Orica announces acquisition of Cyanco to boost mining chemicals business

In a significant move to bolster its position in the global mining chemicals market, Orica has entered into a binding agreement to acquire 100 percent of the common stock of Cyanco Intermediate 4 Corp. (Cyanco) for a hefty sum of US$640 million. This transaction, conducted on a cash-free, debt-free enterprise value basis, marks a pivotal step in Orica’s ambitious strategy to extend its capabilities beyond blasting and establish a formidable presence in the mining chemicals sector. The deal, orchestrated with an affiliate of Cerberus Capital Management, L.P. (Cerberus), is set to redefine the landscape of the sodium cyanide market, essential for the gold mining industry.

Cyanco, a leading entity in the sodium cyanide production and distribution, primarily caters to the gold mining sectors across the US, Canada, Mexico, Latin America, and Africa. This acquisition is poised to significantly complement Orica’s existing Mining Chemicals business, promising to create an integrated global manufacturing and distribution network that stands unrivaled in scope and efficiency.

With a focus on strategic growth, Orica’s decision to acquire Cyanco is more than a mere expansion; it’s a calculated move to more than double its sodium cyanide production capacity, reaching approximately 240kTpa, thanks to Cyanco’s robust manufacturing plants in Nevada and Texas. This expansion is not just a numerical increase but a strategic positioning to tap into the lucrative North American gold mining industry, leveraging cost-competitive US natural gas-based manufacturing assets.

The financing of this monumental deal will be managed through Orica’s available cash reserves and undrawn committed debt facilities, supplemented by a A$400 million underwritten institutional placement. This financial strategy underscores Orica’s commitment to maintaining a prudent balance sheet, with gearing expected to stay within the target range of 30 to 40 percent post-acquisition.

The transaction is anticipated to be mid-single digits earnings per share (EPS) accretive in the first full year of ownership, even before the realization of synergies. Orica and Cyanco’s amalgamation is expected to yield run-rate net cost synergies of approximately US$10 million by the end of the third year, signaling not only a financial boost but also an operational harmonization that could set new industry standards.

Sanjeev Gandhi, Orica’s Managing Director and CEO, expressed enthusiasm about the acquisition, highlighting its strategic alignment with Orica’s Mining Chemicals vision. Gandhi’s vision for the combined entity is to forge a leading integrated global sodium cyanide producer that excels in supply capabilities, significantly enhancing the company’s ability to serve the burgeoning demands of the gold mining industry in the US and Canada.

The transaction is expected to close by the end of FY2024, subject to regulatory approvals and customary closing conditions. Despite the anticipation of integration costs impacting FY2024’s EBIT contribution from Cyanco, Orica’s strategic outlook remains optimistic, with a clear path toward solidifying its leadership in the mining chemicals domain.

This acquisition is a testament to Orica’s strategic foresight and its commitment to driving growth beyond its traditional blasting services. By integrating Cyanco’s operations and expertise, Orica is not only expanding its production capacity but also enhancing its global distribution network, ensuring a more resilient and responsive supply chain for the gold mining industry.

The deal reflects a well-considered investment in a future where mining chemicals play a pivotal role in supporting global mining operations, especially in the gold sector.

Orica’s acquisition of Cyanco marks a milestone in the mining chemicals industry, setting a precedent for strategic growth and global expansion. With this acquisition, Orica is poised to lead the charge in the sodium cyanide market, promising enhanced service and supply capabilities for the global gold mining industry. As both companies embark on this new chapter, the industry watches keenly, anticipating the ripple effects of this strategic alliance on global mining operations.