Featured Company News – Alamos Gold Acquires Richmont Mines; Strengthens Its Position as Leading Intermediate Gold Producer

LONDON, UK / ACCESSWIRE / September 13, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Alamos Gold Inc. (NYSE: AGI), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=AGI. The Company announced on September 11, 2017, that it entered into a definitive agreement with Richmont Mines Inc. (NYSE: RIC) wherein Alamos will acquire all of the issued and outstanding shares of Richmont pursuant to a plan of arrangement. For immediate access to our complimentary reports, including today’s coverage, register for free now at:

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Presently, Richmont Mines produces gold from the Island Gold Mine in Ontario, and the Beaufor Mine in Quebec. The acquisition is expected to further strengthen Alamos’ leadership position as an intermediate gold producer.

Transaction Consideration

As per the agreement, all issued and outstanding common shares of Richmont will be exchanged at an exchange ratio of 1.385:1, i.e. 1.385 Alamos’ common shares for each Richmont’s common share.
This exchange rate denotes a consideration of C$14.20 per Richmont’s common share, basis the closing price of Alamos’ common shares on the Toronto Stock Exchange as on September 08, 2017. This signifies a premium of 22% on Richmont’sclosing price and a premium of 32% on both companies’ 20-day volume-weighted average prices, both as on September 08, 2017. This comes down to a total equity value of nearly US$770 million on a fully diluted in-the-money basis and an enterprise value of US$683 million.
Once the transaction is completed, existing Alamos’ and Richmont’s shareholders will own around 77% and 23% of the pro-forma company, respectively.

Richmont Also Sells its Quebec Assets

Simultaneously, Richmont declared the sale of its Quebec Assets, i.e. the Beaufor Mine, the Camflo Mill, and the Wasamac development project located in Quebec on September 11, 2017. The sale of the Quebec Assets is the termination of the strategic review process that Richmont publicly disclosed in Q1 2017. It is anticipated that the transaction would close by September 29, 2017, and is not a condition to the acquisition.

Deal to Create Long-term Value for Shareholders

John McCluskey, President and CEO of Alamos shared his views about the deal. He stated that Alamos’s combination with Richmont emphasizes on their core strategy of creating long-term value by operating high-quality assets. The Island Gold Mine, in particular, is a high-quality asset in every way. There is an outstanding potential for reserve and production growth from the highest grade, lowest cost gold mines in Canada. This would broaden the production base, boost growth and strengthen Alamos’ balance sheet. Consequently, Alamos would become the leading intermediate producer and create an enthralling revaluation opportunity for both Alamos’ and Richmont’s shareholders.

Strategic Rationale

Acquisition of the Island Gold Mine: The Island Gold Mine in Ontario is high-grade, free cash flowing mine in a world-class jurisdiction. It has huge potential with its growing production and first quartile cash costs.

Strengthen Leadership Position as the Intermediate Gold Producer: It is forecasted that the combined entity would have a diversified gold production of more than 500,000 ounces in 2017, which would be anchored by three core, low-cost, long-life operations in Canada and Mexico.

Improvement in Production and Cost Profile: The short-term production growth of Island Gold compliments the existing peer-leading growth profile of Alamos. Moreover, it also reduces the short as well as long-term cost profile of the combined company.

Enhanced Cash Flow: Acquisition of the Island Gold would lead to an immediate accretion in the cash flow, which would in turn, support internal growth initiatives of the pro-forma Company.

Stronger Financial Profile: It is forecasted that the combined entity would have improved financial flexibility with enhanced free cash flow, no debt, and a stronger balance sheet with cash and equity securities of nearly US$229 million.

Enhanced Capital Markets Profile:It is estimated that the combined entity would become one of the top 10 gold producers in North America, with around 60% of its production in Canada, peer leading growth, a strong balance sheet, proven management team, and increased trading liquidity providing a strong revaluation opportunity owing to an improved appeal in the market.

Transaction Benefits for Alamos’ Shareholders

Acquisition of a high-quality, high-grade, long-life asset in Canada with outstanding exploration potential;
Strengthening and de-risking Alamos’ portfolio of assets with addition of a third core, long-life producing asset;
Short-term production growth along with cost reduction;
Instantaneous accretion to earnings and cash flow while providing stronger operating and free cash flow generation;
Strengthening of Alamos’ balance sheet and financial flexibility;
Deal aligns well with Alamos’ core competencies, delivering corporate, tax as well as other synergies with two underground mines in Ontario.

Transaction Benefits for Richmont’s Shareholders

Immediate and significant premium of 32% based on the 20-day volume-weighted average prices of both Companies;
Significant ownership in Alamos’ high-quality portfolio of assets, which includes diversified North American gold production as well as its peer-leading growth;
Sustained exposure to Island Gold’s significant operating and exploration upside potential;
Considerable revaluation potential for the combined company as a diversified intermediate producer with growth potential up to one million ounces per year;
Greater exposure to trading liquidity and capital markets;
Continual return of capital for shareholders through participation in Alamos’ semi-annual dividend.

Transaction Closing Conditions

The transaction is subject to a plan of arrangement completed under the Business Corporations Act (Quebec). It also requires approval by 66.67% of the votes cast by the shareholders of Richmont at a special meeting of Richmont’s shareholders to be held in November 2017.
Moreover, the issuance of shares by Alamos pursuant to the Transaction is subject to approval by the majority of the votes cast by the shareholders of Alamos at a special meeting of to be held in November 2017 while the transaction is expected to close by mid-November 2017.
In this regard, the directors and senior officers of Richmont and Alamos have entered into voting support agreements, to vote their common shares held in favor of the Transaction.
The Transaction is also subject to applicable regulatory approvals and other customary closing conditions.
In fact, a reciprocal break fee of around C$35 million with a reciprocal expense reimbursement fee is payable by one party to the other party in case the transaction is not completed.

Recommendations of the Boards of Directors

As of now, the Boards of Directors of Alamos and Richmont have unanimously approved the Agreement. Each Company’s Board also recommends that their respective shareholders vote in favor of the transaction.

Last Close Stock Review

On Tuesday, September 12, 2017, the stock closed the trading session at $7.23, climbing 1.83% from its previous closing price of $7.10. A total volume of 3.98 million shares have exchanged hands, which was higher than the 3-month average volume of 2.13 million shares. In the last six months, shares of the Company gained 5.70%. Alamos Gold’s stock price advanced 5.70% since the start of the year. The stock has a dividend yield of 0.28%. At Tuesday’s closing price, the stock’s net capitalization stands at $2.16 billion.

On Tuesday, September 12, 2017, the stock closed the trading session at $9.90, rising 2.59% from its previous closing price of $9.65. A total volume of 1.63 million shares have exchanged hands, which was higher than the 3-month average volume of 472.18 thousand shares. Richmont Mines’ stock price soared 26.11% in the last one month, 24.53% in the past three months, and 45.59% in the previous six months. Furthermore, since the start of the year, shares of the Company have skyrocketed 52.31%. The stock is trading at a PE ratio of 45.00 and currently has a market cap of $632.91 million.

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