Northgate and Primero to Combine and Create A Leading Mid-Tier Gold Producer
13 Juli 2011 - 1:00PM
PR Newswire (Canada)
VANCOUVER, July 13, 2011 /CNW/ -- Business Combination for Superior
Value Creation Notice: Conference Call and Webcast Today at 10:00
am ET Dial in: +647-427-7450 or 1-888-231-8191 VANCOUVER, July 13,
2011 /CNW/ - (All figures in Canadian dollars, unless
otherwise noted) Northgate Minerals Corporation ("Northgate") (TSX:
NGX) (NYSE Amex: NXG) and Primero Mining Corp. ("Primero") (TSX: P)
are pleased to announce today that they have entered into a
definitive arrangement agreement (the "Arrangement Agreement") to
combine their respective businesses and create a new, leading
mid-tier gold producer with significant value creation
opportunities. The combined company will benefit from the
current production and expansion potential at the San Dimas mine in
Mexico and the Fosterville and Stawell gold mines in Australia,
together with the long-life Young-Davidson gold development project
in Ontario. The new company will be led by Joe Conway,
current President and Chief Executive Officer of Primero. The
transaction will create a company with an expected combined market
capitalization of approximately $1.2 billion. Under the terms of
the Arrangement Agreement, Northgate will acquire all of the issued
and outstanding common shares of Primero for 1.50 Northgate common
shares per Primero Share (the "Exchange Ratio"). Each outstanding
option of Primero shall be exchanged for options of Northgate that
will entitle the holder to receive, upon the exercise thereof,
Northgate shares based upon the Exchange Ratio and otherwise on the
same terms and conditions as in the original option. Each
outstanding warrant of Primero will entitle the holder to receive,
upon the exercise thereof, Northgate shares and otherwise on the
same terms and conditions as in the original warrant.
Northgate's offer represents: -- A value of $4.215 for each Primero
common share based on the July 12, 2011 closing price of Northgate
common shares ($2.81) on the Toronto Stock Exchange -- A premium of
approximately 13.9% to Primero's closing price on July 12, 2011 and
a premium of approximately 20.5% and 11.7% calculated on the 10-day
and 20-day volume weighted average price (VWAP) of each respective
company on the Toronto Stock Exchange Highlights of the Transaction
-- Diversified production base: Three producing gold mines with
320,000 gold equivalent ounces in 2011E increasing to 550,000
ounces in 2013E coming from the addition of the Young-Davidson
development project and expansion at San Dimas, plus exploration
pipe-line, all located in pro-mining jurisdictions. -- Leading
growth profile: Expected production growth of 72% from 2011E to
2013E and declining cash costs - which will place the combined
company amongst the leaders of its expected peer group. -- Strong,
complementary management team: Combines proven management with an
experienced technical team. -- Solid financial position and cash
flow: Fully funded development of the Young-Davidson gold project
in Ontario with expected sufficient cash flow to re-pay all
corporate debt and pursue accretive opportunities. -- Unique
re-valuation opportunity: Currently trading below peer average net
asset value and cash flow multiples. -- Enhanced capital markets
presence: $1.2 billion market capitalization is expected to appeal
to a broader shareholder base, increase analytical following and
improve share trading liquidity. Management Team and Board of
Directors The Board of Directors and management of the combined
company will draw from the expertise of both companies. Terry
Lyons will remain the Chairman of the Board and Joe Conway (current
President and Chief Executive Officer of Primero) will become the
new President and Chief Executive Officer upon completion of the
business combination. Peter MacPhail and Jon Douglas will
continue in their current roles as Chief Operating Officer and
Chief Financial Officer of the combined company,
respectively. The remaining senior management team will be
comprised of existing management from both companies. Upon
completion of the transaction, the Board will initially be
comprised of ten directors, with six directors nominated by
Northgate and four directors nominated by Primero including the
Chief Executive Officer. The nominated directors in addition
to Terry Lyons and Joe Conway include Wade Nesmith as Vice
Chairman, Richard Hall, Mark Daniel, David Demers, Patrick D.
Downey, Douglas P. Hayhurst, Rohan Hazelton and Conrad A. Pinette.
Terry Lyons, Chairman of the Board of Directors of Northgate,
stated: "Our proposal is driven by the belief that a combination of
Northgate and Primero will create a stronger and better positioned
company going forward. We believe the value proposition of
the combined company represents a unique opportunity for our
respective companies to deliver both immediate and long-term value
to our shareholders. The proposed transaction is part of an
overall business strategy to grow through acquisition and
exploration in politically stable jurisdictions with long histories
of gold mining." "We are executing on our strategy of low-risk
growth through this consolidation," added Joe Conway, President and
Chief Executive Officer of Primero. "This is a unique
opportunity that brings together two very complementary asset bases
and groups of management. Young-Davidson is a significant
development project in one of the best mining jurisdictions in the
world. Our shareholders will benefit from the enhanced
leverage to a diversified asset base and increased share
liquidity." The combined company is expected to provide Northgate
and Primero shareholders with the following benefits: Benefits for
Northgate Shareholders: -- Adds a high quality, long life producing
precious metals mine in a mining friendly jurisdiction -- Provides
accretive near-term cash flow to help fund construction and ramp-up
of Young-Davidson -- Increases and diversifies production while
decreasing cash costs -- Combines proven management team with
experienced technical team -- Improves market presence Benefits for
Primero Shareholders: -- Diversifies Primero from a single mine
company to a multi-mine producer in mining friendly jurisdictions
-- Delivers on Primero's strategy of growth through consolidation
-- Provides further cash and cash flow to re-pay debt and fund
growth initiatives -- Accretive on a net asset value basis --
Combines proven management team with experienced technical team --
Increases leverage to precious metal prices -- Improves market
presence Transaction Summary The proposed business combination will
be effected by way of a Plan of Arrangement completed under the
Business Corporations Act of British Columbia. Under the terms of
the Plan of Arrangement, each Primero shareholder will receive 1.50
common shares of Northgate for each Primero share held. The
transaction will be carried out by way of a court-approved Plan of
Arrangement and will require approval by at least 66⅔% of the votes
cast by the shareholders of Primero at a special meeting of Primero
shareholders. The transaction is also subject to obtaining
approval by a majority of votes cast by the shareholders of
Northgate at a special meeting of Northgate shareholders expected
to take place the same date as the Primero meeting. In
addition to the shareholder and court approvals, the transaction is
subject to applicable regulatory approvals and the satisfaction of
certain other closing conditions customary in transactions of this
nature. It is anticipated that the shareholder meetings will
be held in September 2011. The Arrangement Agreement includes deal
protection provisions, including no solicitation of alternative
transactions, right to match, dual break fees and customary
fiduciary-out provisions. Both companies' Boards of Directors have
determined that the proposed business combination is in the best
interests of their respective shareholders based on a number of
factors, including fairness opinions received from their respective
financial advisors. Each company's Board of Directors
approved the terms of the proposed transaction and recommends that
their respective shareholders vote in favour of the business
combination. Macquarie Capital Markets Canada Ltd. and GMP
Securities L.P. provided fairness opinions to the Special Committee
and to the Board of Directors of Northgate, respectively. BMO
Capital Markets provided an independent fairness opinion to the
Special Committee and to the Board of Directors of Primero.
In addition, Goldcorp Inc., which holds an aggregate of
approximately 35.5% of the outstanding Primero common shares, has
entered into an agreement to vote in favour of the transaction.
Upon completion of the transaction, existing Northgate and Primero
shareholders will own approximately 69% and 31% of the combined
company, respectively. Full details of the merger will be
included in the management information circulars of Northgate and
Primero to be mailed to their respective shareholders as soon as
practicable. Advisors and Counsel Northgate has retained GMP
Securities L.P. to act as financial advisor and Torys LLP to act as
legal advisor. Primero has retained Canaccord Genuity to act as
financial advisor and McMillan LLP to act as legal advisor.
Conference Call and Webcast Northgate and Primero will host a joint
conference call and webcast on Wednesday, July 13 at 10:00 a.m.
Eastern time for members of the investment community to discuss the
business combination. The call-in details are as follows: --
Local and international: +647-427-7450 -- North American toll-free:
1-888-231-8191 A replay of this conference call will be available
from Wednesday, July 13 starting at 1:00 p.m. Eastern time until
July 27, 2011. The replay numbers are: -- Local and
international: +416-849-0833 -- North American toll-free:
1-855-859-2056 -- Replay passcode: 833 628 47# A live and archived
webcast of the conference call is also available on the homepage at
www.northgateminerals.com or at www.primeromining.com under the
Calendar and Events page. * * * * * * * About Northgate Northgate
Minerals Corporation is a gold and copper producer with mining
operations, development projects and exploration properties in the
Americas and Australia. Northgate currently owns and operates
the Fosterville and Stawell gold mines in Victoria Australia, and
is building the Young-Davidson gold mine in northern Ontario, which
is targeting a 15-year mine life with average annual production of
180,000 ounces of gold commencing in 2012. * * * * * * * About
Primero Primero Mining Corp. is a Canadian-based precious metals
producer and owns 100% of the San Dimas gold-silver mine in Mexico.
Primero offers immediate exposure to un-hedged, low cash cost gold
production with a substantial resource base in a politically stable
jurisdiction. * * * * * * * This press release does not constitute
an offer of any securities for sale or a solicitation of an offer
to purchase any securities. The securities to be issued
pursuant to the proposed transaction have not been and will not be
registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered or sold to U.S. Persons
(as such term is defined in Regulation S under the Securities Act)
absent registration or an applicable exemption from registration
requirements. Northgate intends to issue such securities
pursuant to the exemption from registration set forth in Section
3(a)(10) of the Securities Act. Cautionary Note Regarding
Forward-Looking Statements and Information: This Northgate and
Primero press release contains "forward-looking information", as
such term is defined in applicable Canadian securities legislation
and "forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995, concerning
Northgate's and Primero's future financial or operating performance
and other statements that express management's expectations or
estimates of future developments, circumstances or results.
Generally, forward-looking information can be identified by the use
of forward-looking terminology such as "expects", "believes",
"anticipates", "budget", "scheduled", "estimates", "forecasts",
"intends", "plans" and variations of such words and phrases, or by
statements that certain actions, events or results "may", "will",
"could", "would" or "might", "be taken", "occur" or "be achieved".
Such forward-looking information may include, without limitation,
statements regarding the completion and expected benefits of the
proposed transaction and other statements that are not historical
facts. Forward-looking information is based on a number of
assumptions and estimates that, while considered reasonable by
management based on the business and markets in which Northgate and
Primero operates, are inherently subject to significant
operational, economic and competitive uncertainties and
contingencies. Assumptions upon which forward looking
statements relating to the plan of arrangement have been made
include that Northgate and Primero will be able to satisfy the
conditions in the Arrangement Agreement, that due diligence
investigations of each party will not identify any materially
adverse facts or circumstances, that the required approvals will be
obtained from the shareholders of each of Northgate and Primero,
that all required third party, regulatory and government approvals
will be obtained; and that each of Northgate and Primero will be
able to achieve their currently announced guidance targets.
Northgate and Primero caution that forward-looking information
involves known and unknown risks, uncertainties and other factors
that may cause Northgate's and Primero's actual results,
performance or achievements to be materially different from those
expressed or implied by such information, including, but not
limited to: gold, silver and copper price volatility; fluctuations
in foreign exchange rates and interest rates; the impact of any
hedging activities; discrepancies between actual and estimated
production, between actual and estimated reserves and resources or
between actual and estimated metallurgical recoveries; costs of
production; capital expenditure requirements; the costs and timing
of construction and development of new deposits and expansion of
existing operations; the success of exploration and permitting
activities; parts, equipment, labor or power shortages or other
increases in costs; mining accidents, labour disputes or
other adverse events; and changes in applicable laws or
regulations. In addition, the factors described or referred to in
the section entitled "Risk Factors" in Northgate's and Primero's
Annual Information Form for the year ended December 31, 2010 or
under the heading "Risks and Uncertainties" in Northgate's and
Primero's 2010 Annual Report, both of which are available on the
SEDAR website at www.sedar.com, should be reviewed in conjunction
with the information found in this press release. Although
Northgate and Primero have attempted to identify important factors
that could cause actual results, performance or achievements to
differ materially from those contained in forward-looking
information, there can be other factors that cause results,
performance or achievements not to be as anticipated, estimated or
intended. There can be no assurance that such information will
prove to be accurate or that management's expectations or estimates
of future developments, circumstances or results will materialize.
As a result of these risks and uncertainties, the proposed
transaction could be modified, restricted or not completed, and the
results or events predicted in these forward looking statements may
differ materially from actual results or events. Accordingly,
readers should not place undue reliance on forward-looking
information. The forward-looking information in this press release
is made as of the date of this press release, and Northgate and
Primero disclaim any intention or obligation to update or revise
such information, except as required by applicable law. Cautionary
Note to US Investors Regarding Mineral Reporting Standards:
Northgate and Primero prepare their disclosure in accordance with
the requirements of securities laws in effect in Canada, which
differ from the requirements of US securities laws. Terms relating
to mineral resources in this press release are defined in
accordance with National Instrument 43-101-Standards of Disclosure
for Mineral Projects under the guidelines set out in the Canadian
Institute of Mining, Metallurgy, and Petroleum Standards on Mineral
Resources and Mineral Reserves. The Securities and Exchange
Commission (the "SEC") permits mining companies, in their filings
with the SEC, to disclose only those mineral deposits that a
company can economically and legally extract or produce. Northgate
and Primero use certain terms, such as, "measured mineral
resources", "indicated mineral resources", "inferred mineral
resources" and "probable mineral reserves", that the SEC does not
recognize (these terms may be used in this press release and are
included in the public filings of each of Northgate and Primero
which have been filed with securities commissions or similar
authorities in Canada). Estimates of equivalent production are
calculated using analyst consensus metal price estimates.
Primero's gold equivalent production estimate is adjusted for the
silver purchase agreement and only silver ounces attributable to
Primero are included. To view this news release in HTML formatting,
please use the following URL:
http://www.newswire.ca/en/releases/archive/July2011/13/c5058.html
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/td td /td td bPrimero/b /td /tr tr td bKeren R.
Yun /b /td td /td td /td td bTamara Brown/b /td
/tr tr td Director, Investor Relations /td td /td td
/td td Vice President, Investor Relations /td /tr tr td
416-216-2781 /td td /td td /td td 416-814-3168
/td /tr tr td a
href="mailto:kyun@northgateminerals.com"kyun@northgateminerals.com/a
/td td /td td /td td a
href="mailto:tbrown@primeromining.com"tbrown@primeromining.com/a
/td /tr tr td a
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/td td /td td /td td a
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/table p /p
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