Pegasus Gold Acquires Dayton Mining In Merger Move Makes Pegasus Eighth-Largest Gold Producer
Spokane became home to the eighth largest gold producing company in North America Monday when Pegasus Gold Inc. merged with Dayton Mining Corp. of Vancouver, British Columbia.
The marriage brings together Pegasus, a mid-sized gold producer eager to grow, with Dayton, a smaller producer with a very attractive gold mine looking to spread out.
The $390 million deal would give each Dayton shareholder three-fourths a share of Pegasus stock for each share of Dayton.
“It gives us a world-class asset,” said John Pearson, head of investor relations for Pegasus. “They’re hard to find these days, and we’re pleased to reach an agreement with them.”
Once the deal clears regulatory hurdles, the two companies will talk about combining employees. Pegasus employs about 55 people in Spokane and about 1,000 worldwide. Dayton has about 11 officers and staff in its Vancouver headquarters.
Pegasus is no stranger to Dayton, as the two considered merging about four years ago. “We’ve done this dance before,” Pearson said.
The jewel that enticed Pegasus is the Andacollo gold mine in Chile, which churns out as much as 145,000 ounces of gold each year. Andacollo would be Pegasus’ biggest property, but more important, the cost of getting that gold from the ground would be far below other Pegasus mines.
Andacollo spends only $180 to remove an ounce of gold that sells nearly $400 an ounce. Last year Pegasus spent an average of $262 to pull an ounce of gold from its mines.
The merger means that mining in Spokane has a higher profile, with Pegasus leading the way. The company will be worth an estimated $860 million after the deal, making it the largest mining company based in the Inland Northwest.
The deal reflects a broader trend in mining, said Ivan Urnovitz of the Spokane-based Northwest Mining Association.
“The regulatory burden for mining companies has put the squeeze on the small- to medium-sized ones,” Urnovitz said. “What we’re seeing is either small mom-and-pop sized operations or very large ones.”
Merger-mania has swept through the gold business, with giants such as Houston-based Battle Mountain Gold Co. buying up other large producers this year to increase its stake.
The cost of permitting and clearing the construction of mines domestically has increased to the point where only companies with deep pockets typically the larger mining outfits are able to wait the seven or eight years it takes these days to build mines, Urnovitz said.
This merger also moves Pegasus toward its goal of being a million-ounce-a-year gold company. In two years, Pegasus will produce 880,000 ounces each year from its properties under the merger.
For Dayton shareholders, it spreads their investment risk to the six producing mines in the United States and in Australia instead of just in Andacollo’s basket.
Discovered by Chevron Corp., Andacollo was sold to Dayton Mining in 1990. The mine, located 250 miles north of Santiago, started producing Jan. 1 of this year. It’s about 150 miles from Pegasus’ Pullalli mine project, and cash from Andacollo will be used to pay for developing Pullalli.
Pegasus has become very selective about the countries it chooses to operate in. Countries must be politically and economically stable so the company can mine with a minimum of risk. Chile meets the criteria.
, DataTimes MEMO: This sidebar appeared with the story: MINING MERGER: The players: Spokane’s Pegasus Gold Inc. and Vancouver’s, Dayton Mining Corp. The deal: The exchange of three-fourths of one Pegasus share for each Dayton share. The result: The new Pegasus Gold Inc. will be valued at an estimated $860 million, making it the biggest mining company based in our area. What Pegasus gets: Andacollo Gold Mine in Chile, with huge gold reserves and low costs. What Dayton Mining gets: Shareholders diversify and spread risk among Pegasus properties. U.S. market reaction: Pegasus stock down 25 cents to $11 a share, Dayton stock up 81 cents to $7.88 a share.