The transaction was announced today. Lake Shore Gold operates the low-cost Timmins West and Bell Creek mines in Timmins
PRESS RELEASE (ABRIDGED)
SHORE LAKE GOLD SOCIETY
Under the terms of the Arrangement Agreement, all
Upon closing of the transaction, Tahoe and
The exchange ratio involves taking into account
Based on each company’s 20-day volume-weighted average price on the Toronto Stock Exchange, the exchange ratio implies a premium of 25.7% and 30.4% for
The implied equity value (assuming in-the-money conversion of convertible debentures) is equal to
With Tahoe’s world-class Escobal Mine in
With a diverse suite of low-cost, high-potential assets and a quality pipeline of new development opportunities, Tahoe is well positioned to maintain and grow its production base.
Additionally, with zero net debt, industry-leading operating margins and moderate capital requirements, the combined company will continue to generate strong free cash flow.
Accordingly, following completion of the Transaction, Tahoe intends to continue to pay a dividend of
The main investments of the pro forma company include:
- A leader
Americasbased precious metals producer: the combined company will have a strong diversified production platform anchored by the Escobal mine, one of the largest and richest silver mines in the world, and growth operations at low cost in Peruand Ontario.
- Significant Production at Low Cost: 2016 production forecast of 18 to 21 million ounces (moz) of silver at total cash costs of
US$7.50-US$8.50/oz and all-in sustaining costs (AISC) of we $10.00-US$11.00/oz and 370,000 to 430,000 ounces of gold for total cash costs of we $675-US$725/oz and AISC of US$950-US$1,000/oz. All businesses generate free cash flow in the current commodity price environment.
- Low-risk growth: Growth will be driven by the expansion of Shahuindo to 36,000 tpd and the advancement of a number of growth initiatives at Timmins, including the ramp-up of the 144 Gap field, extending the
Bell Creekdeep mining and the potential for open pit mining at the Whitney project.
- Exciting exploration potential: over 3.4 moz of M&I gold resources and 6 moz of inferred gold resources in 8 exploration projects in
Peruand Canadawith strong near-mine potential to add additional gold resources. Large sets of unexplored land in all regions.
- Strong balance sheet and superior financial performance: Zero net debt, modest capital requirements and strong free cash flow generation from operations provide industry-leading financial strength and flexibility.
Tahoe Shareholder Benefits
- Establishes a significant presence in
Canadawith well-established, low-cost operations, and a talented and focused management team.
- Improved high-margin gold production with organic growth opportunities.
- Strengthens Tahoe’s ability to generate strong free cash flow per share.
- Addition of significant exploration potential to existing operations as well as attractive targets near established and well-constructed mining and milling infrastructure.
- Positions Tahoe to evaluate further consolidation opportunities in
Benefits for Lake Shore Gold shareholders
- Immediate initial premium while maintaining a significant equity stake.
- Superior financial strength and flexibility to support the progress of Timmins projects.
- Pro forma exposure to a large, long-lived reserve base from Tahoe’s world-class Escobal mine and growing low-cost platform in
- Develops operational capabilities, adding proven expertise in surface mining.
- Access to an attractive dividend policy.
- Increased trading liquidity, improved value proposition and capital markets profile.
The Arrangement Agreement has been unanimously approved by the Boards of Directors of Tahoe and
summary of transactions
The proposed business combination will be effected by way of a plan of arrangement made under the Canada Business Corporations Act.
The transaction will require the approval of 66 2/3 percent of the votes cast by shareholders of
The issuance of Tahoe common stock in connection with the transaction will require the approval of a simple majority of Tahoe shareholders voting at a special meeting.
Officers and directors of
In addition to 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.
The Arrangement Agreement contains customary provisions, including non-solicitation provisions, a right to match any Superior Proposal and a
A change of control offer will be made for
Within 30 days following the effective date of the Arrangement Agreement, holders of Debentures will receive a notice (the “Debenture Change of Control Notice”) indicating that a change of control was made together with an offer to purchase the Debentures at 100% of the principal amount together with accrued and unpaid interest on the date that is 30 business days after the delivery of the notice of change of control of the Debentures. As part of the arrangement agreement,
Full details of the transaction will be included in Tahoe’s management information circulars and
It is expected that shareholder meetings and the closing of the transaction will take place at the beginning
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