Saracen (SAR) has signed a binding agreement to acquire Barrick Gold Corporation’s (TSX:ABX) 50% stake in the Kalgoorlie Consolidated Gold Mines Joint Venture (KCGM JV). The acquisition price is US$750m, plus A$96m for stamp duty and transactional fees, for a total A$1,196m. While we model the transaction to be approximately value neutral on a NAV basis, we take a positive view on the acquisition and regard it to be transformational for SAR. Near term, the Company will increase gold production by >65% and add >$100m free cashflow (FCF, Argonaut est.). SAR will become the fourth largest ASX gold producer with ~645Moz from 2021. The transaction will be funded through a mix of debt and equity and the Company is currently in a trading halt pending a $796m underwritten equity raising. BUY maintained with a revised target price of $3.65 (from $3.50).
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