Argonaut Gold Inc. (TSX:AR) ("Argonaut Gold") and Prodigy Gold Incorporated (TSX
VENTURE:PDG) ("Prodigy ") are pleased to announce that they have entered into an
agreement (the "Arrangement Agreement") pursuant to which Argonaut Gold has
agreed to acquire all of the issued and outstanding common shares of Prodigy by
way of a Plan of Arrangement (the "Arrangement"). The combined entity will
benefit from the strong operating experience and cash flow of Argonaut Gold and
its ability to successfully advance Prodigy's Magino gold project, which has an
indicated resource of more than 6 million ounces (223 million tonnes at 0.87 g/t
using a cut-off grade of 0.35 g/t).
Pursuant to the terms of the Arrangement announced today, Prodigy shareholders
will receive 0.1042 of an Argonaut Gold share and C$0.00001 in cash per Prodigy
share, representing C$1.08 per share based on Argonaut Gold's 20-day
volume-weighted average price ("VWAP") and a premium of 54% based on both
companies' 20-day VWAPs as at October 12, 2012, the last trading day prior to
this announcement. The transaction values Prodigy's equity at approximately
C$341 million on a fully diluted in-the-money basis and implies an enterprise
value of approximately C$277 million.
Pro forma the transaction, Argonaut Gold will be owned approximately 78% by
current Argonaut Gold shareholders and 22% by current Prodigy shareholders
(based on fully diluted in-the-money shares outstanding). The terms of the
transaction have been unanimously approved by both companies' Boards of
Directors, with the commitment of votes from all directors and officers of
Prodigy, representing approximately 3.9% of Prodigy's shares, having been
secured.
Highlights of the Combined Entity:
-- Current production from two mines in Mexico and a strong pipeline of two
developments projects in Canada and Mexico, representing a diversified
asset portfolio in two premier jurisdictions for mine development and
operation
-- If both development projects are advanced to production, Argonaut Gold
is expected to enter the ranks of the intermediate producers and fulfill
its stated goal of 300,000 - 500,000 ounces of gold production per year
-- In excess of 12 million ounces of measured and indicated gold resource
including 1.2 million ounces of proven and probable gold reserve (fully
broken out by category and property as described below)
-- Strong balance sheet with no debt
-- Current and projected future cash flow generation expected to self-fund
future development, mitigating future financing risk
-- Strong management team and experienced Board of Directors with proven
development and operating track record
Pete Dougherty, President and CEO of Argonaut Gold said, "We are very pleased to
announce this transaction with Prodigy today. Magino is a highly attractive
asset which has shown continued resource growth, and which we believe will
provide a longer term production opportunity for Argonaut Gold shareholders. The
Magino resource provides substantial flexibility for maximizing value creation
using a higher grade cut-off. We believe the project can be "right-sized" for a
company like Argonaut Gold to deliver the best returns to our shareholders,
while providing further upside should the gold price maintain its strong
performance. This transaction is both highly attractive to Prodigy shareholders
as well as significantly accretive to Argonaut Gold shareholders on all key
financial and operational metrics."
Brian J. Maher, President and CEO of Prodigy said, "The transaction announcement
today is the culmination of the success we have had growing and advancing the
Magino project. We believe the price offered by Argonaut Gold is highly
attractive for our shareholders, and that in addition to the premium our
shareholders receive today, our shareholders now have the opportunity to
participate in a company that has current production exposure and can both
finance and develop Magino."
Transaction Benefits for Argonaut Gold Shareholders
-- Magino represents a significant scale asset in the Argonaut Gold
portfolio, and has the potential to allow Argonaut Gold to achieve or
exceed its stated goal of 300,000 - 500,000 ounces of gold production
-- Magino is a multi-million ounce deposit which provides tremendous grade
flexibility when considering development alternatives while pursuing the
highest returns for Argonaut Gold shareholders
-- Timeline for Magino development provides for continued growth beyond
Argonaut Gold's existing organic growth projects with anticipated start-
up well timed after San Antonio is targeted to start production
-- Provides geopolitical and asset diversification, and entry into another
of the world's most supportive mining jurisdictions
-- Fairness opinion received from the financial advisor to Argonaut Gold
indicating that the transaction is fair from a financial point of view
to Argonaut Gold
-- Transaction significantly accretive to all of Argonaut Gold's per share
metrics, including net asset value per share, resources per share,
longer term cash flow per share, and longer term production per share
-- In addition to Magino, Argonaut Gold will gain exposure to Prodigy's
portfolio of other exploration stage assets
Transaction Benefits for Prodigy Shareholders
-- Significant premium of 54% to Prodigy shareholders based on both
companies' 20-day VWAPs as at October 12, 2012
-- All-share transaction provides Prodigy shareholders with exposure to
current production and cash flow in a strong gold price environment and
continuing exposure to the advancement of Magino as well as Argonaut
Gold's existing organic growth profile
-- Substantially decreases the financing risk for the project
-- Leverages Argonaut Gold's highly experienced and successful management
team
-- Argonaut Gold's shares provide improved trading liquidity for Prodigy
shareholders
-- Fairness opinion received from Prodigy's financial advisor indicating
that the transaction is fair, from a financial point of view, to Prodigy
shareholders
Arrangement Agreement Summary
The Arrangement includes, among other things, certain standard conditions
including receipt of approval of the shareholders of Prodigy and Argonaut Gold
by the affirmative vote of no less than 66 2/3% and 50.1% of the shares voted,
respectively, and receipt of court and stock exchange approvals. Special
shareholder meetings for each company to vote on the transaction are expected to
be held in December, 2012 with closing expected shortly thereafter.
The Arrangement Agreement is subject to customary non-solicitation provisions,
subject to Prodigy's right to consider and accept superior proposals. In the
event of a superior proposal, Argonaut Gold will have a five business day right
to match the superior proposal. If the Arrangement is not completed as a result
of a superior proposal or in other certain specified circumstances, a
termination fee equal to C$10.25 million will be paid to Argonaut Gold. The
Arrangement Agreement also provides for reciprocal expense reimbursement under
certain specific circumstances. After closing of the transaction, Prodigy will
have the right to appoint one Director to the Argonaut Gold Board of Directors.
The terms and conditions of the Arrangement will be disclosed in more detail in
the management information circulars which will be filed and mailed to Argonaut
Gold and Prodigy shareholders in November 2012.
Advisors and Legal Counsel
BMO Capital Markets is acting as financial advisor and Fraser Milner Casgrain
LLP is acting as legal counsel to Argonaut Gold and its Board of Directors. BMO
Capital Markets has provided an opinion that, based upon and subject to the
assumptions, limitations, and qualifications in such opinion, the consideration
to be received by Prodigy's shareholders is fair, from a financial point of
view, to Argonaut Gold.
National Bank Financial Inc. is acting as financial advisor and DuMoulin Black
LLP is acting as legal counsel to Prodigy. National Bank Financial Inc. has
provided an opinion that, based upon and subject to the assumptions,
limitations, and qualifications in such opinion, the consideration to be
received by Prodigy's shareholders is fair, from a financial point of view, to
Prodigy shareholders.
Conference Call Details
Argonaut Gold and Prodigy will host a conference call to investors and analysts
to discuss the transaction on October 15, 2012 at 9:00 a.m. EDT (6:00 a.m. PDT).
You will be able to participate in this call using the following details:
Conference Call Information:
Toll Free (North America) 1-877-440-9795
Toronto Local and International 1-416-340-8527
Webcast http://www.gowebcasting.com/3937
Conference Call Replay:
Toll Free Replay Call (North America) 1-800-408-3053
Replay Call 1-905-694-9451
Passcode 3150074
The conference call replay will be available from 12:00 p.m. ET on October 15,
2012 until October 29, 2012. The webcast archive will be available from 11:00
a.m. ET on October 15, 2012 for one year.
About Argonaut Gold
Argonaut Gold is a Canadian gold company engaged in exploration, mine
development and production activities. Its primary assets are the
production-stage El Castillo Mine in the State of Durango, Mexico, the La
Colorada Mine in the State of Sonora, Mexico, the advanced exploration stage San
Antonio project in the State of Baja California Sur, Mexico, and several
exploration stage projects, all of which are located in Mexico.
Creating Value Beyond Gold
Argonaut Gold Technical Information
----------------------------------------------------------------------------
Resource Tonnes Au Ounces Ag Ounces
Category Grade Grade
(g/t) (g/t)
----------------------------------------------------------------------------
Mineral
Reserves
----------------------------------------------------------------------------
Castillo -
Oxide Proven 84,470,000 0.36 994,000
----------------------------------------------------------------------------
Castillo -
Transition Proven 19,180,000 0.37 228,000
----------------------------------------------------------------------------
Sub Total
Proven -
Oxide &
Transition 104,650,000 0.36 1,222,000
----------------------------------------------------------------------------
Castillo -
Oxide Probable 772,000 0.33 8,000
----------------------------------------------------------------------------
Castillo -
Transition Probable 73,000 0.35 1,000
----------------------------------------------------------------------------
Sub Total
Probable -
Oxide &
Transition 844,000 0.33 9,000
----------------------------------------------------------------------------
Total Proven
and Probable
Reserves 105,495,000 0.36 1,231,000
----------------------------------------------------------------------------
Measured and
Indicated
Mineral
Resources
(Including
P&P
Reserves)
---------------------------------------------------------------
----------------------------------------------------------------------------
Castillo -
Oxide in Pit Measured 114,300,000 0.293 1,220,100
----------------------------------------------------------------------------
Castillo -
Oxide in Pit Indicated 4,900,000 0.293 45,700
----------------------------------------------------------------------------
Castillo -
Oxide in Pit M&I 119,200,000 0.331 1,268,000
----------------------------------------------------------------------------
Castillo -
Transition
in Pit Measured 44,600,000 0.295 423,200
----------------------------------------------------------------------------
Castillo -
Transition
in Pit Indicated 1,900,000 0.278 17,100
----------------------------------------------------------------------------
Castillo -
Transition
in Pit M&I 46,500,000 0.294 439,900
----------------------------------------------------------------------------
Total
Castillo
Oxide and
Transition
in Pit Measured 158,900,000 0.322 1,645,300
----------------------------------------------------------------------------
Total
Castillo
Oxide and
Transition
in Pit Indicated 6,800,000 0.289 62,900
----------------------------------------------------------------------------
Total
Castillo
Oxide and
Transition
in Pit M&I 165,700,000 0.32 1,704,700
----------------------------------------------------------------------------
Castillo
Sulphide
(Global) Measured 70,600 0.328 744,800
----------------------------------------------------------------------------
Castillo
Sulphide
(Global) Indicated 91,200 0.272 797,500
----------------------------------------------------------------------------
Total
Castillo
Sulphide
(Global) M&I 161,800,000 0.296 1,540,000
----------------------------------------------------------------------------
San Antonio,
Las Colinas
- Oxide &
Transition Indicated 1,910,000 0.62 38,000
----------------------------------------------------------------------------
San Antonio,
Las Colinas
- Sulphide Indicated 8,103 0.69 179,000
----------------------------------------------------------------------------
San Antonio,
Los Planes -
Oxide &
Transition Measured 12,351,000 0.76 303,000
----------------------------------------------------------------------------
San Antonio,
Los Planes -
Oxide &
Transition Indicated 8,408,000 0.67 181,000
----------------------------------------------------------------------------
San Antonio,
Los Planes -
Sulphide Measured 6,649,000 1.17 250
----------------------------------------------------------------------------
San Antonio,
Los Planes -
Sulphide Indicated 22,065,000 0.92 653,000
----------------------------------------------------------------------------
San Antonio,
Intermediate
- Oxide &
Transition Indicated 643,000 0.39 8,000
----------------------------------------------------------------------------
San Antonio,
Intermediate
- Sulphide Indicated 4,961,000 0.77 123,000
----------------------------------------------------------------------------
All San
Antonio
Deposits -
Oxide &
Transition M&I 23,312,000 0.71 530,000
----------------------------------------------------------------------------
All San
Antonio
Deposits -
Sulphide M&I 41,778,000 0.90 1,205,000
----------------------------------------------------------------------------
Total San
Antonio
Deposits -
Oxide /
Transition /
Sulphide M&I 65,089,000 0.83 1,735,000
----------------------------------------------------------------------------
La Colorada,
Gran Central
- La
Colorada Indicated 29,915,053 0.724 696,336 5.1 4,905,135
----------------------------------------------------------------------------
La Colorada,
Gran Central
- La
Colorada Inferred 2,500,000 1.204 95,149 8.4 661,000
----------------------------------------------------------------------------
La Colorada,
El Creston
Deposit Indicated 14,438,662 0.618 286,658 12.1 5,635,385
----------------------------------------------------------------------------
La Colorada,
El Creston
Deposit Inferred 2,199,713 0.88 62,703 13.3 943,734
----------------------------------------------------------------------------
La Colorada,
Veta Madre Indicated 2,900,000 0.491 46,261 3.3 307,155
----------------------------------------------------------------------------
La Colorada,
Veta Madre Inferred 8,799 0.665 200 2.4 700
----------------------------------------------------------------------------
La Colorada,
ROM Pad Indicated 2,700,000 0.429 38,000 36.5 3,200,000
----------------------------------------------------------------------------
Total La
Colorada
Deposits M&I 50,000,000 0.664 1,067,255 8.7 14,047,675
----------------------------------------------------------------------------
La Fortuna Measured 1,538,000 2.956
----------------------------------------------------------------------------
La Fortuna Indicated 3,287,000 1.533
----------------------------------------------------------------------------
Total La
Fortuna M&I 4,800,000 1.98 308,000
----------------------------------------------------------------------------
Inferred
Mineral
Resources
----------------------------------------------------------------------------
San Antonio Inferred 6,215,000 0.34 67,000
----------------------------------------------------------------------------
La Colorada Inferred 4,700,000 1.04 158,000 10.6 1,605,000
----------------------------------------------------------------------------
Total
Inferred
Resources 10,915,000 225,000 1,605,000
----------------------------------------------------------------------------
Total
Measured and
Indicated
Resources 447,389,000 6,354,955 14,047,675
----------------------------------------------------------------------------
The technical information contained in this document regarding Argonaut Gold has
been prepared under supervision of, and reviewed and approved by Mr. Thomas H.
Burkhart, Argonaut Gold's Vice President of Exploration, and a qualified person
as defined by National Instrument 43-101 ("NI 43-101"). For further information
on Argonaut Gold's properties please see the reports as listed below on Argonaut
Gold's website or on www.sedar.com:
----------------------------------------------------------------------------
El Castillo NI 43-101 Technical Report on Resources and Reserves, Argonaut
Mine Gold Inc., El Castillo Mine, Durango State, Mexico dated
November 6, 2010
----------------------------------------------------------------------------
La Colorada NI 43-101 Preliminary Economic Assessment La Colorada Project,
Property Sonora, Mexico dated December 30, 2011
----------------------------------------------------------------------------
San Antonio Technical Report and Mineral Resource Estimate on the San
Gold Project Antonio Gold Project, Baja California Sur, Mexico dated June
30, 2011
----------------------------------------------------------------------------
La Fortuna La Fortuna, Durango, Mexico, Technical Report dated October
Property 21, 2008
----------------------------------------------------------------------------
(Argonaut Gold will shortly be filing its previously announced updated
preliminary economic assessment in relation to its San Antonio Gold
Project.)
The preliminary economic assessment is preliminary in nature, includes inferred
mineral resources that are considered too speculative geologically to have the
economic considerations applied to them that would enable them to be categorizes
as mineral reserves, and that there is no certainty that the preliminary
economic assessment will be realized.
Mineral resources are not mineral reserves and do not have demonstrated economic
viability. There is no certainty that all or any part of the mineral resource
will be converted into mineral reserves.
About Prodigy
Prodigy is currently evaluating the development of the Magino mine gold project
in Ontario as an open-pit mining opportunity with the potential for deeper,
higher grade gold production. The Magino project contains Indicated gold
resources of 6,250,990 ounces grading 0.87 g/t gold (223.5 million tonnes), and
355,190 ounces of Inferred gold resources grading 0.80 g/t gold (13.8 million
tonnes) at a cut-off grade of 0.35 g/t gold. For more information please refer
to the "Technical Report on the Magino Property, Wawa, Ontario dated October 4,
2012 available on SEDAR or Prodigy's website.
Mineral resources are not mineral reserves and do not have demonstrated economic
viability. There is no certainty that all or any part of the mineral resource
will be converted into mineral reserves.
The technical information contained in this document regarding Prodigy has been
prepared under supervision of, and reviewed and approved by Tom Pollock, P.Geo.,
Prodigy Gold's Vice President - Exploration, who is a qualified person under the
definitions established by NI 43-101.
Forward-Looking Statements
This press release contains certain "forward-looking statements" and
"forward-looking information" under applicable Canadian securities laws
concerning the proposed transaction and the business, operations and financial
performance and condition of each of Argonaut Gold Inc. ("Argonaut Gold") and
Prodigy Gold Incorporated ("Prodigy"). Forward-looking statements and
forward-looking information include, but are not limited to, statements with
respect to the Arrangement, development and estimated production and mine life
of the various mineral projects of Argonaut Gold and Prodigy; synergies and
financial impact of the Arrangement; the benefits of the development potential
of the properties of Argonaut Gold and Prodigy; the future price of gold,
copper, and silver; the estimation of mineral reserves and resources; the
realization of mineral reserve estimates; the timing and amount of estimated
future production; costs of production; success of exploration activities; and
currency exchange rate fluctuations. Except for statements of historical fact
relating to Argonaut Gold and Prodigy, certain information contained herein
constitutes forward-looking statements. Forward-looking statements are
frequently characterized by words such as "plan," "expect," "project," "intend,"
"believe," "anticipate", "estimate" and other similar words, or statements that
certain events or conditions "may" or "will" occur. Forward-looking statements
are based on the opinions and estimates of management at the date the statements
are made, and are based on a number of assumptions and subject to a variety of
risks and uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the forward-looking
statements. Assumptions upon which such forward-looking statements are based
include that all required third party, court, regulatory and governmental
approvals to the Arrangement will be obtained and all other conditions to
completion of the transaction will be satisfied or waived, that actual results
of exploration activities will be as expected, that proposed mine plans and
recoveries will be achieved, that capital costs and sustaining costs will be as
estimated, that the assumptions underlying mineral resource estimates are valid,
that Argonaut Gold and Prodigy will not experience unforeseen accident, fire,
ground instability, flooding, labor disruption, equipment failure, or adverse
metallurgical or environmental events, and that supplies, equipment, personnel,
permits and other approvals required to conduct planned activities will be
available on reasonable terms. Many of these assumptions are based on factors
and events that are not within the control of Argonaut Gold or Prodigy and there
is no assurance they will prove to be correct.
Factors that could cause actual results to vary materially from results
anticipated by such forward-looking statements include non-completion of the
Arrangement, changes in market conditions, variations in ore grade or recovery
rates, risks relating to international operations, fluctuating metal prices and
currency exchange rates, changes in project parameters, the possibility of
project cost overruns or unanticipated costs and expenses, labour disputes and
other risks of the mining industry, failure of plant, equipment or processes to
operate as anticipated. Although Argonaut Gold and Prodigy have each attempted
to identify important factors that could cause actual actions, events or results
to differ materially from those described in forward-looking statements, there
may be other factors that cause actions, events or results not to be
anticipated, estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such statements.
Argonaut Gold and Prodigy undertake no obligation to update forward-looking
statements if circumstances or management's estimates or opinions should change
except as required by applicable securities laws. The reader is cautioned not to
place undue reliance on forward-looking statements. Statements concerning
mineral reserve and resource estimates may also be deemed to constitute
forward-looking statements to the extent they involve estimates of the
mineralization that will be encountered if the property is developed.
Comparative market information is as of a date prior to the date of this
document.
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