Silverstone Resources Corp. ("Silverstone") (TSX VENTURE: SST) and
Silver Wheaton Corp. ("Silver Wheaton") (TSX: SLW)(NYSE: SLW) today
announced that they have entered into a definitive agreement
pursuant to which Silver Wheaton will acquire by way of a plan of
arrangement all of the outstanding common shares of Silverstone in
exchange for 0.185 common shares of Silver Wheaton for each common
share of Silverstone.
Based on the 20-day volume-weighted average of Silver Wheaton's
common shares of C$8.58, the transaction value per Silverstone
common share is C$1.59, and the total transaction value is
approximately C$206 million. This represents a premium of 40% based
on the 20-day volume-weighted average of both companies' common
shares on the TSX for Silver Wheaton and the TSX Venture for
Silverstone. Silverstone's board of directors and officers along
with Capstone Mining Corp. ("Capstone"), its largest shareholder
(representing an aggregate of 30.5 million shares (24%) of
Silverstone, fully diluted), have entered into support agreements
in respect of the transaction. Based on a recommendation from a
special committee of independent directors of Silverstone (the
"Special Committee") the unconflicted members of Silverstone's
board of directors have unanimously supported the transaction and
recommend the shareholders of Silverstone vote their shares in
favour of the offer.
Highlights of the Transaction
- Immediate premium for Silverstone shareholders
- Silverstone shareholders to have an ownership stake in the
largest silver streaming company in the world
- Exposure to Silver Wheaton's organic silver sales growth
profile with long life, low cost and high quality mines all located
in politically stable jurisdictions, including Goldcorp's
world-class Penasquito mine in Mexico which is now in production
and is expected to be Silver Wheaton's growth engine for years to
come
- Significantly increased diversification by geography,
counterparty and primary metal
- Silverstone shareholders to participate in Silver Wheaton's
continued growth and potential re-rate of Silver Wheaton's
valuation
- Significantly enhanced trading liquidity on both the Toronto
and New York Stock Exchange
"Silverstone welcomes this acquisition by Silver Wheaton as we
believe this transaction benefits Silverstone shareholders,
allowing them to participate in a larger, more diversified silver
stream company with access to greater amounts of capital and
liquidity. As a result of this transaction, Silverstone
shareholders through the combined Company, will benefit from Silver
Wheaton's growth profile including Goldcorp's world class
Penasquito mine and unique position as the largest silver stream
company in the world," said Darren Pylot, President and Chief
Executive Officer of Silverstone.
Transaction
The transaction will be carried out by way of statutory plan of
arrangement whereby Silver Wheaton will acquire all of the issued
and outstanding shares of Silverstone, and Silverstone will become
a wholly-owned subsidiary of Silver Wheaton. Full details of the
offer will be included in the Management Information Circular to be
filed with the regulatory authorities and mailed to Silverstone
shareholders in accordance with applicable securities laws.
Under the transaction, Silver Wheaton will acquire all of the
issued and outstanding shares of Silverstone in consideration for
the issue of Silver Wheaton shares on the basis of 0.185 of a
Silver Wheaton share for each Silverstone share. The number of
Silver Wheaton shares received upon exercise, and the exercise
price, of Silverstone's outstanding options and warrants, will be
adjusted proportionately to reflect the share exchange ratio. On a
pro forma fully diluted basis Silver Wheaton will be held by
approximately 93% of existing Silver Wheaton shareholders and 7% by
existing Silverstone shareholders. The total number of Silver
Wheaton common shares outstanding will be approximately 310
million, on a pro forma basis.
Capstone and directors and officers of Silverstone, holding an
aggregate of 24% of the outstanding shares of Silverstone (fully
diluted, including special warrants), have agreed to support and
vote in favour of the transaction.
The definitive agreement entered into in connection with the
transaction includes a commitment by Silverstone not to solicit
alternative transactions to the proposed transaction. If the
acquisition agreement is terminated in certain circumstances,
Silverstone has agreed to pay Silver Wheaton a termination fee of
C$6 million. Each party has also been provided with certain other
rights, representations and warranties and covenants customary for
a transaction of this nature and Silver Wheaton has the right to
match competing offers made to Silverstone.
Advisors
Silverstone's financial advisor is Canaccord Adams and its legal
counsel is Blake, Cassels & Graydon LLP. Silver Wheaton's
financial advisor is Genuity Capital Markets and its legal counsel
is Cassels Brock & Blackwell LLP.
Fairness Opinion
The board of directors of Silverstone and the Special Committee
have received a fairness opinion from Scotia Capital Inc. in
respect of the transaction and are recommending Silverstone
shareholders vote in favour of the transaction. Silverstone expects
to mail the Management Information Circular in April 2009. The
transaction is subject to the approval of not less than 66 2/3% of
the shares of Silverstone voted with respect to the transaction at
a meeting of Silverstone shareholders and certain customary
conditions, including receipt of all necessary court and regulatory
approvals and third party consents. The transaction is expected to
close by the end of May 2009.
About Silver Wheaton
Silver Wheaton is the largest public company with 100% of its
operating revenue from silver production. Silver Wheaton expects,
based upon its current agreements, to have annual silver sales of
15 to 17 million ounces in 2009, increasing to approximately 30
million ounces in 2013, without any capital expenditures being
required to generate that growth.
Silver Wheaton has nine long term agreements to purchase silver
production from low-cost, well-managed and high-quality mining
operations, all located in politically safe jurisdictions. In 2008,
greater than 85% of silver sales were generated from its three core
assets - the Luismin, Yauliyacu and Zinkgruvan mines. Each of these
mines is a low-cost producer, has been in continuous production for
over 100 years and has survived through numerous commodity cycles.
Silver Wheaton's core asset base of silver from high quality mines
continues to grow with Goldcorp Inc.'s ("Goldcorp") Penasquito
mine. Soon to be Mexico's largest open pit mine, Penasquito
commenced production in 2008 and is expected to be Silver Wheaton's
growth engine for many years to come.
Luismin Mines
The Luismin mines consist of the San Dimas, Los Filos and San
Martin mines with the San Dimas mine, owned and operated by
Goldcorp, being the most significant of the three. San Dimas has
been in continuous operation for over 100 years and is a low cost
producer of gold and silver. The San Dimas gold-silver deposit is
one of the most significant precious metal deposits in Mexico with
historical production from the San Dimas district estimated at 655
million ounces of silver and 9.33 million ounces of gold, affirming
it as a world class epithermal mining province. Silver sales from
the Luismin mines are forecast to be 5.7 to 6.2 million ounces in
2009 and the potential exists to significantly increase future
silver production at the San Dimas mine as the mill has the
capacity to increase throughput by more than 50% over 2008
levels.
Yauliyacu Mine
Yauliyacu is a low-cost zinc/lead/silver mine located in Peru,
owned and operated by Glencore International, a private company and
one of the largest base metals traders in the world. The mine has
been in continuous production for more than 100 years and has the
ability to transition between high and low grade ore, giving them
an enormous competitive advantage in an environment of low base
metals prices. In 2009, higher grade zinc and lead ore is expected
to be processed, which should result in an increase in silver
deliveries to Silver Wheaton. Silver sales from the Yauliyacu mine
are forecast to be 2.9 to 3.5 million ounces in 2009.
Zinkgruvan Mine
The Zinkgruvan mine is owned and operated by Lundin Mining
Corporation and is located in Sweden. This zinc/lead/silver mine is
in the lowest cost quartile in its industry and has been in
continuous production for more than 150 years. Infrastructure
improvements in 2008 should increase 2009 production levels by
approximately 10% with a further increase expected in 2010 once a
new copper orebody is brought into production. Silver sales from
the Zinkgruvan mine are forecast to be 1.8 to 2.1 million ounces in
2009.
Penasquito Mine
The Penasquito mine, owned and operated by Goldcorp, is soon to
be Mexico's largest open pit polymetallic mine, and Silver
Wheaton's engine of growth. The heap leach operation began
producing silver in mid-2008 and the mill is forecast to begin
production in mid- 2009. In April 2007, Silver Wheaton agreed to
purchase 25% of all the silver produced from the mine, over its
entire life. Since completion of the agreement, silver reserves
have increased 82%, and attributable silver production to Silver
Wheaton's shareholders has increased 52% or 48 million ounces of
silver, with additional increases anticipated in the near future.
This does not take into account the vast underground potential,
only just beginning to be fully recognized, and very likely to
result in significant additional silver production in the years
ahead. Once at full production capacity, Silver Wheaton is forecast
to receive average annual silver deliveries of approximately 8
million ounces from the Penasquito mine.
Other Assets
Silver Wheaton has several other high quality and long term
silver stream agreements, each offering significant upside
potential. These include European Goldfield's Stratoni Mine in
Greece, Farallon Resources Ltd.'s Campo Morado mine in Mexico,
Mercator Minerals Ltd.'s Mineral Park mine in the United States,
Alexco Resource Corp.'s Keno Hill project in Canada, and Aurcana
Corporation's La Negra mine in Mexico.
2009 and Five Year Silver Sales Forecast
Silver Wheaton estimates, based upon its current agreements, to
have annual silver sales of 15 to 17 million ounces in 2009,
increasing to approximately 30 million ounces by 2013. Mine-by-
mine forecast 2009 silver sales are as follows:
----------------------------------------------------------
2009 Silver Sales Forecast
Mine ('000 ozs)
----------------------------------------------------------
Luismin(i) 5,700 - 6,200
----------------------------------------------------------
Yauliyacu 2,900 - 3,500
----------------------------------------------------------
Zinkgruvan 1,800 - 2,100
----------------------------------------------------------
Stratoni 1,600 - 1,700
----------------------------------------------------------
Penasquito - heap leach 800 - 1,000
----------------------------------------------------------
- mill 600 - 700
----------------------------------------------------------
Campo Morado, Mineral
Park, La Negra 1,600 - 1,800
----------------------------------------------------------
Total 15,000 - 17,000
----------------------------------------------------------
(i) includes the San Dimas, Los Filos and San Martin mines
As several mines continue to ramp up production throughout 2009,
silver sales are anticipated to be more heavily weighted towards
the second half of the year. Silver sales are forecast to be
approximately 3 million ounces in the first quarter of 2009.
About Silverstone
Silverstone's core assets consist of agreements to purchase
silver and gold from Capstone's Minto mine in Canada and silver
from its Cozamin mine in Mexico, as well silver from Lundin Mining
Corporation's ("Lundin Mining") Neves-Corvo mine in Portugal.
Minto Mine
Capstone owns the high grade Minto copper-gold-silver mine in
Yukon, Canada, which was built on budget and ahead of schedule in
2007. The Minto mine is one of the highest-grade open pit copper
mines in the world, and is a low cost producer. Since commencing
production in 2007, the Minto mine has undergone two successful
expansions, more than doubling production levels. With a
significant growth in resources since 2007, Capstone plans to
complete a pre-feasibility study by the end of 2009 targeting an
additional mill expansion of approximately 50%. The Minto mine is
forecast to produce approximately 290,000 ounces of silver and
31,000 ounces of gold in 2009.
Silverstone has the right to purchase all of the silver and gold
production from the Minto mine for the lesser of US$3.90 per ounce
of silver and US$300 per ounce of gold (subject to an annual 1%
inflationary adjustment after 3 years) or the prevailing market
price per ounce of silver or gold delivered. If production from the
Minto mine exceeds 50,000 ounces of gold per year in the first two
years of the agreement, or 30,000 ounces of gold per year
thereafter, Silverstone is entitled to purchase only 50% of the
amount in excess of those thresholds.
Cozamin Mine
Capstone owns the high grade, low-cost, underground Cozamin
copper- silver-lead-zinc mine located in Zacatecas State, Mexico.
The mine has undergone two expansions since its commissioning in
2006, tripling production levels. Exploration success has led to
significant resource increases over the last few years and
excellent potential exists to continue this expansion. Cozamin is
forecast to produce approximately 1.5 million ounces of silver in
2009.
Silverstone has the right to purchase 100% of the silver
production from the Cozamin mine until 2017 for the lesser of
US$4.00 per ounce of silver (subject to an annual 1% inflationary
adjustment after 3 years) or the prevailing market price per ounce
of silver delivered.
Neves-Corvo Mine
Lundin Mining owns the high grade underground Neves-Corvo
copper- zinc-silver mine located in Portugal, which has been in
continuous production since 1989. The copper mill has a throughput
capacity of 2.2 million tonnes per annum and Lundin Mining has
recently converted the smaller zinc circuit to handle additional
copper ores. Neves-Corvo is forecast to produce approximately
500,000 ounces of silver in 2009.
Silverstone has the right to purchase 100% of the life of mine
silver production from the Neves-Corvo mine for the lesser of
US$3.90 per ounce of silver (subject to an annual 1% inflationary
adjustment after 3 years) or the prevailing market price per ounce
of silver delivered.
Other Assets
Silverstone also owns other assets which offer long-term growth
potential. Adjacent to the Neves-Corvo copper deposits is the
world-class Lombador zinc-lead-silver deposit, which Lundin Mining
is currently advancing to a feasibility study, with a goal of
commencing production in 2012. This would lead to increased silver
production from the Neves-Corvo mine. Also located in Portugal,
Silverstone has a silver stream agreement with MTO Holdings' zinc-
lead-silver Aljustrel mine, which is currently under care and
maintenance until base metal prices improve.
Silverstone holds a convertible debenture with Aquiline
Resources, convertible into an agreement to purchase 12.5% of the
life of mine silver production from a portion of the Navidad
project in Argentina. In addition, Silverstone holds a right of
first refusal to purchase any silver or gold streams from
Capstone's high-grade Kutcho copper-zinc project in Canada, which
is advancing towards production.
Conference Call
Silverstone will host a conference call on Thursday March 12,
2009 at 9:00am PST (12:00pm EST) to discuss this transaction. The
conference call may be accessed by dialing 1.866.365.1119 in North
America or 1.416.849.7329 internationally. Please ask for the
Silverstone Resources Corp. conference call. The conference call
will be archived for later playback until March 19, 2009 and can be
accessed by dialing 1.866.501.5559 and the passcode is
21301063#.
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
This news release contains "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and applicable Canadian securities legislation.
Forward-looking statements include, but are not limited to,
statements with respect to the future price of 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, reserve determination and
reserve conversion rates. Generally, these forward-looking
statements can be identified by the use of forward-looking
terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases or state that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved".
Assumptions upon which such forward looking statements are based
include that Silver Wheaton and Silverstone will be able to satisfy
the conditions in the definitive agreement, that the 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 Silver Wheaton and
Silverstone, that all third party regulatory and governmental
approvals to the transactions will be obtained and all other
conditions to completion of the transaction will be satisfied or
waived. Many of these assumptions are based on factors and events
that are not within the control of Silver Wheaton and Silverstone
and there is no assurance they will prove to be correct.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of Silver Wheaton
and Silverstone to be materially different from those expressed or
implied by such forward-looking statements, including but not
limited to: risks related to the integration of acquisitions, the
absence of control over mining operations from which Silver Wheaton
and Silverstone purchase silver and gold and risks related to these
mining operations, including risks related to international
operations, actual results of current exploration activities,
actual results of current reclamation activities, conclusions of
economic evaluations, changes in project parameters as plans
continue to be refined, as well as those factors discussed in the
section entitled "Description of the Business - Risk Factors" in
Silver Wheaton's annual information form for the year ended
December 31, 2007 incorporated by reference into Silver Wheaton's
Form 40-F on file with the U.S. Securities and Exchange Commission
in Washington, D.C. and although Silver Wheaton and Silverstone
have attempted to identify important factors that could cause
actual results to differ materially from those contained in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward- looking statements. Silver Wheaton
and Silverstone do not undertake to update any forward-looking
statements that are incorporated by reference herein, except in
accordance with applicable securities laws.
Contacts: Silverstone Resources Corp. Chris Tomanik Investor
Relations 1-866-684-8894 Email: ctomanik@silverstonecorp.com
Silverstone Resources Corp. Mark Patchett Investor Relations
1-866-684-8894 Email: mpatchett@silverstonecorp.com Website:
www.silverstonecorp.com.com
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