Q: Hi 5i Research Team,
I would appreciate your thoughts on today’s merger of equals between Equinox Gold (EQX) and Orla Mining (ORLA).
From an investment perspective, which company do you believe currently offers the better opportunity to participate in the upside of the combined entity? Based on today’s market reaction, valuation, exchange ratio, and expected synergies, would you lean toward buying EQX or ORLA at current levels?
Also, do you see any short-term dislocation or arbitrage opportunity between the two stocks following the announcement?
Thank you in advance for your insight.
Oscar Duran
I would appreciate your thoughts on today’s merger of equals between Equinox Gold (EQX) and Orla Mining (ORLA).
From an investment perspective, which company do you believe currently offers the better opportunity to participate in the upside of the combined entity? Based on today’s market reaction, valuation, exchange ratio, and expected synergies, would you lean toward buying EQX or ORLA at current levels?
Also, do you see any short-term dislocation or arbitrage opportunity between the two stocks following the announcement?
Thank you in advance for your insight.
Oscar Duran
5i Research Answer:
Technically, OLA is the target, but we do not see any material arbitrage here. The deal continues consolidation in the sector, and will create a $19B company producing 1.1M ounces of gold. This could rise to 1.9M with developing assets. All mines are in good jurisdictions with key assets in Canada and Mexico. Bigger usually means a better valuation. EQX is only 9x earnings and certainly we think that can increase. Other than the usual difficulties with a merger, such as people clashes and culture, we do not see any unusual issues. We think it makes sense from a capital markets point of view for sure. We would lean to OLA if buying, just on the odd chance a third party wants to enter this contest.