Q: Thoughts on EQX recent transaction to have 100% ownership of Greenstone mine? $1B transaction with a $2.4B market cap seems pretty significant. I am wondering whether to add on share price decline following the news?
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5i Research Answer:
It is an aggressive deal. 25% is in stock to Orion shareholders, but there is also a $260M equity financing as well. Gold production increases 160,000 ounces. EQX says it will bring 'significant near-term EBITDA and per share cash flow accretion'. We would not consider it a 'bad' deal, business wise. The stock reaction likely reflects the discount on the new issue moreso than a vote on whether the deal is 'bad'. Still, the size of the deal creates risks if there are any problems. Owning 100% of Greenstone will make the corporate structure 'cleaner'. With the gold sector looking better, if interested in adding we would be OK to chip away on the buy side here after the decline, with no need to rush.