Fresnillo enters Canada with $556M Probe Gold acquisition

[Ben Graham]

Mexican precious metals miner Fresnillo (LON: FRES) is acquiring Canada’s Probe Gold (TSX: PRB) for C$780 million ($556 million) in cash, marking the company’s first entry into North America.

Fresnillo will pay C$3.65 per share, representing a 39% premium to Probe Gold’s last closing price and 24% above its 30-day average as of Oct. 30. The deal gives Fresnillo access to Probe’s 10 million ounces of gold reserves, including 8 million ounces at the Novador project in Quebec’s Val-d’Or Mining Camp.

The acquisition also includes the early-stage Detour Gold Quebec property, which Fresnillo said could benefit from its technical expertise and exploration experience.

Shares in Fresnillo, the world’s largest silver producer and one of Mexico’s biggest gold miners, rose 1.7% to 22.86p in early London trading. The stock has surged more than 250% this year, buoyed by a 50% rise in gold prices. Futures in New York climbed above $4,030 a troy ounce in early Friday trade.

Focus on Mexico

Fresnillo CEO Octavio Alvídrez said the acquisition aligns with the company’s strategy of pursuing disciplined, value-driven mergers and acquisitions, while focusing on early-stage precious metals projects that complement its core operations. He added that Probe’s assets would “meaningfully” strengthen Fresnillo’s project pipeline, with Mexico remaining central to its growth strategy.

Probe Gold CEO David Palmer said in a separate statement that after nearly a decade of development, it was time to hand over Novador to a more experienced operator capable of advancing it through permitting and construction. The project is expected to produce more than 200,000 ounces of gold annually for over a decade.

Fresnillo said it plans to continue developing Novador following the deal’s completion. The company currently operates eight mines and holds exploration projects in Peru and Chile.

All directors and officers of Probe, along with Eldorado Gold (TSX: ELD)(NYSE: EGO), which collectively own about 12% of the company, have agreed to support the transaction.