Interview with Chairman & CEO Paul Huet, and EVP Corporate Development, Oliver Turner

Our previous interview: https://www.cruxinvestor.com/posts/karora-resources-tsxkrr-positioned-for-growth-as-mid-tier-australian-gold-producer-4977

Recording date: 9th April 2024

Karora Resources, a growing mid-tier gold producer with operations in Western Australia, has announced a transformative merger of equals with Westgold Resources. The combined company will have a pro-forma market capitalization of A$2.2 billion and will be the third largest gold producer in Australia with annual production of 400,000 to 450,000 ounces.

Under the terms of the deal, Karora shareholders will own 49.9% of the combined entity and receive A$5.90 per share in total consideration, representing a significant premium to Karora's recent trading price. The consideration consists of A$5.15 per share in Westgold stock, A$0.60 per share in cash, and A$0.15 per share in SpinCo equity.

The merger brings together two complementary businesses with a shared focus on operational excellence, financial strength, and sustainable returns for shareholders. Karora's portfolio includes the high-grade Beta Hunt underground mine and the Higginsville processing plant, while Westgold owns three production centers in the Central Murchison region of Western Australia.

By combining their operations, the merged company expects to realize significant synergies through optimizing mine plans, equipment utilization, procurement and overhead costs. The larger scale will also provide opportunities to accelerate exploration and advance high-potential development projects like Spargos and Mount Henry.

Importantly, the merged entity will be 100% unhedged, providing full exposure to the current strength in the Australian dollar gold price. With over A$300 million in cash and a strong balance sheet, the company will have the financial flexibility to invest in growth while also implementing a sustainable dividend policy. Westgold has already announced its intention to pay an annualized dividend of A$0.07 per share, equivalent to a 1% yield.

The merger has been unanimously approved by the Boards of Directors of both companies and is expected to close in the third quarter of 2023. Upon completion, the combined company will have an enhanced profile in the Australian market with index inclusion in the ASX200 and ASX300, which should drive increased trading liquidity and institutional ownership.

For Karora shareholders, the merger provides an immediate uplift in value and exposure to a larger, more liquid and profitable producer. The combined company will be led by an experienced management team with a proven track record of value creation, including Westgold Managing Director Wayne Bramwell and Karora Chairman and CEO Paul Andre Huet.

In a joint statement, Mr. Bramwell and Mr. Huet commented: "This merger is a transformational moment for both companies. By combining our assets, people and expertise, we are creating a leading Australian gold producer with the scale, synergies and financial strength to deliver superior returns for our shareholders. We are excited to begin this next chapter as one team with one mission."

With a rising gold price, a major merger catalyst, and a commitment to sustainable shareholder returns, Karora Resources presents a compelling investment opportunity in the Australian gold sector. The stock offers exposure to a growing, profitable and soon-to-be dividend-paying producer with significant upside potential as the benefits of the merger are realized in the coming years.

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Learn more: https://cruxinvestor.com/companies/karora-resources

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