Under the terms of the Arrangement, each Cerro shareholder will receive 0.023 of a Primero common share (the “Exchange Ratio”) for each Cerro common share held (the “Share Consideration”). Additionally Cerro shareholders will receive 80.01% of the common shares of a newly incorporated company (“Spinco”). Spinco will assume Cerro’s interests in the
Excluding the value of the Spinco exploration assets, the offer represents an implied 62% premium to Cerro’s 20-day volume weighted average price (“VWAP”) and a 77% premium to the spot closing price at
“For the past two years, Primero has been focused on organic growth at
“Cerro management has recognized the investment market’s prevailing preference to see new precious metals operations funded out of existing cash flows. By undertaking this transaction, Cerro shareholders will benefit from Primero’s balance sheet and cash flow, enabling the Cerro Del Gallo project to be constructed without external financing. Importantly, this should enable returns from an operationalised Cerro Del Gallo to be maximized benefitting all shareholders. They will also benefit from improved market liquidity for shareholders and the combination with Primero’s proven management team who have a demonstrated track record of successfully growing precious metals mining companies,” stated
Highlights of the Transaction:
- Creates a diversified, high growth, competitive cost producer in
Mexicowith further consolidation opportunities.
- Peer leading growth profile with expected annualized production growth of 24% over the next four years, reaching at least 260,000 ounces of gold production by 2016.
- Combined attributable proven and probable reserves of approximately 1.7 million gold equivalent ounces and measured and indicated resources of over 3.1 million gold equivalent ounces (inclusive of reserves).
- Strongly enhances and diversifies Primero’s production profile and diversifies Cerro’s development project with a high quality mine and existing cash flow.
- Ability to fund further opportunities with a strong balance sheet and significant cash flows from existing production.
- Leverages on Primero’s position in
- Additional significant exploration upside.
- Exceptional re-valuation opportunity for all shareholders, driven by compelling valuation, growth potential, transaction rationale and management track record.
Benefits to Primero Shareholders:
- Attractive long-life, precious metals project.
- Diversifies near-term production with an additional 95,000 gold equivalent ounces per year, a 58% increase in currently estimated near-term production.
- Doubles reserves and triples measured and indicated resources3.
- Leverages on Primero’s regional expertise and solidifies Primero’s presence in
Mexico, one of the world’s most supportive mining districts, with further consolidation opportunities.
- Accretive to Primero on key metrics and an attractive total acquisition cost.
- Asset diversification reduces risk and volatility in cash flow and earnings.
- Allows participation in upside potential of non-Cerro Del Gallo assets through 19.99% ownership of Spinco.
- Enhanced capital markets profile and re-rating potential as a junior gold producer with a proven operating team, a superior growth profile and significant exploration upside.
- Delivers on Primero’s strategy of creating value for shareholders through low risk exposure to precious metals in the
Benefits to Cerro Shareholders:
- Offer represents an implied premium of 62% to the 20 trading day VWAP as at
December 12, 2012. The implied premium represents a share price exceeding Cerro’s 52 week high.
- Immediate exposure to strong balance sheet and cash flow sufficient to fund the development of Cerro Del Gallo, as well as finance further growth opportunities including a potential further expansion of
- Primero has an existing management team with proven mine construction and operational expertise.
- Provides opportunity to participate in valuation re-rating as the combination has a greater market capitalization, liquidity and immediate cash flows.
- Increases analytical following and exposure of the Cerro Del Gallo opportunity.
- Allows continuing shareholder participation in non-Cerro Del Gallo assets through 80.01% ownership of Spinco.
Under the terms of the Arrangement, each Cerro shareholder will receive 0.023 of a Primero common share for each Cerro common share held (the “Share Consideration”). Cerro shareholders will also receive 80.01% of the common shares of a newly incorporated company (“Spinco”). Spinco will acquire Cerro’s interests in the
Cerro’s outstanding options and its option plan will be substantially assumed by Primero, subject to adjustment to reflect the Exchange Ratio and a corresponding upward adjustment in the exercise price.
The transaction will be carried out by way of a court-approved scheme of arrangement and will require approval by at least 75% of the votes cast by at least 50% of the shareholders of Cerro at a special meeting of Cerro shareholders. Approval of Cerro’s option holders will also be required. The transaction is also subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature. It is anticipated that the Cerro shareholder meeting will be held in
The Arrangement includes customary provisions, including no solicitation of alternative transactions by Cerro, a right in favour of Primero to match any potential superior proposals and a reimbursement fee payable to Primero by Cerro in certain events.
Both companies’ Boards of Directors have determined that the proposed transaction is fair and reasonable to their respective shareholders based on a number of factors. Each company’s Board of Directors approved the terms of the proposed Arrangement and Cerro’s Board of Directors will recommend that their shareholders vote in favour of the proposed transaction.
The transaction is expected to close in
Advisors and Counsel
Primero’s financial advisor in relation to the transaction is
Cerro’s Canadian financial advisor in relation to the Canadian aspects of the transaction is
Conference Call and Webcast
A conference call is scheduled for
A recorded playback of the call will be available until
A live and archived webcast of the conference call will also be available at www.primeromining.com.
For more details about the transaction please refer to the investor presentation on Primero’s website at www.primeromining.com.
|(1)||Cerro Del Gallo is owned 69.2% by Cerro Resources NL and 30.8% by Goldcorp Inc. as of September 30, 2012.|
|(2)||Gold equivalent reserves and resources are calculated based on 100% ownership of Cerro Del Gallo and on long term consensus prices of US$1,350 per ounce of gold, US$23.25 per ounce of silver and US$7,447 per tonne of copper. Measured and indicated resources include reserves.|
|(3)||Assuming Goldcorp Inc. converts their position to a Net Profit Interest.|
Primero’s website is www.primeromining.com.
About Cerro Resources
Cerro Resources is a precious and base metals exploration and development company. The Company is currently focused on
Additional information about the Company and its projects is available on the Cerro’s website at www.cerroresources.com and on SEDAR.
CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION
This Primero news 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 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 Primero operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Assumptions upon which forward looking statements relating to the arrangement have been made include that Primero will be able to satisfy the conditions in the 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 Cerro, that all required third party, regulatory and government approvals will be obtained and that Primero will be able to achieve its currently announced guidance targets.
Primero cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause 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 Primero’s Annual Information Form for the year ended
This news release does not constitute an offer to buy any securities or a solicitation of any vote or approval or a solicitation of an offer to sell any securities.
Cautionary Note to US Investors Regarding Mineral Reporting Standards:
Primero prepares its disclosure in accordance with the requirements of securities laws in effect in
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.