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Some Kirkland Lake shareholders urge miner to engage with bidders

Wednesday, 16 November 2016

Nov 16 (Reuters) - Some Kirkland Lake Gold Inc shareholders want the Canadian miner to open talks with Gold Fields Ltd and Silver Standard Resources Inc, arguing that Kirkland was too hasty in rejecting their joint takeover offers.

Kirkland Lake on Friday confirmed a Reuters report that the two firms had made three joint bids for the mid-sized gold miner and recently sweetened their offer to about C$1.4 billion ($1.03 billion). The bidders' names and deal value were not previously disclosed.

Shareholders want the company to disclose more details of the offer so they can weigh it against Kirkland's planned acquisition of Newmarket Gold. Results of a shareholder vote on the Kirkland Lake-Newmarket deal are due Nov. 25.

"Your shareholders deserve the opportunity to vote on the best offer for the company, and the board has a fiduciary duty to find it," Kirkland Lake shareholder John Tumazos, Chief Executive of New Jersey-based John Tumazos Very Independent Research, wrote in a Nov. 14 letter to the miner's board.

Tumazos has voted his 215,950 Kirkland Lake shares against the Newmarket deal, he said in the letter seen by Reuters.

Kirkland Lake CEO Tony Makuch said the only firm offer on the table was Kirkland's planned takeover of Newmarket.

"What was presented was a non-binding, conditional proposal based on some yet to be determined mix of cash and shares," Makuch said in an emailed statement, referring to the Gold Fields-Silver Standard offer.

Makuch said financial and legal advisors to Kirkland's board had found the proposals "financially inferior" to the Newmarket deal.

"In terms of ensuring that shareholders are treated well, it would be good to have a sense for the basis on which the board decided not to go down that road," said a fund manager at one of Kirkland Lake's 10 biggest shareholders.

"As much information as possible is best in the situation," added the manager, who was not authorized to speak publicly on the matter.

Daniel Oliver, founder and managing member of New York-based hedge fund Myrmikan Capital LLC, said he would vote his Kirkland Lake shares against the Newmarket deal, describing it as a "mad drive for growth."

Harry Dobson, Kirkland Lake's former chairman and a current shareholder, also said last week he plans to vote against the Newmarket transaction.

At least two-thirds of Kirkland Lake shareholders and more than half of Newmarket investors must back the C$1 billion all-share transaction by a Nov. 23 voting deadline.

To be sure, there may be adequate support for the Kirkland Lake-Newmarket deal, especially after influential advisory firms ISS and Glass Lewis recommended shareholders back it.

Glass Lewis, while remaining supportive of the Kirkland Lake-Newmarket transaction, said after news the other bids came out that its "ability to evaluate the alternative acquisition proposal remains somewhat limited." The proxy firm cited the lack of details about the exchange ratio and the cash-stock split between the suitors.

Kirkland Lake, which has mines and mills in Ontario, said on Monday the majority of shareholders it has talked to support the transaction with Newmarket, which has mines and projects in Australia.

Joseph Foster, a portfolio manager at New York-based Van Eck, Kirkland Lake's biggest shareholder, declined to comment. He told Reuters on Nov. 5 there was not much synergy in the Newmarket deal but it did create a niche, high-grade underground miner.

Kirkland Lake Chairman Eric Sprott was not available for comment. Sprott declared a conflict of interest in the Newmarket takeover as he owns around 13.45 percent of Newmarket. He also owns 6.7 percent of Kirkland Lake.

An Oct. 28 Kirkland Lake circular states that Sprott recused himself from all Kirkland Lake board deliberations, discussions or voting on the Newmarket offer.

Silver Standard declined to comment on the Kirkland shareholders wanting to open talks, while Gold Fields did not immediately respond to a request for comment.

($1 = 1.3536 Canadian dollars) (Additional reporting by Susan Taylor in Toronto; Editing by Chris Reese)

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