Alkane and Mandalay Merge to Create 180,000 oz Gold Producer with USD$100M in Cash & Zero Debt

• Alkane Resources and Mandalay Resources are merging in a transaction characterized as a "merger of equals," with Mandalay shareholders receiving 55% and Alkane shareholders retaining 45% of the combined entity, which will trade under Alkane Resources on both the ASX and TSX.
• The merged company will produce 160,000-180,000 gold equivalent ounces annually, have over USD$100 million in cash with no debt, and generate approximately USD$200M million in free cash flow annually.
• Key strategic rationales include achieving capital relevance through increased market capitalization (~USD$650M), improved trading liquidity, index inclusion (ASX 300 and GDXJ), and asset diversification across three mines in Australia and Sweden.
• The company will maintain a disciplined capital allocation strategy focused on organic exploration, potential M&A opportunities, and potential shareholder returns, with a focus on creating value rather than "growth for growth's sake."
• The merger is expected to close by August 2025 following shareholder votes in July, with both companies' boards unanimously recommending the transaction and key shareholders supporting it.

In a significant development for mid-tier gold producers, Alkane Resources (ASX:ALK) and Mandalay Resources (TSX:MND) have announced a strategic merger of equals. The transaction will create a more diversified precious metals producer with assets in Australia and Sweden, increased market capitalization, and improved trading liquidity. Managing Director of Alkane Resources, Nick Earner, and President and CEO of Mandalay Resources, Frazer Bourchier, recently discussed the details and strategic rationale behind this merger, highlighting the opportunity to create a platform for sustainable growth and potential market revaluation.

Transaction Structure & Timeline

The transaction is structured as a "merger of equals" where Alkane Resources will acquire Mandalay Resources in an all-share deal valued at AUS$559.1M (USD$357.8M), with the combined entity continuing to trade as Alkane Resources. Upon completion, Mandalay shareholders will own 55% of the new entity, while Alkane shareholders will retain 45%. According to Earner, 

"This is pro-forma Alkane taking over Mandalay. It's a merger of equals, but the actual legal method is that on the Toronto Stock Exchange, wherein the combined entity, which will remain and trade under Alkane Resources, will be 45% of the entity will be held by existing Alkane shareholders and 55% by Mandalay shareholders."

The merger has received unanimous board approval from both companies and has secured voting support agreements from key shareholders. The companies expect shareholders to vote on the transaction in mid-to-late June 2025, with closing anticipated in late July or early August 2025. The transaction requires two-thirds approval from voting shareholders. Regulatory approvals, including from the Australian Foreign Investment Review Board and Swedish Foreign Direct Investment Review, are also required but are expected to be routine given the nature of the transaction.

Combined Asset Portfolio & Financial Profile

The merged entity will bring together three producing assets: Alkane's Tomingley gold operation in Australia, which is expected to produce over 70,000 ounces of gold in 2025, and Mandalay's Costerfield gold-antimony mine in Australia and Björkdal gold mine in Sweden, which together produce 90,000-100,000 gold equivalent ounces.

The combined production profile will start at approximately 160,000 gold equivalent ounces annually, increasing to 180,000 ounces within a year. Bourchier emphasized the strong financial position: 

"Within a year, 180,000 ounces... at the end of March, we had just about USD$90M in cash and zero debt. We couple that together pro-forma... this company will have over USD$100M in net cash positive with no debt."

The merged company will generate substantial free cash flow, with Bourchier noting, 

"Tomingley at a run rate, 7-year mine life for now... at an ASIC cost of USD$1,500 to USD$1,600 at most... will generate well over USD$100M, probably $120M free cash flow a year. Costerfield $50M to $80M  free cash flow a year... and Björkdal $30M to $50M ... combined that is over $200 free cash flow a year for... a USD$600-650M market cap company."

Strategic Rationale: Capital Relevance & Growth Platform

A key driver for the merger is achieving what the executives refer to as "capital relevance." With a pro-forma market capitalization of approximately $650 million USD, the combined entity expects to qualify for inclusion in both the ASX 300 index and the GDXJ (VanEck Junior Gold Miners ETF), potentially attracting institutional investors who previously couldn't invest due to size limitations. Bourchier explained, 

"When I joined Mandalay two years ago, I wasn't brought in to run the company. I was brought in to grow the company, and we set a very clear vision to become a mid-tier producer." 

He outlined a three-pillar strategy: focusing on operations, building cash reserves, and pursuing M&A opportunities. Earner highlighted the practical constraints that prevent institutional investors from investing in smaller companies: 

"[institutional investors] might have a billion dollars, maybe more under management... but the minimum ticket size that they'll write might be $20M, $30M, $50M ... and they have no desire to be more than 5% of the register. So... they need to be able to invest that position and remove that position... If you're not a billion dollar company, that fund isn't coming in."

Nic Earner, MD of Alkane Resources & Frazer Bourchier, CEO of Mandalay Resources

Diversification Benefits & Operational Synergies

The merger provides geographic and operational diversification, with three producing mines across two countries. Bourchier emphasized that this diversification reduces vulnerability to problems at any single asset: 

"As a public company, if you have one or two assets, sometimes things happen at those assets... and if you're not careful, it can lead to short-term thinking to meet that market demand. When you have three or four assets... there's a bit more flexibility, and you're not potentially put into a corner on making short-term decisions."

While cost savings from corporate consolidation are expected to be moderate (approximately $5-6 million), the executives stressed that the real synergies come from enhanced operational flexibility and improved access to capital. Both companies operate with similar management philosophies, employing empowered site-level leadership with minimal corporate oversight, which should facilitate integration.

Governance & Management Structure

The merged entity will feature a balanced governance structure reflecting the "merger of equals" philosophy. The board will consist of six directors: three from Mandalay (Frazer Bourchier, Chairman Brad Mills, and former CEO Dominic Duffy), two from Alkane (Nick Earner and Chairman Ian Gandel), plus a new independent chairman, Andy Quinn, who is retiring from the Barrick board.

The management team will be predominantly from Alkane, given that two of the three assets are in Australia. Mandalay's COO and VP of Exploration will join the Alkane team, creating a combined leadership group capable of driving the growth strategy. Earner emphasized, 

"Both of us have similar values and we operate our sites pretty independently. We have a very empowered general manager on each site and then we have low-touch at a corporate level."

Future Growth Strategy & Capital Allocation

The executives made it clear that this merger is not an endpoint but rather a platform for future growth. Bourchier stated, 

"This is just not as simple as combining and it creates this great platform and, you know, drop the mic and move on. It's not that simple. It's great, it's part of the story, but there's a lot more to it than that."

The merged entity will pursue a disciplined capital allocation strategy, potentially including:

1. Organic exploration around existing assets
2. Further M&A activity, including potential asset purchases or additional mergers
3. Project development opportunities
4. Potential shareholder returns through dividends or share buybacks

Earner emphasized that growth must be value-driven: 

"The reason Alkane exists, the reason Mandalay exists, the reason [the merger] exists is to make money for the investors and owners of those companies... The thing that people, I think, despair of is when people say 'I'm doing growth for growth's sake.' No, it's all about the return on the capital employed and where else could the money have gone."

Both executives highlighted the efficiency of their exploration programs, with Bourchier noting: 

"At both our operations, we have replaced resources at between 1 to 2% of the current spot price. That's a pretty efficient use of capital."

Dual Exchange Listing Strategy

The merged entity will maintain listings on both the Australian Securities Exchange (ASX) and the Toronto Stock Exchange (TSX), providing access to different investor pools. Mandalay shareholders will receive 7.875 Alkane shares for each Mandalay share they own, with these shares trading on the TSX.

Earner explained that sophisticated investors can trade on either exchange, while retail investors typically remain on their home exchange. He noted that arbitrage funds will help keep prices relatively consistent between exchanges. The dual listing strategy should help maintain and potentially increase trading liquidity, supporting the overall goal of enhanced capital relevance.

The Investment Thesis for Mandalay & Alkane Resources

• Scale and Capital Relevance: Combined market capitalization of approximately USD$650M will qualify for index inclusion (ASX 300 and GDXJ), attracting institutional investors and potentially driving a market revaluation
• Strong Production Profile: Initial production of 160,000 gold equivalent ounces, growing to 180,000 ounces within a year across three producing mines in tier-one jurisdictions
• Robust Financial Position: Over USD$100M in cash, zero debt, and approximately USD$200M in annual free cash flow (at a 3:1 cash flow multiple versus typical 4-5x EBITDA multiples)
• Asset Diversification: Three producing mines across Australia and Sweden reduces operational risk and provides more stable overall performance
• Efficient Resource Replacement: Both companies have demonstrated ability to replace resources at 1-2% of the spot gold price, indicating disciplined and effective exploration programs
• Expanded Growth Platform: Enhanced ability to pursue value-accretive M&A, develop new projects, or return capital to shareholders through dividends or share buybacks
• Experienced Leadership: Combined management team and board with proven track records in building and operating profitable gold mining companies
• Trading Liquidity: Dual listing on ASX and TSX with broader shareholder base will significantly improve trading volumes and liquidity

Macro Thematic Analysis

The Alkane-Mandalay merger exemplifies a growing trend of consolidation among mid-tier gold producers seeking to gain scale, relevance, and access to capital in an environment of rising gold prices. While gold prices have surged to record highs in 2025, many gold producers continue to trade at discounted valuations relative to their cash flow generation, creating opportunities for value-accretive transactions.

The merged entity will generate approximately USD$200M in free cash flow against a market capitalization of $650M, representing a cash flow multiple of approximately 3:1 compared to the more typical 4-5x EBITDA multiples for the sector. This valuation gap creates both an opportunity for investors and a platform for the company to pursue further accretive acquisitions.

The merger also addresses a critical issue in gold mining equities - the need for scale, liquidity, and index inclusion to attract institutional capital. By creating a more relevant investment vehicle with enhanced liquidity and index membership, Alkane and Mandalay are positioning themselves to capture a larger share of investment flows into the gold sector during what appears to be a strengthening bull market for precious metals.