Kirkland Lake Gold Inc.
TSX : KGI

Kirkland Lake Gold Inc.
St Andrew Goldfields Ltd.
TSX : SAS
OTCQX : STADF

St Andrew Goldfields Ltd.

November 16, 2015 17:25 ET

Kirkland Lake Gold Creates an Ontario-Focused Intermediate Gold Producer With the Acquisition of St Andrew

TORONTO, ONTARIO--(Marketwired - Nov. 16, 2015) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Kirkland Lake Gold Inc. ("Kirkland Lake" ) (TSX:KGI) and St Andrew Goldfields Ltd. ("St Andrew") (TSX:SAS)(OTCQX:STADF) are pleased to announce that they have entered into a binding definitive agreement (the "Agreement") whereby Kirkland Lake will acquire all of the outstanding common shares of St Andrew pursuant to a plan of arrangement (the "Transaction") to create a multi-asset, Ontario-focused, intermediate gold producer.

Under the terms of the Agreement, common shareholders of St Andrew will receive 0.0906 of one common share of Kirkland Lake (the "Exchange Ratio") for each St Andrew common share held. The Exchange Ratio represents the equivalent of C$0.47 per St Andrew common share, based on the closing price of Kirkland Lake on November 16, 2015. The Exchange Ratio implies a 46% premium based on both companies' 20-day volume-weighted average prices and a 25% premium to St Andrew's closing price, both as at November 16, 2015 on the Toronto Stock Exchange. The Exchange Ratio implies a total equity value of approximately C$178 million on a fully diluted in-the-money basis.

Upon completion of the proposed Transaction, existing Kirkland Lake and St Andrew shareholders will own approximately 71% and 29% of the combined company, respectively.

Highlights of the Combined Company

  • Diversified production base - Combined entity will operate four mines and two mills in Ontario's southern Abitibi greenstone belt, one of the world's most attractive mining jurisdictions;
  • Strong financial position and flexibility - Combined entity will have increased financial flexibility through the aggregated positive cash position and anticipated free cash flow;
  • Enhanced scale and capital markets profile - Expected to increase analyst coverage, enhance share trading liquidity and appeal to a larger shareholder base;
  • Strong production growth profile - Combined entity is expected to produce 260-310 koz gold in 2016 with attractive cash costs between US$600-690/oz gold;
  • Exploration opportunity - Combines two companies with significant exploration upside in two historically prolific and underexplored camps, close to existing mine infrastructure;
  • Re-valuation opportunity - Combined entity will have diversified production and cash flow, a strong balance sheet, and substantial prospects for significant growth driven by a proven management team, which creates the opportunity for a re-rating more in line with other mid-tier gold producers.

George Ogilvie, President & CEO of Kirkland Lake, stated: "This transaction adds high quality assets and ounces to our existing operations and is immediately accretive to our production, net asset value and cash flow on a per share basis. With this acquisition we continue to focus on gold production in proven and safe mining jurisdictions. We believe this creates both financial and operational synergies which will contribute greatly to our continued success."

Duncan Middlemiss, President & CEO of St Andrew, stated: "We are pleased to be combining with another established producer to create a leading intermediate gold producer focused in Canada. St Andrew shareholders will have the opportunity to benefit from the promising potential of the combined company, with greater trading liquidity and capital markets exposure to drive shareholder value. Both St Andrew Goldfields and Kirkland Lake Gold are pleased to bring forth a consolidated Abitibi focused company, as we all believe in the huge potential of our assets."

Benefits to Kirkland Lake Shareholders

  • The acquisition is accretive to Kirkland Lake shareholders based on net asset value, production and cash flow per share
  • Over 50% increase in proven & probable gold reserves to a combined 2.3 Moz Au, and over 100% increase in measured & indicated gold resources, supporting long-term sustainable production profile
  • Production from four mines and two mills with expected production of 260 - 310 koz in 2016
  • Exploration potential on the St Andrew properties across 120km of strike length situated along the Porcupine-Destor Fault Zone

Benefits to St Andrew Shareholders

  • Immediate premium to St Andrew shareholders of 46% based on the 20-day volume-weighted average closing prices of both companies and a 25% premium to St Andrew's closing price on November 16, 2015
  • Enhanced financial position with free cash flow from Kirkland Lake's high-quality Macassa mine
  • Ongoing exposure to St Andrew's producing mines and exploration portfolio through an all-share transaction
  • Exposure to financial and operational synergies of combining the two companies
  • Significantly improved trading liquidity and capital markets exposure

Transaction Summary

The Transaction will be carried out by way of a court approved plan of arrangement and will require the approval of at least 66 2/3% of the votes cast by the shareholders of St Andrew at a special meeting of St Andrew shareholders expected to be held in January 2016. The issuance of shares by Kirkland Lake under the Arrangement is also subject to the approval of a majority of the votes cast by the shareholders of Kirkland Lake at a special meeting of Kirkland Lake shareholders expected to be held in January 2016.

The directors and senior officers of St Andrew, representing approximately 5% of the outstanding St Andrew common shares, have entered into support agreements pursuant to which they have agreed to vote in favour of the proposed transaction. Other shareholders of St Andrew have entered into support agreements pursuant to which they have agreed to vote approximately 29% of St Andrew's outstanding shares in favour of the proposed transaction.

The directors and senior officers of Kirkland Lake, representing approximately 10% of the outstanding Kirkland Lake common shares, have entered into support agreements pursuant to which they have agreed to vote both their Kirkland Lake Gold shares and their St Andrew shares, if any, in favour of the proposed Transaction.

In addition to the requisite shareholder and court approvals, the proposed Transaction will be subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary for a transaction of this nature. The Arrangement includes customary deal protections, including mutual covenants not to solicit other acquisition proposals, a right to match provision for Kirkland Lake, a reciprocal break fee payable in an amount of C$7.1 million and a reciprocal expense reimbursement fee of C$1.0 million payable by one party to the other party in certain circumstances if the Transaction is not completed.

Both Kirkland Lake and St Andrew have formed special committees of independent directors to review and approve the proposed Transaction. Based on the respective recommendations of the special committees, the Agreement has been unanimously approved by the Boards of Directors of each of Kirkland Lake and St Andrew. Each of the Kirkland Lake and St Andrew Boards of Directors will recommend that their respective shareholders vote in favour of the proposed Transaction and have determined that the proposed Transaction is in the best interest of their respective shareholders based on a number of factors, including fairness opinions received from their respective financial advisors. The special committee of independent directors of Kirkland Lake has received an opinion that based upon and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration to be paid by Kirkland Lake pursuant to Transaction is fair, from a financial point of view, to Kirkland Lake. The special committee of independent directors of St Andrew has received an opinion that based upon and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration to be received by St Andrew shareholders pursuant to the Transaction is fair, from a financial point of view to St Andrew shareholders.

Upon completion of the Transaction, one mutually acceptable nominee of St Andrew will be appointed to the Board of Directors of Kirkland Lake, with the existing 7 directors of Kirkland Lake continuing as directors.

Upon completion of the Transaction, Kirkland Lake will have approximately 117.6 million common shares issued and outstanding.

Meeting materials with respect to the Transaction are expected to be mailed to the respective shareholders of Kirkland Lake and St Andrew in December 2015, with closing of the Transaction to occur as soon as reasonably practicable following the respective shareholder votes and receipt of regulatory and court approvals.

A copy of the Agreement, the meeting materials and related documents will be filed under the SEDAR profile of both Kirkland Lake and St Andrew at www.sedar.com.

Advisors and Counsel

The financial and legal advisors to Kirkland Lake and its Board of Directors are Macquarie Capital Markets Canada Ltd. and Stikeman Elliott LLP, respectively. The financial advisor of the special committee of Kirkland Lake is CIBC World Markets Inc.

The financial and legal advisors to St Andrew are BMO Capital Markets and McMillan LLP, respectively.

Qualified Persons

Messrs. George Ogilvie, P.Eng, Christopher Stewart, P.Eng. and Stewart Carmichael, P.Geo, of Kirkland Lake, are all Qualified Persons as defined under National Instrument 43-101 ("NI 43-101"). All of the scientific and technical disclosure contained in this news release regarding the Kirkland Lake project was reviewed and approved by Mr. Ogilvie, Mr. Stewart and Mr. Carmichael. As the Chief Executive Officer, VP Operations and Manager of Exploration of Kirkland Lake, respectively, neither Mr. Ogilvie, Mr. Stewart or Mr. Carmichael are considered independent.

Messrs. Duncan Middlemiss, P.Eng., Marc-Andre Pelletier, P.Eng. and Doug Cater, P. Geo. of St Andrew, are all Qualified Persons as defined under National Instrument 43-101. All of the scientific and technical disclosure contained in this news release regarding the St Andrew properties was reviewed and approved by Mr. Middlemiss, Mr. Pelletier and Mr. Cater. As the Chief Executive Officer, VP and General Manager of Operations and VP Exploration of St Andrew, respectively, neither Mr. Middlemiss, Mr. Pelletier or Mr. Cater are considered independent.

Conference Call and Webcast

Kirkland Lake and St Andrew will host a joint conference call on Tuesday, November 17, 2015 at 8:30 a.m. Eastern Standard Time. You are invited to participate via teleconference using the details below. Participants may also join the call via webcast at www.sasgoldmines.com. A playback of the conference call will be available via the website and will be posted within 24 hours of the call.

Participant dial-in numbers:

Toll-free North America: 1 (888) 886-7786

Toll-free United Kingdom: 0-800-652-2435

International: +1 416 764 8658

About Kirkland Lake Gold Inc.

Kirkland Lake Gold Inc. is a gold producer with assets in Kirkland Lake, northeastern Ontario. Current gold production is in excess of 150,000 ounces per year and is expected to grow to over 180,000 ounces per year in the next three years as exploration and development work continue. The exploration program is aimed at maintaining a property wide reserve and resource base sufficient to sustain a mine life of more than ten years, with the current mine life estimated at between ten to fourteen years of production in a high grade gold camp.

Kirkland Lake Gold Inc. is committed to building a sustainable mining company that is recognized as a safe and responsible gold producer. Kirkland Lake Gold plans to evolve into an intermediate gold mining company centered in the historically robust Kirkland Lake gold camp, while evaluating opportunities for growth in other safe mining jurisdictions.

About St Andrew Goldfields Ltd.

St Andrew Goldfields Ltd. is a gold mining and exploration company with an extensive land package in the Timmins mining district, north-eastern Ontario, which lies within the Abitibi greenstone belt, the most important host of historical gold production in Canada. St Andrew will produce approximately 105,000 ounces of Au this year with 2016 production growth potentially up to 140,000 ounces of Au. St Andrew owns and operates the Holt, Holloway, and Taylor mines. In addition, St Andrew is also conducting a targeted exploration program across 120km of land straddling the Porcupine Destor Fault Zone.

Cautionary Statement on Forward-Looking Information

This news release contains forward-looking statements and forward-looking information (collectively, "forward-looking information") within the meaning of United States and Canadian securities laws, respectively. The use of any of the words "expect", "potential", "target", "anticipate", "continue", "estimate", "objective", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information. More particularly and without limitation, this news release contains forward-looking information concerning: the anticipated benefits of the Transaction to Kirkland Lake, St Andrew and their respective shareholders, the timing and anticipated receipt of required regulatory, court, and shareholder approvals for the Transaction; the ability of Kirkland Lake and St Andrew to satisfy the other conditions to, and to complete, the Transaction as proposed; the anticipated timing of the mailing of the information circular regarding the Transaction, the closing of the Transaction, the future gold production of Kirkland Lake and St Andrew, future cash costs of production, the gold resources and reserves of Kirkland Lake and St Andrew and the development and exploration of 120 kilometres of strike length situated along the St Andrew Porcupine-Destor Fault Zone.

In respect of the forward-looking information concerning the anticipated completion of the proposed Transaction and the anticipated timing thereof, Kirkland Lake and St Andrew have provided them in reliance on certain assumptions that they believe are reasonable at this time, including assumptions as to the time required to prepare and mail shareholder meeting materials, including the required information circular; the ability of the parties to receive, in a timely manner, the necessary regulatory, court, shareholder and other third party approvals; and the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Transaction. These dates may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary shareholder, regulatory, court or other third party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the Transaction. Accordingly, readers should not place undue reliance on the forward-looking information contained in this news release concerning these times.

With respect to the forward looking information of Kirkland Lake and/or St Andrew, concerning the future gold production of Kirkland Lake and St Andrew, future cash costs of production, the gold resources and reserves of Kirkland Lake and St Andrew, and the development of the Kirkland Lake and St Andrew properties are subject to various key assumptions described in their respective Annual Information Forms and Technical Reports referred to herein and therein.

Since forward-looking information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risk that the Transaction may not close when planned or at all or on the terms and conditions set forth in the arrangement agreement; the failure to obtain the necessary shareholder, Court, regulatory and other third party approvals required in order to proceed with the transaction; the synergies expected from the Transaction not being realized; business integration risks; operational risks in development, exploration and production for precious metals; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; uncertainties inherent to feasibility and other economic studies; health, safety and environmental risks; gold price and other commodity price and exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other risks and factors that could affect the operations or financial results of Kirkland Lake and St Andrew are included in reports on file with applicable securities regulatory authorities, including but not limited to, Kirkland Lake's Annual Information Form for the fiscal year ended April 30, 2015 which may be accessed on Kirkland Lake's SEDAR profile and St Andrew's Annual Information Form for the fiscal year ended December 31, 2014 which may be accessed on St Andrew's SEDAR profile at www.sedar.com.

Management has included the above summary of assumptions and risks related to forward looking information provided in this news release in order to provide shareholders with a more complete perspective on the proposed transaction and such information may not be appropriate for other purposes. Actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward looking information will transpire or occur, or if any of them do so, what benefits may be derived therefrom and accordingly, readers are cautioned not to place undue reliance on the forward looking information.

The forward-looking information contained in this news release are made as of the date hereof and neither Kirkland Lake nor St Andrew undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events, or results or otherwise, other than as required by applicable securities laws.

Cash Costs

"Cash costs" per ounce figures is a non-GAAP measure. This data is furnished to provide additional information and is a non-IFRS measure. Cash costs presented do not have a standardized meaning under IFRS and may not be comparable to similar measures presented by other mining companies. It should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS.

This announcement is for informational purposes only and does not constitute an offer to purchase, a solicitation of an offer to sell the share or a solicitation of a proxy.

Contact Information

  • Kirkland Lake Gold Inc.
    Toll Free: 1-866-384-2924
    www.klgold.com

    Kirkland Lake Gold Inc.
    George Ogilvie, P.Eng
    Chief Executive Officer
    +1 416-840-7884
    ogilvie@klgold.com

    Kirkland Lake Gold Inc.
    Suzette N. Ramcharan, CPIR
    Director of Investor Relations
    Direct: +1 647-361-0200; Mobile: +1 647-284-5315
    sramcharan@klgold.com

    Kirkland Lake Gold Inc.
    Jennifer Wagner, LL.B
    Corporate Legal Counsel
    +1 647-361-0198
    jwagner@klgold.com

    St Andrew Goldfields Ltd.
    Toll Free: 1-800-463-5139
    www.sasgoldmines.com

    St Andrew Goldfields Ltd.
    Duncan Middlemiss, P.Eng
    Chief Executive Officer
    +1 416-815-9855
    dmiddlemiss@sasgoldmines.com

    St Andrew Goldfields Ltd.
    Keyvan Salehi, P.Eng, MBA
    VP Corporate Development and Technical Services
    +1 416-815-9855
    ksalehi@sasgoldmines.com