Thank you for standing by. This is the conference operator. Welcome to the conference call and webcast to discuss the Equinox Gold and Leah Gold Mining merger. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity Webcast viewers may submit questions through the text box in the lower left corner of the webcast frame.
Should you need assistance during the conference call, I would now like to turn the conference over to Rillen Bailey, Vice President, Investor Relations for Equinox Gold. Please go ahead, Ms. Bailey. Thank you, and thank you everybody for joining us today. We will, of course, be making some forward looking statements today, so please do take a moment to visit the Leagold website and the Equinox Gold website to find our continuous disclosure documents.
I'd like to introduce the people that are in the room with us today. We've got Ross Beatty, Chairman of Equinox Gold, Officer of Leah Gold, Christian Nilao, Chief Executive Officer of Equinox Gold and Addie Rou, Chief Operating Officer of Leah Gold. I'm now going to turn the call over to Ross Beatty to make some opening remarks.
Thank you, Berlin, and good morning, ladies and gentlemen. Thank you also for joining us today. Well, I'm very pleased that our 2 companies are joining to create a bigger, stronger company. I've always felt that Leo Gold is, in many ways, a twin of Equinox. We're both young dynamic companies, both based in Vancouver, both with assets exclusively in the Americas, both with veteran management teams who have created a lot of wealth for many shareholders over time.
Besides our common histories, we have common missions to build ourselves into larger, less risky, more diversified gold companies, offering shareholders greater liquidity and larger scale, In an investment world where size matters today, more than I've ever experienced in my long career in the mine and public markets business. And equally importantly, our merged company will offer our shareholders more leverage to the gold price. With increased gold production comes greater income exposure to up movements in gold, greater earnings, greater cash flow, and as soon as possible dividends to our stockholders. And also greater capital exposure in terms of our larger gold reserves and resources base. It's no secret that I'm bullish on gold.
And they share this conviction with Leo Gold's Chairman, Frank Gistra, who has followed and invested in gold and gold companies throughout his illustrious career. Frank has said many times, and I agree that the macro environment for gold is as strong today as at any time in either of our long careers. So in this environment, I look for massive exposure to gold, both on the income side and the capital side, and this combination delivers that to shareholders of both companies. This is one of those organic deals that just makes sense. We have real synergies.
We have exclusively Americas Assets We have outstanding management teams on both sides with long successful track records. Strong financial capacity. And it's a true merger of equals, avoiding the kind of unconscionable premiums that investors hate and building true scale and value. I'm very excited by this transformative deal for stockholders of both companies, and I recommend its approval. I look forward to working with Neil Woodyer and the combined team to maintain a record of fast and accretive wealth creation with or without a moving goal.
But if gold moves higher as I expect it well in 2020, we'll do really well. Thank you again for joining us today. I'll now turn the call over to Neil Woodyer, CEO of Lee Gold And CEO of the New Bigger And Better Equinox Goldcorp, Neil.
Thank you, Ross. I'll go through some of the detail. This is coming together with the 2 companies and the strategic merger to create a premier gold producer. It puts us into the top 20 primary producers, gold producers. Our organic growth takes us to 1,000,000 ounces of production in the near term.
We have 6 producing mines, 2 development projects and 2 mine expansion projects. Our P and P reserves of 12,700,000 ounces and our M and I resources 23.6. As Russ said, all our assets in Americas, U. S, Mexico and Brazil. Very importantly, we are fully funded.
We have a strong internal cash flows, and we have a financing package of US670 million dollars. The banks are underwritten a new deal for $500,000,000. The Sovereign Wealth Fund of Abu Dhabi is during the second comparable for GBP 130,000,000. And most importantly, Ross is putting GBP 40,000,000 of that market equity into the transaction addition to the significant, the substantial investments you've made before. And he actually will end up as our largest shareholder at 9%.
We have a clear path to market rerate. We have dual listing now or we'll have dual listing now in the U. S. And Canada. With a lot of potential for inclusion in the indexes as we go forward.
We have pre liquidity and size to attract new shareholders. Significant scale, diversification, synergies, growth. We have a lot ahead of us in the next year or so putting this deal together. I'll hand over to Christian to get through some more of the detail.
Yes, thanks, Neil. Just want to walk you through the transaction summary on page 6 briefly here. So it will be a merger by a plan of arrangement fairly standard for this type of deal. It's been unanimously recommended by both sets of board of directors, and we have strong set of voting support agreements or lockups, 21% from Equinox side and 42% from Leagold side. Terms of the consideration, it's 0.331 shares of Equinox for every Leagold share in an all share deal.
And it's an at market merger at CAD 2.70 per Leagold share, which is the closing price as of Friday last week. The pro form ownership will be 55% Equinox, 45% Leagold, the concurrent financing, I think Neil has already walked through here, but very strong support from our core strategic long term partners. We're very excited to be working with them as we move forward to grow the business and fund all of our development internally. The $500,000,000 underwritten bank financing is $100,000,000 in a 5 year term loan, $400,000,000 in a revolver. The core banks that have been supporting both groups continue to support in this transaction.
So very pleased that they've continued on. In terms of leadership and governance, we've already talked will be split fifty-fifty 4 from each side. As well in terms of key approvals and timeline here, the approvals from shareholders of Equinox will a simple majority and the security holders of legal will be a 2 thirds vote. We'll have customary regulatory approvals and obviously the Mexican antitrust approval will take a couple of months, which we'll go through. Looking at Slide 7.
Stepping back, this is an at market merger, it's a true merger of equals. And I think as Ross alluded to before, this is what the market has been asking for. And we're really pleased today to deliver on that. When you look at this exchange ratio, it's 0.331, but you look back over the last year on this diagram, and it's basically almost the same number 0.32 effectively. It's been, so there's some big swings in the short term, but on the average for the whole year, it's been very similar to the final exchange ratio.
We're very pleased about that. Obviously, the exchange ratio is a blend of accretive and dilutive metrics for each company, but in line with that average exchange ratio since the start of 2019. Looking at the asset base on Slide number 8. Now with this transaction, we're creating a premier America's gold producer, very few companies are solely on the Americas and certainly not many are of this scale. This portfolio demonstrates that strong diversification by geography and asset with 6 producing mines across these 3 countries and 4 growth projects are now internally funded.
The large reserve base that Neil alluded to of 13,000,000 ounces is a peer leading, a number, as well as a very large resource of almost 24,000,000 ounces of MNI And we'll be producing almost 700,000 ounces of gold based on analyst consensus in the coming year. And then we have past to 1,000,000 ounces on a run rate basis, but we do need to execute on the expansion of several lease assets, which are now fully funded in this plan. And at the bottom line, this will be a cash flow machine. There's $300,000,000 of cash flow from operations and $350,000,000 of EBITDA. So strong cash flow from operations in the future.
Page, Page 9, you know, this combination results in significant growth in mining friendly jurisdictions. I know both of our shareholders' bases have been asking for that and for us focused on these geographies. So we have that estimated 1,000,000 ounce annualized gold production within sight here in the next couple of years. While 8 producing assets and 3 mining friendly jurisdictions, nicely broken down there, as you can see in the diagram to the right, diversifieds a good spread by region, then the growth at the very bottom there will allow us to get to that 1,000,000 ounces to Los Filos expansion, Santa Luz restart, those can be accelerated. We have Castle Mountain expansion and for phase 2 and phase 1 will be in production in the next 6 to 7 months.
Turning over to Slide 10, a premier America's gold producer. That's been our target. That's been our goal. And I think when you look at this slide, see how we slot into this new set of peers with very attractive growth profile. And we're really excited that, we've moved up to that scale and we're within the sight of that 1,000,000 ounces per year.
Turning to 11, a little more detail on the funding for this growth. We have a fortress balance sheet now, and we have cash flow growth that allows us to be fully funded for this whole program. Our cash balance of $270,000,000, excluding transaction costs, comes from about $100,000,000 of cash on hand at September 30th. Movado investment brings in $130,000,000 on the new convertible proceeds and Ross's investment brings in $40,000,000 of debt market financing, so a strong cash position to come out of the gate here. In terms of drawn debt, we'll have of this new term loan of $100,000,000 from the banking group, the new move out of a convertible note of $130,000,000 and the new corporate revolver of which 3 20 of $100,000,000 will be drawn.
And importantly, with that, as well, our cost of capital is coming down. We'll be at LIBOR plus 2.5 to about 3.5% on that large loan. So really improving our cost of funds. So the overall financing factor is $670,000,000 and our net debt now is a very low $280,000,000 for a very substantial business. So we're in a strong position to execute on these growth plans.
Looking at Slide 12, just again, repositioning us within the peers. We're extremely well positioned now. If you look at the 20 21s and we'll be in that top portion, now competing with the other sort of million ounce type producers. The growth is sector leading or peer leading in terms of this this sector group. Over the next couple of years, the anticipated growth is about 20% plus.
And then our P and P or 2P reserves will be in the higher end or upper end of this with almost 13,000,000 ounces. Turning to 13, what's really important here is We'll have exceptional re rate potential in the near term, which Neil alluded to earlier. We believe we're well positioned now that the growth is fully funded. Index inclusion is basically imminent in the first half of this coming year. And we have the dual listing, which I think was good step moving on to the New York Stock Exchange recently.
So if you look at this graph, on the combined market cap values, you're about a CAD 1,300,000 And when you look at the potential rerate potential to 1 to 1.1 times price to NAV, that's $2,000,000,000 plus of value right out of the gate. I'll turn it back over to Neil right now to walk you through a few more slides here.
Okay. Well, first of all, the Board of Directors, I'll step through that. Assume your chief executive is largely set through his board. Ross will be Chairman, coming from the Equinox size, Len Bageo, who is director, whenever some time, he was our partner at PricewaterhouseCoopers and this past chairman of the Canadians who charter the cantents. Tim Green, non selling member of the Jubilee Investment Company and also the 4th structure is Marshall Cobalt who's been a geologist for 38 years and involved in a lot of corporate transactions.
From the Leer Gold side, West Clark, ex General, joined us the board again. Gordon Campbell, former high commissioner, at Canada for the UK, Premier of BC, And last but not least, Peter Maroney, Chairman and CEO of Yamana. Plus, myself, If we turn to the executive team, Messina Executive team, Christian, who's currently CEO of Equinox has been since 2016. Previously CEO, True Gold, and his youth was CFO of Devil Mining. He takes on the role of EVP Corporate.
Patty, who's currently vehicle COO, become COO as the new merged company. And Peter Hardy, our CFO Equinix continues in that role going forward. Looking at the next slide, which shows that the bringing together of these 2 companies creates a very, very strong mix of shareholders. Our present shareholder bases have a different profile. We end up with a very broad mix of corporate, institutional, high net worth retail shareholders, and extremely important, which is supported by strong long term shareholders.
Not only do we have the converts possibility of getting pulled, but ROS represents 9% of the shareholder base for largest shareholder. Looking at the transaction timeline, theoretically fairly straightforward, merger announcement today, Lots of work to be done between now and late December when the special meeting mails information is mailed out. Shareholder meetings late January, expected close, February, maybe early March, in addition to a Kirsten said, the shareholders, we do need the approval of the Mexican antitrust. So when we look at 2020 on a nearby basis, We need to look at value creation. From operational points of view, our priorities are to accelerate Los Filos expansion.
Complete the Castle Mountain phase 1, advise Castle Mountain phase 2 expedite center moves restart. And optimize Mesquite. We have a lot of exploration potential. We'd like to extend the mine life, Aurizona, Zender, Los Filos, and at Mesquite. Corporarily, we have the challenge of executing the merger and integrating it G And A Savings.
We're also able to formalize our external ESG reporting. So you believe that by communicating the growth story, and the benefits that we'll see to investors in the future. You should be able to see that market rerate. Importantly, qualifying for a number of indexes the first half of next year. So we have a clear path to 1,000,000 ounces during 2021 and beyond.
Finally, in summary, and I think this is a summary that is conceptual and really very true, we are creating scale, 6 operating mines with significant cash flow stability, long term mines in favorable jurisdiction. Flexibility of 400,000,000 corporate revolver and strategic partners, 4 growth assets with upside potential. A strong balance sheet fully funded, value of scale and growth, pathway to a care market derating. That's ladies and gentlemen finishes the formal part of the presentation and hand you back over so we can go with questions and answers.
You. Webcast viewers may submit questions through the text box in the lower left corner of Our first question comes from Bryce Adams of CIBC.
I think Slide 18 might have addressed my first question, but it was on the phased approach that Leagold was taken Los Filos and Santa Luz. So the financing package rethinks all of that and the improved balance sheet. Allow for those projects to be accelerated?
Yes, that's right.
Got it. Under Leagold, the Palar asset was deemed noncore, is that through for the pro form a company? And would there be any other assets that now fall into the non core category?
I think what we have intention is to continue to expand and enhance the quality of our portfolio. From their data point of view, this trial section starts off by doing that. I think we have to look at all our assets, and size and growth management time of criteria we have to use. So we'll be assessing that in the short term.
So we should expect an update in terms of portfolio rationalization in the first half of next year?
Yes, Stephanie, correct.
In the opening comments, there was Ross's bullish view on gold. Given the scale of the company that this deal would provide, is there a view to unwind the gold hedging program that was announced earlier in the year? The legal side?
We are considering the sensibility of getting that. We put it on not just because of the bank debt, we put it on because we were going through a capital expansion phase and we want to protect that. I think the situation has changed now as this goes forward, so that's something we're assessing.
And last one for me, just on the ESG report, it was my understanding that Equinox was just about ready to put out a stand alone ESG report. Would that still be coming now as a deal to defer that until later in next year?
Yes, certainly it's Christian here. We certainly will look at, combining our forces and our external reporting and look at what we can do. I mean, ESG has become a really important topic for the key funds and certainly new funds that are looking at our sector investing. So we'll take the best of both worlds and come out with something on a combined basis that will satisfy everyone for sure.
Are you planning, are you going to do loan for Equinoxic right now? What's decided if you could do that? And then just
Our plan for Equinox
is definitely to do one in the 1st part of next year, certainly the half of next year. Now we'll try and obviously do it on a combined basis.
Our next question comes from Kerry Smith of Haywood Securities.
Maybe I could just ask a quick question to Ross just generally in terms of strategy. And I guess I should congratulate you on what I think is a pretty interesting deal. So you had talked about getting 2,000,000 ounces by 2023 by the end of 2023, actually, which was the original target. You're going to do that. Way before schedule.
Do you have a bigger picture over the longer term? Like, do you think that this should be 1,500,000 ounce a 1,500,000 ounce a year company? Or do you think it should be a 1,000,000 ounce a year producer and you're constantly upgrading the quality of the portfolio as time goes by, by bringing in new assets and selling off older assets. I'm just curious how you're thinking now?
Thanks, Carrie. And, thanks for your comments. Well, you don't have to walk before you run. So first, we get to a 1,000,000 and then we decide what to do. There's no magic to a 1,000,000 ounces.
It's just a number, but it represents scale. And in this game, as I described in my opening comments, scale really does matter. More today than ever before, ever I've seen it for all sorts of reasons. And so we had a targeted Equinox to try to get bigger we just threw out the really notes, because it was sort of a nice little number that sort of uses an objective. To be honest, the real important driver isn't really number answers, it's quality of answers.
You know that, and we all know that. It's quality and cash flow and risk and all those things. And they all, they're all very important. So as Neil said earlier, let me get this deal done. It's going to be done in sort of Q1.
We hope late Q1 2020. We're going to then look at all of our existing assets. We're going to kind of reevaluate things, make sure that all of the reasons that we're doing this means are or remain. And, and then we're going to try to manage the assets we have as best we can. We're going to do lots of exploration work.
Going to do all the expansion work that we've described. And we're always going to be looking at improving the quality of the assets. It may mean getting bigger, it may mean getting smaller, but it will try to focus on value and quality. And you're just going to have to wait until we get this deal done to see what we do next. If anything.
So there's no promises, but certainly, the bottom line today is that the larger companies have better multiples and they have better multiples for good reasons. They offer better value to shareholders in terms of risk diversification, overall risk, liquidity and all of the things that are important today. So we're going to keep trying to focus on that But at the end of the day, it's the quality of the assets, not the quantity that it accounts.
Right. Okay. Okay. And just secondly, as a Congress to that, just on the dividend strategy, if you would call it that, you did mention it in your opening remarks. What would have to happen to get to point where you could pay a sustainable dividend for us?
You know, dividends, we can't pay a dividend quickly enough as far as I'm concerned, but we won't pay a dividend until we have all of our expansions sort of done the risk profile of the company lower And we feel we're generating more free cash flow than we can use back in our operations to drive value. So we can't give you a timeline, Terry, but you can look to some of the other companies that are going to evolve in specifically Pan American sort of model for how to build a really good, successful company, which I really hope we're going to be following with Equinox School over the long term. And And when you get that happy position where you're generating more cash and you're consensively using your operations and you don't have sort of a urge to do a new deal, just for the sake of doing a new deal, that's when you return money to shareholders. You do it by dividends and you do it by share buybacks. And so We can't get to that position soon enough because when we get there, we'll know we're really, really a cash generating machine, and that's our all of our objectives, I think, here.
Okay. And maybe I could ask just one final question and maybe it's Neil or Christian. Just on the expansion and the restart in right now, you're at, call it 700,000 ounces in 2020. And this path to a 1,000,000 ounces in 2021, what are the assets that are included in that incremental 300,000 ounces?
Included that incremental 300,000 ounces is the expansion of loss fee loss speed full operation, in Brazil of Equinox's assets there.
Castle phase 1, open to full production as well.
And it's Central Louis, we should be able to start. That has a about a 9 or 10 month start construction period.
Okay. Okay. So really outside of Castle, there's three other assets that would be involved in that?
No, Los Filos, presenter RDM, peel off a little bit. Santa Luz.
Right. Okay. Perfect. Thank you very much.
That's the analyst consensus figure 700.
Yes, Gary.
Our next question comes from Andrew Weekly of Smith Weekly Research.
Well, congratulations on this merger. Both teams have done an exceptional job of, hearing these low levels in the market. And certainly, we at Smith Weekly have been strong supporters of both companies. It's good to consolidate these businesses. Neil, Christian and Ross, what can we expect going forward in terms of taking near term advantage of continued suppressed asset prices in this market.
What specific jurisdictions and stage of assets will you be looking at going forward? And will the focus remain on gold? Thank you, gentlemen, and merry Christmas to you.
Thanks, Andre. Quick answer, remain on gold. The Americas We have a handful, putting this integration together. We have a pipeline of projects. We have an intention to improve the quality of our portfolios and move forward as stage, we'll do another transaction.
Okay.
Guys. Thank you.
Okay. Thank you. We do have four questions online, but they're asking the same thing. So the first question is, will the stock warrant through the EQX stock warrants continue to trade with the same terms?
Yes, the EQM warrants will continue. I mean, there's no change to the EQX shares and warrants.
Okay. Another question, what do you and the forward looking statements here? What do you anticipate for your corporate all in sustaining costs for 2020 2021?
We haven't got an answer to that question at the moment. We're going through our budget processes to see where we are. We're seeing where our priorities are. Haven't got an answer to that yet. We've had that start to the new
year. Okay.
And just one more question. Do you have any sense of what your trend for net debt is going to be over the coming years?
Yes, in terms of net debt, obviously, we have, I'll call it, a low level of net debt going into this transaction with all the cash being raised. And We would see that obviously gradually declining as we deliver on the development projects. The cash flow from operations will actually fund a very significant proportion of that. But I'd see a net debt level or ratio trending downwards over the next number of years here.
Are there any further questions on the phone? Nope. And we'll hand it back. Please, Kim Neal, for closing remarks. Yeah.
Can I just speak for a moment as a Allego Sharejo? I'm looking transaction. I believe it's a step that takes us into another league. I believe it's a step that strengthens our balance sheet with more cost effective finance and more flexible finance. Importantly, it brings in a long term strategic partner.
We'll have no shareholder over 10%. This is a step that importantly improves our asset portfolio. It's a step that senses in the greater chance of rerating and greater shareholder liquidity. It's a step definitely in the right direction for us.
I have nothing to add to that. Well said, Neil, and, I just look forward to a great, a great new chapter ahead for 2 great companies and now combine into 1. Thank you all for joining us today.
Thank you very much. We'll now disconnect the call. This concludes today's conference