Kirkland Lake Gold (TSX:KL, NYSE:KL) and Newmont (TSX: NGT; NYSE: NEM) have signed a strategic alliance agreement to collaborate on exploration and development work in Northern Ontario.
Under the terms of the multimillion-dollar deal, announced on Aug. 17, Toronto-based Kirkland Lake and the world's leading gold company are pledging to focus on the companies' various properties located near Timmins, Ont., including Kirkland Lake's Holt Complex.
The agreement sees Newmont paying Kirkland Lake US$75 million to acquire an option on certain mining and mineral rights related to the Holt Complex. But the companies are also committed to working together to identify additional exploration opportunities around their properties in the region, with the stated goal of advancing projects and creating values for both companies.
The Holt Complex was acquired by Kirkland Lake in January 2016, and consists of three underground mines - Holt, Holloway and Taylor - as well as the Holt processing mill. However, the Newmont option only applies to the Holt mine. Built in the late 1980s by Barrick (TSX: ABX; NYSE: GOLD), Holt's production last year totalled 113,952 oz. gold at an average grade of 4.4 grams gold per tonne.
Due to the pandemic, all operations were suspended at the Holt Complex at the beginning of April, and in July the company extended the shutdown indefinitely. When the suspension was announced, Kirkland's president and CEO, Tony Makuch, said in a press release: "Going forward, we will continue to review strategic options for the Holt Complex properties, including the potential for additional explorations activities in the area."
Newmont can only exercise its option in the event that operations restart at Holt. Kirkland Lake retains ownership of all infrastructure on the Holt property, including the mill, and will act as manager of activities related to the strategic alliance agreement.
In its own press release, Newmont said that the "formation of the strategic alliance provides Kirkland Lake Gold with capital to evaluate strategic alternatives for the future of the Holt mining complex, explore on its existing properties, and evaluate other regional opportunities where Kirkland and Newmont may cooperate in the future."
News of the agreement with Newmont came just days after Kirkland Lake announced it was selling its stake in Osisko Mining (TSX: OSK). The company said it was divesting itself of 32.63 million common shares of Osisko, at a price of $4.45 per share, for a total consideration of $145.2 million.
The Aug. 13 announcement also said Kirkland Lake had sold 748,700 common shares in Novo Resources (TSX-V: NVO). The sales, which occurred in June and August, amounted to a total consideration of $2.58 million. Kirkland Lake Gold still retains holdings in the company.
Meanwhile, Kirkland Lake Gold continues to buy back its own shares, purchasing an additional 863,000 common shares for cancellation under its normal course issuer bid. This brings the total share buyback this year to 11.9 million common shares for US$388.4 million.
At press time, Kirkland Lake's shares were trading at US$52.68 within a 52-week trading range of $18.02 to $57.69. It has just under 276 million outstanding shares for a US$14.48-billion market capitalization.