We are back with another segment on merger and acquisition transactions within the mining stocks. Big news broke Sunday evening in North America that two of my larger weighted gold positions, Equinox Gold and Calibre Mining, are tying the knot in a zero-premium merger-of-equals transaction. These are 2 companies we’ve discussed a number of times in this Substack channel, and 2 very visible companies in the gold producer space.
There are lots of ideas to unpack on this specific deal, in addition to what this type of transaction may portend for future M&A trends in the larger mining sector.
So, let’s get into it….
Before we dive into the details of this deal, let me just initially say, I am stunned at how many of the companies we outlined in the series “Opportunities In Growth-Oriented Gold Producers” have been involved in M&A deals in just the last year, (out of the 8 companies featured thus far).
Some of those featured companies were acquired: (Karora was bought by Westgold, then Argonaut was scooped up by Alamos, and the Argonaut spin-co Florida Canyon was split up in acquisitions where Heliostar got the 2 Mexican mines, and Integra got the mine in Nevada)
Some of those featured companies have been the acquirers: (Calibre acquired Marathon, Equinox acquired the other 40% of it’s Greenstone Mine in a competitive bidding process from Orion, Mako took over both Goldsource and the Moss Mine from Elevation, and Minera Alamos took over Sabre). By the way, I’ve not forgotten about the article on Minera Alamos that was scrapped when the Sabre transaction was announced, where that M&A deal had to be teased in an abbreviated fashion. We’ll still take a deeper dive soon in that that company, so stay tuned…
Now we have a legitimate merger-of-equals; where 2 of the previous mid-tier acquirers in the growth-oriented gold producer segment, Equinox and Calibre, are growing once again by merging into a Major gold producer.
Equinox Gold and Calibre Mining Combine to Create a Major Americas-Focused Gold Producer
02/23/2025
“Equinox Gold Corp. (TSX: EQX) (NYSE American: EQX) and Calibre Mining Corp. (TSX: CXB) (OTCQX: CXBMF) are pleased to announce that the Companies have entered into a definitive arrangement agreement in an at-market business combination whereby Equinox will acquire all the issued and outstanding common shares of Calibre pursuant to a court-approved plan of arrangement. The combined company will continue under the name ‘Equinox Gold Corp.’"
“The Transaction will create an Americas-focused diversified gold producer with a portfolio of operating mines in five countries anchored by two high-quality, long-life, low-cost Canadian gold mines. The Greenstone Mine in Ontario achieved commercial production in November 2024 while the Valentine Gold Mine in Newfoundland & Labrador is nearing construction completion with first gold pour targeted for mid-2025.”
“The combined company is expected to produce approximately 950,000 ounces of gold in 2025, not including production from Valentine or Los Filos. New Equinox Gold has the potential to produce more than 1.2 million ounces of gold per year with Greenstone and Valentine operating at capacity. Additionally, the combined company will have a large gold endowment of Mineral Reserves and Mineral Resources, and a highly prospective pipeline of development, expansion and exploration projects for low-risk sustainable growth.”
My personal thoughts and takeaways on this business combination:
I would have preferred to have seen both Calibre and Equinox stay separate for the next 2 years; because I believe both companies would have had more potential for dramatic upside rerating moves as individual smaller entities.
I don’t think I’m alone in that belief, as both stocks sold off by close to 5% earlier in the day on Monday, but then recovered some by the end of the trading session; with Equinox mildly down by less than a percent and Calibre down by just over 3%. There were quite a few Calibre investors upset that there wasn’t a premium for a traditional takeover, versus just a zero-premium merger.
I really wanted to see what kind of torque Calibre would have had once the Valentine Gold Mine went into production in the 2nd half of this year, and then moved into full commercial production for a full year in 2026. After that had all been achieved, and the company had properly rerated for being a solid mid-tier producer doing ~500,000 ounces per year of production, and spent another 1.5 years doing some solid exploration work and expanding resources… THEN I would have been more content with a merger or takeover.
I really wanted to see how Equinox would fare having 100% of the production from Greenstone for a full year in 2025. I also wanted tosee how some of their other expansion projects at other secondary mines moved forward and what kind of rerating they may get in this higher gold price environment. Then, maybe in 2026, I would have been OK with them making an acquisition or being acquired.
Now that these 2 companies are combining, with close to 1 million gold ounces in production projected for 2025, and 1.2 million ounces of gold production slated for 2026, then they have effectively become a Major gold producer. I don’t typically hold Majors in my portfolio, because they are often more clunky and laggards, compared to the more exaggerated moves that we see in the small and mid-tier producers.
Some investors have already quipped that they should have combined Equinox + Calibre into a new name change as “Excaliber” (playing off the Arthurian “Excalibur” sword theme). Not a bad suggestion. :-)
I do like that the board will have members from both management teams, and Ross Beaty as the chair will continue to demand a premium. I’ve also been a long-time fan of Featherstone Capital (Blayne Johnson and Doug Forster), and did well with Newmarket Gold (taken over by Kirkland Lake), have successfully traded Newcore Gold in the past (which they seeded), and always felt comfortable with them on the board of Calibre Mining. Blayne and Doug will still be involved with the new Equinox Gold, which I see as a big plus.
Ross Beaty, Chair of Equinox, stated: "Great companies are built on strong foundations and strong teams. The combination of Equinox and Calibre brings together two new Canadian cornerstone gold mines, Greenstone and Valentine, a portfolio of operating gold mines in the Americas, and two excellent operating teams to create a gold mining powerhouse. With improved scale, diversification and financial strength, New Equinox Gold will be well positioned to deliver long-term value to its shareholders. I'm really excited about our future as a great new major gold mining company."
Blayne Johnson, Chair of Calibre, stated: "This merger creates a major gold producer with a solid foundation of two brand-new, high-quality, long-life mines: Greenstone and Valentine. Positioned in Canada's top gold regions, this combination transforms New Equinox Gold into the country's second-largest gold producer. With a strong portfolio of highly profitable and prospective assets across the United States, Mexico, Nicaragua, and Brazil, the company is well-positioned for long-term growth and sustained shareholder value creation. Doug and I look forward to continuing as directors and shareholders, working closely with Ross and the combined Equinox-Calibre team to build on Calibre's strong track record of operational excellence and execution for its shareholders."
I can see the rationale to bring in a new class of larger institutional investors that prefer the more liquid larger-cap major gold producers. It is still probable that they’ll get a rerating up to a larger valuation as the market eventually digests the expanded production profile, diversification of assets and jurisdictions, the new combined all-in sustaining costs, and ability to pay down remaining debt faster.
For all of these reasons, and even though I’d have preferred not to see these 2 companies merge at all; I’m still going to keep a position in the pro-forma company for the ongoing ride in this PM bull market.
· Even though I’ve been trimming back my Calibre position over the last year into its continuous ascent higher, it still is one of my heaviest weighted gold positions, and a larger weighting than what I have had in Equinox.
· I decided to sell half my Equinox position today for a little more than a 1-bagger, upon reflecting on the merger news, because there were other junior stocks that had sold off lately that I wanted to rotate those funds into. In hindsight, it may have been wise to wait for a better day in the market with strength in gold equities strength to sell into; but again, I was using those funds to buy into weakness in other companies… so I’m OK with that decision.
· Since I will be letting my Calibre shares convert over to Equinox shares, then I’ll likely liquidate the remaining portion of the Equinox shares in my portfolio once we do see some better sector strength and upside movement in the gold producers. The balance will be sold into strength for a solid gain of over 100%.
· I deployed this same strategy with the Coeur Mining takeover of Silvercrest. It worked out well to have liquidated the Coeur (CDE) shares, in tranches, at higher prices; knowing I had the SilverCrest (SILV) shares in my portfolio to eventually convert over. It was interesting to note that the Silvercrest (SILV) shares tanked in the days leading up to the merger, and then the (CDE) shares have continued to sell off ever since the merger, as investors from both camps closed out of positions. As a side note: I actually added to my CDE position today into the weakness, as that selling is getting a bit extreme, and I don’t believe the valuation today reflects the strength of the assets or the margins we’ll see in Q1 from that new pro-forma combined Coeur. Just a little M&A trading follow up…
As far as dissecting all the individual assets one by one, and looking at each mine’s production guidance and exploration upside… I just don’t have the bandwidth to do so in this missive. However, I’m sure the investor relations teams will be producing a slide deck that breaks down all of that information for investors.
Also….we already did that here in this channel in [Part 2] for Calibre and [Part 4] for Equinox in the “Opportunities In Growth-Oriented Gold Producers” articles, and then I provided more updates as news was announced that were included in the follow-up [Parts 5, 6, 7, and 8] in that series, as well as periodically within this series on “Merger and Acquisition Opportunities In The Mining Stocks.”
For me this is not a complicated decision-making process, because I already have positions in both companies. As a result, I’m ultimately OK with the pro-forma combined company staying in my portfolio. However, since I don’t need it to have too big of a portfolio weighting, I sold some Equinox today, and will sell the rest of that position into strength; letting the Calibre shares convert over to Equinox shares when the business combination happens.
Now for those investors that only had shares in one of the two companies, that may not really like the other company or their assets, then they must weigh various metrics around profitability, cost differences between the 2 companies, the combined balance sheet, different jurisdictional risks, and the unique value drivers each separate company had. Those investors must decide if they are willing to accept both the good and the bad of the new combined company, or if this liquidity event should be their exit strategy. There will be lots of buying and selling on both sides of this deal, and also new investors getting positioned for the very first time in these companies and assets.
To help those considering buying or selling either one or both of these companies in light of this news between Equinox and Calibre, then here is a recent interview where Ross Beaty is unpacking why he feels it is a solid win for shareholders of both companies, and is of course talking his book:
Equinox Gold & Calibre Mining Merge: A New Gold Giant is Born - Feb 24, 2025
Now, with all of those thoughts on the specific transaction unpacked, I believe this deal is symbolic of the kind of transaction we should expect to keep seeing in the PM sector, where 2 mid-tiers combine into a larger major producer.
We keep hearing the gripe from resource investors that there just aren’t enough Majors anymore; as a result of them cannibalizing one another over the last 5-7 years. I’ve postulated a number of times on the KE Report podcasts and blog, that we are going to see that resolved as more mid-tier gold producers are going to combine to form new majors in this cycle.
That is precisely what we just saw when this news broke today about Equinox and Calibre combining to form a multi-mine, multi-jurisdictional producer of around 1 million gold equivalent ounces per year. A new Major gold producer was just created.
This transaction will spur on more mid-tier producers to consider who they want to pair up with and invite to the PM dance for this cycle; massing up to attract bigger institutional suitors.
This may result in some non-core projects being divested from their combined portfolio, which could lead to smaller-scale M&A deals with juniors.
This could take some attention away from Mid-tiers acquiring advanced development projects with construction risk, capex blowout risk, and permitting risk, but I still think we’ll see plenty of those kinds of transactions for quality development projects as well.
Another key takeaway is that it is critical to be dual-listed on both the Canadian and US big board exchanges, like Equinox was and will remain. This is the trend more companies will need to emulate.
I continue to be befuddled as to why more Canadian listed gold producers are still dragging their feet on getting listed on the NYSE, NYSE American, or Nasdaq exchanges in the US.
Yes, those listings are expensive, and involve more paperwork, but believing you can just be listed in Canada and the Over-The-Counter (OTC) markets for US investors is a huge error in judgement.
The US investing population dwarfs that of Canada. There is a much deeper pool of investment capital in the USA, more liquidity, and the flat-out requirement by some American funds to have those listings to even invest in an equity.
When we saw the 1-2 day #SilverSqueeze from the last day of January into the first day of February of 2021, it was the dual-listed companies that got the bid. That is because most of the trading volume came in through the US exchanges. While that event was very short-lived, the principle is the same.
Some US trading platforms don’t even allow OTC trading.
When the worm turns in the PM sector, and hot speculative money start flowing into gold and silver stocks from momentum traders; then companies with a big-board US listing are going to garner more attention from a broader audience.
Additional update:
Earlier today Feb 25th, 2025 over at the KE Report, Dave Erfle, Editor of the Junior Miner Junky, joined us to discuss this recent major news in the gold sector: the merger between Equinox Gold and Calibre Mining. It’s a bit of an expanded take on the deal, which Dave feels favors he Equinox shareholders more so than the Calibre shareholders, and he doesn’t see it as the merger advertised, but more so a takeover of Calibre without the premium. We also get into the ramification of this transaction on how other mid-tier gold producers might proceed with future M&A deals, and we get into some of the other acquisitions we’ve seen in the PM equities.
Dave Erfle - The Equinox Gold & Caliber Mining Takeover Unpacked
Yet Another Update:
Jordan, the Mining Stock Monkey, joined me this last week to outline the 2025 trends that he sees in the valuations of gold and silver producers and royalty companies, the key takeaways from the Equinox / Calibre merger, and thoughts on Mexico as a mining jurisdiction.
We take a deeper dive into the Equinox Gold Corp. and Calibre Mining Corp. merger news, and Jordan lays out a number of positive factors and synergies he sees in the deal for both sets of shareholders, in particular for the Calibre shareholders. This is a more bullish take on their business combination than we’ve heard out in the marketplace chatter or in other analysts comments, and he provides some interesting food for thought about how he analyzes M&A deals.
(this should hotlink you to that part of the discussion at the 5:42 mark)
While I’m sad to see Calibre Mining taken off the gameboard before it even got into production at the Valentine Gold Mine, I do wish the new combined Equinox Gold well for the balance of this PM cycle. I will let my shares convert over into the new merged entity, and will continue riding with the proforma company; at least until we see the anticipated rerating in value that it should command in the fullness of time.
Thanks for reading and may you have prosperity in your trading and in life!
