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Gold Road Resources backs out of Greenstone deal

It’s no wonder Gold Road Resources (ASX:GOR) bailed on a move to buy an interest in the Canadian gold miner Greenstone.

Gold Resources pulled the plug late Tuesday on the deal. On Wednesday, Equinox Gold announced it is buying partner Orion Mine Finance’s 40% stake in their new Greenstone gold mine in Ontario for $US995 million in cash and shares.

That’s more than $A1.5 billion (at a rate of 65 US cents to the Aussie), a price that would have crippled Gold Road and its existing shareholders.

Gold Road is valued at just under $A1.8 billion and has a big decision mid-year on helping 20%-owned De Grey advance its $A1 billion-plus gold mine project at Hemi, in WA’s Pilbara.

Canadian investors didn’t like the deal; shares in Equinox fell 11% at one stage after the announcement and closed down more than 8%, leaving Equinox valued at $C1.7 billion.

“When we acquired our 60% interest in Greenstone in 2021, our goal was to ultimately own the whole mine,” Equinox chair Ross Beaty said in a release.

“Consolidating 100% of Greenstone into Equinox Gold delivers our shareholders full exposure to a mine of outstanding scale and quality.”

The deal increases Equinox’s annual gold production by about 160,000 oz., while boosting earnings and cash flow, the company said.

Greenstone will be its largest mine among eight total, producing about 400,000 oz. of gold per year over the first five years. It’s expected to be one of the world’s lowest-cost open-pit gold mines with all-in sustaining costs of $US890 per oz.

Equinox’s other mines are Aurizona, Fazenda, Santa Luz, and RDM in Brazil, Castle Mountain and Mesquite in California, and Los Filos in Mexico.

Equinox expects total gold output this year to end up between 660,000 to 750,000 oz. with all-in sustaining costs of $US1,630 to $US1,740 per oz.

Equinox produced 564,458 oz. of gold last year with all-in sustaining costs of $US1,612 per oz. for $US304.4 million in earnings before interest, taxes, depreciation, and amortization.