Tahoe Resources Inc. [THO-TSX; TAHO-NYSE] and Lake Shore Gold Corp. [LSG-TSX] signed a definitive agreement under which Tahoe will acquire all of the issued and outstanding shares of Lake Shore Gold. Pursuant to the agreement, all issued and outstanding common shares of Lake Shore Gold will be exchanged at the rate of 0.1467 common shares of Tahoe for each common share of Lake Shore Gold. Upon completion of the transaction, existing shareholders of Tahoe and Lake Shore Gold will own approximately 74% and 26% of the company pro forma, respectively, on a fully diluted in-the-money basis.
The exchange ratio involves consideration of C $ 1.71 per Lake Shore Gold common share, based on the closing price of Tahoe common shares on the TSX on February 5, 2016, representing a premium of 14.8% relative to Lake Shore Gold’s closing price on February 5. , 2016 and a 28.6% premium on the closing Lake Shore Gold share on February 4, 2016.
Based on each company’s 20-day volume weighted average price on the Toronto Stock Exchange, the exchange ratio involves a 25.7% and 30.4% premium over Lake Shore common stock. Gold for the periods ending February 5, 2016 and February 4, 2016, respectively. The implied equity value (assuming the conversion of convertible debentures in-the-money) is C $ 945 million.
Lake Shore Gold operates the low-cost Timmins West and Bell Creek mines in Timmins, Ontario. With the world-class Tahoe Escobal mine in Guatemala and its low-cost La Arena and Shahuindo mines in Peru, the combined company is firmly established as America’s leading producer of precious metals. With a diverse range of low-cost, high-promise assets and a quality pipeline of new development opportunities, Tahoe is well positioned to maintain and grow its production base. In addition, with zero net debt, industry-leading operating margins and moderate capital requirements, the combined company will continue to generate significant free cash flow. Therefore, after completion of the transaction, Tahoe intends to continue paying a dividend of US $ 0.02 per share per month.
Kevin McArthur, Executive Chairman of Tahoe, said: “The combination with Lake Shore Gold strengthens Tahoe’s position as a new leader in precious metals by adding another low-cost operation in Timmins, one of the world’s most successful gold camps. prolific in the world. We are impressed with the long term presence and see huge regional opportunities going forward. We look forward to continuing the strong relationships Lake Shore Gold has fostered in Timmins with local stakeholders. Finally, I am very pleased to welcome Alan Moon, the current President of Lake Shore Gold, to our Board of Directors following the transaction, as well as Tony Makuch, the current CEO of Lake Shore Gold. , within Tahoe’s management team as President of Canadian Operations.
Tony Makuch, President and CEO of Lake Shore Gold, said: “The combination with Tahoe represents a unique opportunity for our shareholders to gain exposure to a high quality portfolio of long-life producing mines with mineral reserves. substantial. Today’s announcement of an initial resource at our 144 Gap deposit is a perfect example of the long-term growth potential of our Timmins portfolio. Tahoe’s strong balance sheet and superior cash-generating capabilities will provide Lake Shore Gold with the financial resources to unlock the enormous growth potential of our asset base.