expected to increase to 150,000 ounces in 2026 as the ATO Gold Mine Phase 2 Expansion is set to come online.
The company also expects significant value upside from potential cost synergies from combined purchasing power and lower relative administration costs and increasing reserves and resources near the existing mines.
“We are very pleased to announce the agreement to acquire Boroo Gold,” commented Steppe Gold CEO Bataa Tumur-Ochir.
“This transaction accelerates our path to a multi-asset Mongolia-focused mining group and, importantly, immediately provides strong cash flow to support our growth plans, further improved with the recent strong gold prices.”
Details of the transactions
Steppe Gold will purchase Baroo Gold by issuing 138,150,000 shares of its own stock. As a result of this share issuance, Boroo Singapore, either directly or indirectly, will hold a 55.9% ownership stake in Steppe Gold.
A special meeting of shareholders is expected to be held in June 2024.
Per separate share purchase agreements, Boroo Singapore will acquire two of Steppe Gold’s indirect, wholly-owned subsidiaries for aggregate cash consideration of approximately C$12 million.
The cash will be paid in four installments over 18 months starting on the closing date.
The transaction is expected to close in July 2024, after which the Boroo Gold acquisition is expected to close.