Tesla co-founder and CEO Elon Musk gestures while introducing the newly unveiled all-electric battery-powered Tesla Cybertruck at Tesla Design Center in Hawthorne, California on November 21, 2019.
FREDERIC J. BROWN | AFP | Getty Images
Tesla's futuristic pickup truck appears set to go head-to-head against the Ford F-150 in an "apples to apples" tug-of-war battle.
The anticipated showdown, which could take place as early as next week, comes shortly after Tesla unveiled its all-electric Cybertruck.
During the promotional event in Los Angeles last week, which turned into a somewhat embarrassing debut for the company's first electric pickup truck, Elon Musk showcased a promotional video of the vehicle engaging in a tug-of-war battle against a Ford F-150.
The 16-second clip, which has since been viewed more than 12 million times, shows Tesla's Cybertruck hardly breaking a sweat during the display, as it comfortably pulls a screeching Ford F-150.
However, critics of the demonstration have since argued the test was unfavorable to the U.S. automaker.
Sundeep Madra, vice president at Ford X, sent a message via Twitter to Musk on Monday, apparently urging the Tesla CEO to send over a Cybertruck for an "apples to apples" tug-of-war test.
In a tweet directly replying to the Ford X vice president, Musk replied: "Bring it on."
A Ford spokesperson was not immediately available to comment when contacted by CNBC Tuesday morning.
Astrophysicist Neil deGrasse Tyson — who has previously suggested that he believes Musk is more important than Jeff Bezos, Steve Jobs and Mark Zuckerberg — was one of those skeptical about the legitimacy of the original tug-of-war test.
Tyson said the stunt may not have demonstrated the pickup truck's engine power, challenging Musk to "fully load" the Ford F-150, "giving highest traction to its rear wheels, then try to drag that up the hill."
Musk agreed to do that next week.
He has since suggested the next tug-of-war test will be available to watch via webcast.
Botched demo
On Sunday night, Musk said Tesla had received 200,000 orders for its Cybertruck, despite a botched demo that led to a broken window and sparked meme's making fun of the vehicle's steel trapezoid shape.
At the unveiling, Musk tried to showcase the Cybertruck's durability by having the company's design chief hurl a metal ball at one of the Cybertruck's armored glass windows.
The window ended up cracking. Then another ball was thrown at another window and it shattered, too.
TOKYO (Reuters) - Asian stocks rose on Tuesday, bolstered by new momentum in Sino-U.S. efforts to end their acrimonious trade dispute and as Chinese e-commerce giant Alibaba made a strong Hong Kong debut in the world's largest share sale this year.
MSCI's broadest index of Asia-Pacific shares outside Japan () rose 0.4% to a one-week high. Australian shares () were up 0.83%, while Japan's Nikkei stock index () rose 0.54%.
Shares in the region extended earlier gains after Beijing said Liu He, China's Vice premier and chief trade negotiator, held a phone call with his U.S. counterparts and that both sides reached consensus on how to move forward in their dispute.
That followed positive headlines out of China and the United States on Monday, which had helped bolster confidence.
The yen fell to a two-week low versus the dollar, while the Swiss franc traded near a six-week low against the greenback as the optimistic tone sapped demand for safe-haven currencies.
"The broad trend is the markets are looking for a deal because trade has been the biggest factor weighing on global growth and holding back confidence," said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.
"We have a low interest rate environment that is supportive of equities. If we get better economic news and relief from geopolitical risks, equities could rally further next year."
U.S. stock futures () edged 0.08% higher in Asia on Tuesday after Wall Street's three main stock averages closed at record highs on Monday, buoyed by hopes for a trade deal and by M&A activity.
The pan-region Euro Stoxx 50 futures () were up 0.03%, German DAX futures () were up 0.12%, while futures () were up 0.14% on Tuesday.
Traders pointed to China's decision to increase punishments for intellectual property rights violations as a fresh concession to the United States in the drawn-out and volatile negotiations.
Investors were also encouraged by positive comments from U.S. President Donald Trump, Chinese President Xi Jinping and Chinese state-owned media about the chance for an imminent trade deal.
Also driving Wall Street higher was a burst of major acquisition activity with France's LVMH (PA:) offer to buy U.S. jeweler Tiffany & Co (N:) and Charles Schwab Corp's (N:) purchase of U.S. discount brokerage TD Ameritrade Holding Corp (O:).
In Hong Kong, shares of Alibaba (HK:) (N:) opened 6.9% higher than their issue price and at a small premium to pricing in New York. However, the Hang Seng index () fell 0.14%.
The Chinese firm has raised at least $11.3 billion from the secondary listing, which has been seen as a vote of confidence in Hong Kong after months of anti-government protests rocked the former British colony.
The United States has imposed tariffs on Chinese goods in a 16-month long dispute over trade practices that the U.S. government says are unfair. China has responded in kind with its own tariffs on U.S. goods.
If both sides cannot reach an agreement soon, the next important date to watch is Dec. 15, when Washington is scheduled to impose even more tariffs on Chinese goods.
In the offshore market, the yuan briefly rose to a one-week high of 7.0188 versus the dollar.
The yen fell to 109.205 per dollar, the lowest since Nov. 12, as safe-haven demand waned.
The Swiss franc , another safe-haven, traded at 0.9967 per dollar, close to the lowest since Oct. 16.
(), the world's biggest cryptocurrency, rose 1.34% on Tuesday to $7,218.11, recovering from a six-month low on Monday after the People's Bank of China (PBOC) launched a fresh crackdown on cryptocurrencies.
The PBOC is stepping up efforts to roll out its own digital currency, partly to fend off potential threats from Facebook's proposed digital currency, Libra.
U.S. crude () was flat at $58.01 a barrel. Brent crude () rose 0.09% to $63.71 per barrel.
Tesla CEO Elon Musk plainly says his pickup is a “better truck than an F-150.” Ford is taking issue with that claim.
While releasing a series of specs last week for Cybertruck, which is scheduled to start deliveries as soon as late 2021, Musk called up a video of the the pickup in a tug-of-war against Ford’s best-selling F-150.
He tweeted a clip of the test on Sunday showing his vehicle pulling a screeching Ford model up a hill.
Ford thinks Musk was making an apples-to-oranges comparison. The video the Tesla chief executive officer tweeted appears to show a two-wheel-drive version of the F-150 against an all-wheel-drive Cybertruck.
Other details that could have factored in which pickup won out include curb weight and tire type.
He linked to a post by the car-enthusiast site motor1.com that questioned whether Tesla’s test was “fair game.”
Tesla and Ford have been at this before. More than a year after Musk tweeted a boast about how much weight Tesla’s truck would be able to tow, Ford released a promotional video of an electric F-150 prototype dragging more than 1 million pounds of double-decker rail cars.
LISTEN: What do car dealers think about electric vehicles? Are they keen to have them in their showrooms? We talk to Vancouver GM dealer Blair Upton about this and much more during this week’s episode of Plugged In.
Dozens of tractors from Quebec farms delivered bags of corn to the doors of Prime Minister Justin Trudeau's constituency office Monday, along with a demand for action from Ottawa in the weeklong CN Rail strike.
"We're on the alert — it's an intolerable situation," said Marcel Groleau, president of the UPA, Quebec's agricultural producers union, at the rally in Montreal.
His message was echoed across the Prairies, though there are differences in how producers want the labour dispute resolved.
About 3,200 CN employees, members of the Teamsters Canada Rail Conference union, walked off the job last Tuesday. They've been without a contract since July 23, and say they're concerned about long hours, fatigue and what they consider dangerous working conditions.
On Monday, the union released an Oct. 19 recording of a CN supervisor asking a conductor to move his train to a location near Pickering, Ont., where a relief team could take over.
The conductor replies that he and the locomotive engineer are unfit to move a train, having been on duty too long.
The union says the conductor was suspended for two weeks without pay after refusing to move the train through residential areas east of Toronto.
"This recording illustrates CN's blatant disregard for the health and safety of our members and the public," Teamsters Canada president François Laporte said in a statement.
"This is why we are on strike against CN. This happens every day across the rail industry, and CN regularly intimidates workers who raise the issue of fatigue with the threat of discipline."
Many farmers say they are sympathetic to the working conditions of rail workers, but they're also worried they won't be able to get crops to market in a year when they had a disappointing harvest and continue to face trade disputes — notably China's ban on Canadian canola.
In Montreal, the UPA isn't asking for special legislation to force the CN employees back to work, but it wants Trudeau and his government to "put pressure on CN" to prioritize the transportation of propane.
Dozens of tractors from Quebec farms delivered bags of corn to the doors of Prime Minister Justin Trudeau’s constituency office — they also delivered a demand for action from Ottawa in the weeklong CN Rail strike. 0:31
Farmers use propane to heat hog barns and henhouses, and they need it to dry their grain before it can be stored — especially this year, when the crop is abnormally wet, said Dominique Leroux, a grain farmer who is also a member of the Grain Farmers Association of Quebec.
Leroux has no propane left on his farm — and he says Ottawa needs to act.
"They need either to resolve the strike, resolve the problem, resolve the negotiation or take a risk with us. Because if we lose our crop, we lose our income," he said, adding that farmers need to harvest before it snows.
"Everything is still in the field. I'm also a grain elevator owner, so what that means is I dry corn for other farmers …. They have to leave their crops in the field, because I can't dry their crops. So that's really stressful for them, for me, for our family, for everybody."
Strikes part democracy
In Winnipeg, the CN strike was top-of-mind at the annual National Farmers Union meeting, but members have mixed ideas on how they want the dispute settled.
Ian Robson, who farms in western Manitoba, said he is having a hard time planning his grain sales to get the best possible price, but as a member of a farmers union, he supports the Teamsters.
"We like to see fair bargaining and fair determination of labour standards and labour conditions," Robson said.
"The longer the strike goes on, the bigger the impact and that is the point of a strike.… That's what negotiations are for. And you know that's part of democracy and very important that that things play out."
NFU president Katie Ward said she has reached out to federal Agriculture Minister Marie-Claude Bibeau, who was re-appointed to the portfolio last week.
"I certainly hope that she will be working with her cabinet colleagues to help shepherd the decision process to an equitable and swift agreement," Ward said.
Manitoba farmer John Preun relies on rail to transport the majority of his crops, but the CN Rail strike means three-quarters of the crop he expected to ship out is still on his farm. (Tyson Koschik/CBC)
'It holds all of us ransom'
Manitoba farmer John Preun won't say how he hopes the dispute is settled — he just hopes it's soon.
His grain bin is supposed to be empty this time of year, but instead he has about a dozen bins filled with 7,500 tonnes of cereals, soybeans, oats and wheat.
"This is one of the worst years that I remember in my entire career of farming. I've never seen anything this bad, where we've gone from a drought, to an unconfirmed tornado, to a drought, and then just a deluge of rain when we didn't need it anymore," Preun said.
He agrees rail workers deserve to have a safe workplace and he's sympathetic to their concerns, but he says Canadian farmers are among those paying the price.
"The fact of the matter is that they've brought Canada [to] a standstill. We need the trains to move, so that we can move our grain to an export position. It holds all of us ransom."
Rail is an essential service
The association representing western grain elevators is going further – asking Parliament to recognize rail service as an essential service so it won't be subject to work stoppages.
"My understanding is that they can impose binding arbitration.… We would like to see Parliament resume as quickly as possible to take a look at passing emergency legislation to get grain flowing," said Wade Sobkowich, executive director of the Western Grain Elevator Association, based in Winnipeg.
"We don't think that was the intention of the collective bargaining process to hold Canada's economy as a hostage… as they work things out."
About half of the 360 Prairie elevators are on CN tracks, and they are being squeezed on both sides of the supply chain, Sobkowich said.
Wade Sobkowich, executive director of the Western Grain Elevator Association, wants the federal government to recognize rail service as an essential service so it won’t be subject to work stoppages. (Supplied)
"On the producer side, farmers are being called in and asked to deliver it at some point in the future [but] they don't get paid until they deliver, so it's having an impact on farmers. And then on the export side … we're paying contract extension penalties, because we can't get the grain to port loaded onto a vessel to get it to a customer."
Empty vessels in Vancouver face fines of up to $15,000 a day, costs that will eventually be passed on to producers.
A worst-case scenario is defaulting on contracts, Sobkowich added.
"If we're not seen as a reliable supplier there are going to be customers in the world that will have less interest in Canadian grains and oilseeds," he said.
"So now we're not able to earn as much of a return on our grain sales yet we still need to move it because we need to make room for next year's crop to come in."
Believes in negotiating
The federal Liberals say they are trying to help both sides reach a deal, but they are hesitant to intervene and introduce back-to-work legislation.
On Monday, Bibeau spoke at the Canadian Western Agribition show in Regina, where she also met with farmers and the Saskatchewan Agriculture Minister David Marit.
She said the federal government believes in the negotiating process and is pushing both sides to come to an agreement.
Canada's agriculture minister is urging Canadian National Railway Co. and its workers to reach a deal to alleviate the impact the ongoing strike is having on farmers.
Agriculture Minister Marie-Claude Bibeau is encouraging the Canadian National Railway Co. to reach a deal with its workers to end ongoing labour action. (Andrew Vaughan/The Canadian Press)
Marie-Claude Bibeau delivered remarks Monday at the Canadian Western Agribition show in Regina, where she also met with producers.
Bibeau said the federal government believes in the negotiating process and is pushing both sides to come to an agreement.
Moe says intervene
"Every option's always on the table. But for the time being, we hope that both parties will get to an agreement," she said.
Saskatchewan Premier Scott Moe wants Ottawa to intervene in the strike, and Alberta Premier Jason Kenney has asked that Parliament be recalled early to pass back-to-work legislation.
Manitoba Premier Brian Pallister said Monday he wants Ottawa to "move toward a resolution as soon as possible," adding Manitoba and Alberta have been discussing joint strategies to apply pressure on the federal Liberals.
"No one wants to enter into the fray of a labour dispute, but the consequences of this one are so severe," he told reporters.
"This is an issue of public safety now as well in terms of heating supplies, heating fuel…. This is one that they need to take action on fairly quickly.
No quick end
Parliament isn't scheduled to resume until Dec. 5, and the first order of business will be to elect a new Speaker and hear the Speech from the Throne.
Even if the minority Liberals introduce a back-to-work bill, there's no guarantee of a quick end to the strike.
NDP Leader Jagmeet Singh has already said he's opposed to legislating CN workers back. Conservative Leader Andrew Scheer wants Parliament brought back early and "emergency legislation" tabled.
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November 26, 2019 at 04:43AM
Charles Schwab Corp. agreed to buy TD Ameritrade Holding Corp. for about US$26 billion in a deal that will reshape the retail brokerage business.
TD Ameritrade stockholders will receive 1.0837 Schwab shares for each TD Ameritrade share, the companies said in a statement Monday. That’s a 17 per cent premium based on the average share price as of the close on Nov. 20.
Announcement of the deal comes after news of an acquisition broke on Thursday, sending up shares of both firms. Schwab, America’s original discount broker, will now have even more sway over the sector it pioneered nearly a half-century ago.
“Our view is that this is a great deal for the consumer,” Schwab Chief Executive Officer Walt Bettinger said on a conference call Monday with analysts. “We’ve been doing nothing but driving costs down for decades.”
The equity value of the deal is US$28.3 billion based on Schwab’s closing price of US$48.20 on Nov. 22. Schwab shares fell 0.3 per cent at 10:16 a.m. in New York trading. TD Ameritrade, the Omaha-based brokerage that’s partly owned by Toronto-Dominion Bank, rose four per cent.
The tie-up creates a mega-firm with US$5 trillion in assets — a Goliath that may attract the attention of antitrust regulators, analysts say. Smaller brokerages like E*Trade Financial Corp. will have to contend with a much more formidable competitor.
The combined firm will relocate its headquarters to Schwab’s new campus in Westlake, Texas. Schwab’s San Francisco operations will remain a sizable hub.
TD Bank, which holds 43 per cent of TD Ameritrade, will own roughly 13 per cent of the new business. Its voting stake will be limited to 9.9 per cent, with the rest of its position in a non-voting class of stock. The Canadian lender will have two new seats on the combined firm’s board, while TD Ameritrade will name a single director.
As a result of the deal, Schwab will see its business add 12 million client accounts, US$1.3 trillion in assets, and roughly $5 billion a year in revenue.
Bettinger downplayed the potential antitrust risks of the combination.
“We have numerous competitors, many of which are far larger than us today and far larger than a combined organization,” he said on the call. “They’re going to continue to come right after us, as they are now in all aspects of the business.”
Schwab said in the statement that the new firm will have “the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys.”
Schwab last month eliminated commissions for U.S. stock trading, forcing other brokerages to follow suit and sweeping away an important revenue stream. Analysts speculated that online brokerages might have to cut deals to survive the increased industry pressure.
TD Ameritrade has relied more on commissions than some competitors, drawing 36 per cent of its net revenue from commissions in 2018, compared to seven per cent at Schwab.
Founder Charles Schwab hinted he was open to dealmaking in an interview with Bloomberg Radio in October.
“I don’t know whether we’ll be successful in that pursuit, but in the industry you’re going to see more consolidation, more firms getting together,” he said. “You just have to have that scale and volume.”
If the deal goes through, the combined company will have unparalleled clout as top custody service providers to independent financial advisers. That may give authorities pause, Keefe, Bruyette & Woods analyst Kyle Voigt wrote Thursday. He estimates Schwab has about a 50 per cent market share of registered investment adviser custody assets, while TD Ameritrade may have as much as 20 per cent.
The acquisition comes after TD Ameritrade announced in July that CEO Tim Hockey would leave early next year. Hockey denied at the time that his departure had anything to do with a potential deal.
Credit Suisse Securities was Schwab’s financial adviser. PJT Partners and Sander O’Neill Partners were financial advisers to TD Ameritrade’s board. Davis Polk & Wardwell and Wachtell Lipton Rosen & Katz were legal advisers to Schwab and TD Ameritrade, respectively.
--With assistance from Matthew Monks.
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November 25, 2019 at 10:54PM
London’s transit authority on Monday refused to renew Uber’s licence to operate, putting the ride-hailing company’s future in the British capital in doubt.
It’s the latest chapter in Uber’s rocky history with London transport officials, who have been subjecting the San Francisco-based company to ever tighter scrutiny over concerns about passenger safety and security.
Uber vowed to appeal the decision, which it called “extraordinary and wrong.” The company, which has 21 days to file an appeal, can continue operating while the appeals process is underway.
Transport for London cited “several breaches that placed passengers and their safety at risk” in its decision not to extend Uber’s licence, which expires at midnight Monday.
The transit authority, known as TFL, said that despite addressing some issues, it “does not have confidence that similar issues will not reoccur in the future.”
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As a result, it deemed Uber “not fit and proper at this time.”
The company fired back, pointing out that TFL had found it to be fit and proper in September, when it was given a two-month licence renewal.
“We have fundamentally changed our business over the last two years and are setting the standard on safety,” Jamie Heywood, Uber’s regional general manager for Northern and Eastern Europe, said in a statement.
Report links rideshare apps to increased congestion
TFL had already been keeping Uber on a tight leash following concerns about aggressive corporate tactics and passenger safety. It had revoked Uber’s licence once before, in 2017, but a court later granted it a licence lasting only 15 months, which TFL then extended for two more months in September, while also imposing a set of 20 stricter conditions.
In the latest decision, the transit authority said it was concerned that Uber’s systems “seem to have been comparatively easily manipulated” by drivers.
One key issue was a change to Uber’s systems allowing unauthorized drivers to upload their photos to other driver accounts.
This let them pick up passengers as though they were the booked Uber driver on at least 14,000 trips, which means all those journeys were uninsured, TFL said.
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The change also resulted in some passengers travelling with unlicensed drivers, including one whose licence was previously revoked by TFL.
TFL also faulted Uber for another “failure” that allowed dismissed or suspended drivers to create a new account and carry passengers. And it cited other “serious breaches” involving unspecified insurance-related issues.
Shares in Uber were down almost six per cent in premarket trading in New York.
Toronto-based Kirkland Lake Gold Ltd. on Monday announced a multibillion dollar acquisition of Detour Gold Corp., a deal that would elevate it into a major gold miner and could attract new institutional investors.
But investors weren’t impressed, with the stock declining 16 per cent by mid-afternoon to $40 on the Toronto Stock Exchange. Detour rose 3.6 per cent to $23.
The combination marries two near opposites: Kirkland Lake operates two high grade underground mines at some of the lowest cash costs in the sector, whereas Detour operates a single, low grade bulk tonnage open pit mine at comparatively higher costs.
The acquisition would boost Kirkland’s annual gold production by about one-third to more than 1.5 million announces per year, but its costs are also expected to rise.
The value of the all-stock deal was somewhat uncertain as of Monday, initially pegged at $4.9 billion but falling with Kirkland’s stock. If some investors expressed initial skepticism, one of the biggest and perhaps most important investors in Kirkland, billionaire Eric Sprott, who stepped down as chairman earlier this year, said he would support the deal.
“The more I reflect on Detour, I think we’re ‘stealing value’ — value that the market’s not seeing,” Sprott told the Financial Post.
Detour reported all-in sustaining costs of $1,198 in the third quarter whereas Kirkland reported all-in sustaining costs of $562, about half of that.
Eric Sprott in October 2019.Peter J. Thompson/National Post
Nonetheless, Sprott said he had been studying Detour: With gold prices rising — about 15 per cent since June to US$1467 per ounce — higher cost producers can catch momentum more quickly than lower cost producers because they’re starting from a lower profit base.
For example, Detour reported revenue from mining operations of US$59.8 million in the third quarter — compared to about US$15 million in the same quarter one year earlier. It said in its report that it had sold its gold for US$222 per ounce more on average during the quarter than the prior period.
Sprott also said he was encouraged by signs that Detour looks like it’s bringing costs down to around US$1,100 per ounce, and that could increase its gold production beyond the 621,000 ounces produced in 2018.
“I think we’re on the cusp of something really special,” he said. “I think a lot of good things will happen at that property.”
Tony Makuch, chief executive of Kirkland Lake, said his company was attracted to Detour Lake by its sheer size. It provides the company with 15.4 million ounces of proven reserves, roughly triple what the company holds between its two underground mines, with Fosterville in Australia at about 2.7 million ounces, and Macassa, in Ontario at 2.2 million ounces.
I think we’re on the cusp of something really special
Eric Sprott
Plus, he said Detour is already lowering its costs, and its production has been rising on track to produce more than 600,000 ounces for a second straight year.
“You can see potential to get this up to well over 800,000 ounces per year production,” he said, adding that the company had spent only about $40 million on exploration during the past five years — which Kirkland will look to increase.
A spokesman for Paulson & Co. declined to comment on the proposed merger.
He said initial discussions began in August, but didn’t really pick up speed until last Thursday.
“It came together fairly quickly,” said Makuch.
Both Detour’s Lake mine and Kirkland’s Macassa underground mine are located on Ontario’s Abitibi Greenstone belt, about several hundred kilometres away from each other, and Kirkland Lake said it expects about $75 to $100 million in pre-tax synergies.
A gold pour at a Kirkland Lake Gold site.Handout/Kirkland Lake Gold.
The management of both companies declined to provide any details of how that would be achieved during a conference call on Monday morning.
Kerry Smith, an analyst at Haywood Securities who covers Detour, said he thinks the combined company, which would have a market valuation of around US$14 billion, could attract new institutional investors who want a gold stock in their portfolio, but who viewed Kirkland and Detour as too small or lacking in liquidity.
“All of a sudden you’re getting another company that could be a name these investors gravitate to,” he said.
David Neuhauser, managing director of a Illinois-based hedge fund, Livermore Partners, was ecstatic about the deal: In 2018, during the activist campaign launched by Paulson, he bought into Detour at around $11 per share.
In recent months, he had started to sell down his position as Detour’s stock soared above $24.
He predicted more consolidation in the gold space. Since 2018, there have been at least two other megamergers, with Barrick Gold Corp. swallowing Randgold Resources Ltd. in a US$6-billion deal and Newmont Gold Corp. merging with Goldcorp Inc. in a US$10-billion deal.
Under the deal, Kirkland agreed to exchange 0.43 of its shares for each Detour share, which give Detour shareholders approximately 27 per cent of the newly combined entity.
Before the deal was announced, Kirkland had been trading at $63.33, one of the best performing stocks on the TSX during the past two years, rising 228.5 per cent in that time.
Having dropped 16 per cent, to $53.24, that meant the deal still valued Detour’s shares at approximately $22.89 apiece — slightly less than the $27.50 announced by the companies.
A November 2013 handout photo of Detour Gold’s Detour Lake open pit mining.Handout/Detour Gold
Smith noted Kirkland trades at 12 times its cash flow whereas Detour trades at 8 times. The difference in the trading multiple of their net asset value is more stark, he added, calculating Kirkland trades at 2.1 times whereas Detour is 0.9.
“Undoubtedly, (Detour) is higher cost, so investors are wondering what’s going to happen to the multiple,” Smith said.
Kirkland was smart to move while its stock had a high valuation, and could be used as a currency, Smith noted.
It was a point that Sprott, who owns approximately 14 million shares of Kirkland, according to one recent estimate, raised too: Kirkland is not taking any debt to complete the deal.
He compared the market reaction to Kirkland Lake’s acquisition of the Fosterville mine in 2016, which Sprott helped engineer, and which the market initially disliked. Yet after more exploration, Fosterville emerged as one of the highest grade gold mines in the world and helped give Kirkland one of the highest trading multiples of any of its peers.
“When Kirkland bought Fostervile, everyone hated it, well, the market did,” Sprott said. “And the market was wrong.”
Makuch said given the exploration potential at Detour Gold’s property it was similar to Fosterville in that it has the potential to provide a big contribution to Kirkland Lake’s bottom line.
“We got to recognize that Fosterville is a special asset, and we may not find another of those in the world, even though we keep looking,” said Makuch. “And Detour is a very special asset too.”
The deal must be approved by two-thirds of shareholders and is not expected to close until next year.
