Just three years after Ross Beatty formed Equinox Gold (TSX:EQX) through a merger of three smaller companies, the company is now one of the top 20 gold producers in the world.
Last week, a merger between Equinox and Frank Giustra’s Leagold Mining Corp. was concluded.
When the merger was announced in December, Equinox had a market cap of just over $900 million and Leagold close to $800 million.
But the valuation of both companies increased 30% to 40% – by about $1 billion – since the merger was announced, bringing the combined company’s market cap to $2.5 billion.
That’s partly due to the rising value of gold itself, a safe haven to which many investors have been fleeing recently, with the spread of COVID-19.
But it’s also a vote of confidence in the company itself, said Equinox CEO Christian Milau.
“The market has reacted so well to the deal announcement,” he said. “It’s one of the few deals where both share prices went up after the deal was announced. It’s because the industrial logic of this deal makes a ton of sense.”
The newly merged company has six operating gold mines in the U.S., Mexico and Brazil, with another scheduled to be in operation this year in California, and an eighth in operation by 2021.
The merger comes at a time when the price of gold has been on the rise. It recently hit US$1,700 per ounce, although a sell-off of gold last week brought it down to about US$1,650.
“It’s kind of an exciting time for us because we’re literally in the middle of a gold price environment that’s increasing here,” Milau said. “Obviously with the turmoil in the markets and all the difficulties that are ongoing in the world right now, it seems like gold is getting its time in the sun for a change. It’s been a tough eight to 10 years for the gold sector.
“It’s really exciting for Vancouver, as well, to have another company growing and becoming one of those top-tier gold producers, because with Goldcorp being bought out by Newmont [TSX:NGT], this is one of the newest companies in the sector. With Ross Beatty as chairman and the largest shareholder behind it, it’s got a real Vancouver flavour.”
Investment research firm Zacks last week published a note underlining how Equinox is outperforming many of its peers in the Zacks rankings.
It points to the company’s full-year earnings, compared with other companies in its portfolio. Since the start of the calendar year, Equinox had an earnings increase of 0.26%, whereas other companies in the gold mining class had a 5.75% decrease.
“This means that Equinox Gold is performing better than its sector in terms of year-to-date returns,” Zacks said in it brief.
“Investors with an interest in Basic Materials stocks should continue to track EQX. The stock will be looking to continue its solid performance.”
