Northgate Minerals L (AMEX:NXG)
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VANCOUVER, July 13, 2011 /CNW/ --
Business Combination for Superior Value Creation
Notice: Conference Call and Webcast Today at 10:00 am ET
Dial in: +647-427-7450 or 1-888-231-8191
VANCOUVER, July 13, 2011 /CNW/ - (All figures in Canadian dollars,
unless otherwise noted) Northgate Minerals Corporation ("Northgate")
(TSX: NGX) (NYSE Amex: NXG) and Primero Mining Corp. ("Primero") (TSX:
P) are pleased to announce today that they have entered into a
definitive arrangement agreement (the "Arrangement Agreement") to
combine their respective businesses and create a new, leading mid-tier
gold producer with significant value creation opportunities. The
combined company will benefit from the current production and expansion
potential at the San Dimas mine in Mexico and the Fosterville and
Stawell gold mines in Australia, together with the long-life
Young-Davidson gold development project in Ontario. The new company
will be led by Joe Conway, current President and Chief Executive
Officer of Primero. The transaction will create a company with an
expected combined market capitalization of approximately $1.2 billion.
Under the terms of the Arrangement Agreement, Northgate will acquire all
of the issued and outstanding common shares of Primero for 1.50
Northgate common shares per Primero Share (the "Exchange Ratio"). Each
outstanding option of Primero shall be exchanged for options of
Northgate that will entitle the holder to receive, upon the exercise
thereof, Northgate shares based upon the Exchange Ratio and otherwise
on the same terms and conditions as in the original option. Each
outstanding warrant of Primero will entitle the holder to receive, upon
the exercise thereof, Northgate shares and otherwise on the same terms
and conditions as in the original warrant. Northgate's offer
represents:
-- A value of $4.215 for each Primero common share based on the
July 12, 2011 closing price of Northgate common shares ($2.81)
on the Toronto Stock Exchange
-- A premium of approximately 13.9% to Primero's closing price on
July 12, 2011 and a premium of approximately 20.5% and 11.7%
calculated on the 10-day and 20-day volume weighted average
price (VWAP) of each respective company on the Toronto Stock
Exchange
Highlights of the Transaction
-- Diversified production base: Three producing gold mines with
320,000 gold equivalent ounces in 2011E increasing to 550,000
ounces in 2013E coming from the addition of the Young-Davidson
development project and expansion at San Dimas, plus
exploration pipe-line, all located in pro-mining jurisdictions.
-- Leading growth profile: Expected production growth of 72% from
2011E to 2013E and declining cash costs - which will place the
combined company amongst the leaders of its expected peer
group.
-- Strong, complementary management team: Combines proven
management with an experienced technical team.
-- Solid financial position and cash flow: Fully funded
development of the Young-Davidson gold project in Ontario with
expected sufficient cash flow to re-pay all corporate debt and
pursue accretive opportunities.
-- Unique re-valuation opportunity: Currently trading below peer
average net asset value and cash flow multiples.
-- Enhanced capital markets presence: $1.2 billion market
capitalization is expected to appeal to a broader shareholder
base, increase analytical following and improve share trading
liquidity.
Management Team and Board of Directors
The Board of Directors and management of the combined company will draw
from the expertise of both companies. Terry Lyons will remain the
Chairman of the Board and Joe Conway (current President and Chief
Executive Officer of Primero) will become the new President and Chief
Executive Officer upon completion of the business combination. Peter
MacPhail and Jon Douglas will continue in their current roles as Chief
Operating Officer and Chief Financial Officer of the combined company,
respectively. The remaining senior management team will be comprised
of existing management from both companies.
Upon completion of the transaction, the Board will initially be
comprised of ten directors, with six directors nominated by Northgate
and four directors nominated by Primero including the Chief Executive
Officer. The nominated directors in addition to Terry Lyons and Joe
Conway include Wade Nesmith as Vice Chairman, Richard Hall, Mark
Daniel, David Demers, Patrick D. Downey, Douglas P. Hayhurst, Rohan
Hazelton and Conrad A. Pinette.
Terry Lyons, Chairman of the Board of Directors of Northgate, stated:
"Our proposal is driven by the belief that a combination of Northgate
and Primero will create a stronger and better positioned company going
forward. We believe the value proposition of the combined company
represents a unique opportunity for our respective companies to deliver
both immediate and long-term value to our shareholders. The proposed
transaction is part of an overall business strategy to grow through
acquisition and exploration in politically stable jurisdictions with
long histories of gold mining."
"We are executing on our strategy of low-risk growth through this
consolidation," added Joe Conway, President and Chief Executive Officer
of Primero. "This is a unique opportunity that brings together two
very complementary asset bases and groups of management.
Young-Davidson is a significant development project in one of the best
mining jurisdictions in the world. Our shareholders will benefit from
the enhanced leverage to a diversified asset base and increased share
liquidity."
The combined company is expected to provide Northgate and Primero
shareholders with the following benefits:
Benefits for Northgate Shareholders:
-- Adds a high quality, long life producing precious metals mine
in a mining friendly jurisdiction
-- Provides accretive near-term cash flow to help fund
construction and ramp-up of Young-Davidson
-- Increases and diversifies production while decreasing cash
costs
-- Combines proven management team with experienced technical team
-- Improves market presence
Benefits for Primero Shareholders:
-- Diversifies Primero from a single mine company to a multi-mine
producer in mining friendly jurisdictions
-- Delivers on Primero's strategy of growth through consolidation
-- Provides further cash and cash flow to re-pay debt and fund
growth initiatives
-- Accretive on a net asset value basis
-- Combines proven management team with experienced technical team
-- Increases leverage to precious metal prices
-- Improves market presence
Transaction Summary
The proposed business combination will be effected by way of a Plan of
Arrangement completed under the Business Corporations Act of British
Columbia.
Under the terms of the Plan of Arrangement, each Primero shareholder
will receive 1.50 common shares of Northgate for each Primero share
held. The transaction will be carried out by way of a court-approved
Plan of Arrangement and will require approval by at least 66⅔% of the
votes cast by the shareholders of Primero at a special meeting of
Primero shareholders. The transaction is also subject to obtaining
approval by a majority of votes cast by the shareholders of Northgate
at a special meeting of Northgate shareholders expected to take place
the same date as the Primero meeting. In addition to the 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. It is anticipated
that the shareholder meetings will be held in September 2011.
The Arrangement Agreement includes deal protection provisions, including
no solicitation of alternative transactions, right to match, dual break
fees and customary fiduciary-out provisions.
Both companies' Boards of Directors have determined that the proposed
business combination is in the best interests of their respective
shareholders based on a number of factors, including fairness opinions
received from their respective financial advisors. Each company's
Board of Directors approved the terms of the proposed transaction and
recommends that their respective shareholders vote in favour of the
business combination. Macquarie Capital Markets Canada Ltd. and GMP
Securities L.P. provided fairness opinions to the Special Committee and
to the Board of Directors of Northgate, respectively. BMO Capital
Markets provided an independent fairness opinion to the Special
Committee and to the Board of Directors of Primero. In addition,
Goldcorp Inc., which holds an aggregate of approximately 35.5% of the
outstanding Primero common shares, has entered into an agreement to
vote in favour of the transaction.
Upon completion of the transaction, existing Northgate and Primero
shareholders will own approximately 69% and 31% of the combined
company, respectively. Full details of the merger will be included in
the management information circulars of Northgate and Primero to be
mailed to their respective shareholders as soon as practicable.
Advisors and Counsel
Northgate has retained GMP Securities L.P. to act as financial advisor
and Torys LLP to act as legal advisor.
Primero has retained Canaccord Genuity to act as financial advisor and
McMillan LLP to act as legal advisor.
Conference Call and Webcast
Northgate and Primero will host a joint conference call and webcast on
Wednesday, July 13 at 10:00 a.m. Eastern time for members of the
investment community to discuss the business combination. The call-in
details are as follows:
-- Local and international: +647-427-7450
-- North American toll-free: 1-888-231-8191
A replay of this conference call will be available from Wednesday, July
13 starting at 1:00 p.m. Eastern time until July 27, 2011. The replay
numbers are:
-- Local and international: +416-849-0833
-- North American toll-free: 1-855-859-2056
-- Replay passcode: 833 628 47#
A live and archived webcast of the conference call is also available on
the homepage at www.northgateminerals.com or at www.primeromining.com under the Calendar and Events page.
* * * * * * *
About Northgate
Northgate Minerals Corporation is a gold and copper producer with mining operations, development
projects and exploration properties in the Americas and Australia.
Northgate currently owns and operates the Fosterville and Stawell gold
mines in Victoria Australia, and is building the Young-Davidson gold
mine in northern Ontario, which is targeting a 15-year mine life with
average annual production of 180,000 ounces of gold commencing in 2012.
* * * * * * *
About Primero
Primero Mining Corp. is a Canadian-based precious metals producer and owns 100% of the San
Dimas gold-silver mine in Mexico. Primero offers immediate exposure to
un-hedged, low cash cost gold production with a substantial resource
base in a politically stable jurisdiction.
* * * * * * *
This press release does not constitute an offer of any securities for
sale or a solicitation of an offer to purchase any securities. The
securities to be issued pursuant to the proposed transaction have not
been and will not be registered under the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and may not be offered or sold to
U.S. Persons (as such term is defined in Regulation S under the
Securities Act) absent registration or an applicable exemption from
registration requirements. Northgate intends to issue such securities
pursuant to the exemption from registration set forth in Section
3(a)(10) of the Securities Act.
Cautionary Note Regarding Forward-Looking Statements and Information:
This Northgate and Primero press 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 Northgate's and 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 Northgate and Primero operates, are
inherently subject to significant operational, economic and competitive
uncertainties and contingencies. Assumptions upon which forward
looking statements relating to the plan of arrangement have been made
include that Northgate and Primero will be able to satisfy the
conditions in the Arrangement 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 each of Northgate and Primero, that all
required third party, regulatory and government approvals will be
obtained; and that each of Northgate and Primero will be able to
achieve their currently announced guidance targets. Northgate and
Primero caution that forward-looking information involves known and
unknown risks, uncertainties and other factors that may cause
Northgate's and 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 Northgate's and Primero's Annual Information Form for the year ended
December 31, 2010 or under the heading "Risks and Uncertainties" in
Northgate's and Primero's 2010 Annual Report, both of which are
available on the SEDAR website at www.sedar.com, should be reviewed in conjunction with the information found in this
press release. Although Northgate and Primero have attempted to
identify important factors that could cause actual results, performance
or achievements to differ materially from those contained in
forward-looking information, there can be other factors that cause
results, performance or achievements not to be as anticipated,
estimated or intended. There can be no assurance that such information
will prove to be accurate or that management's expectations or
estimates of future developments, circumstances or results will
materialize. As a result of these risks and uncertainties, the proposed
transaction could be modified, restricted or not completed, and the
results or events predicted in these forward looking statements may
differ materially from actual results or events. Accordingly, readers
should not place undue reliance on forward-looking information. The
forward-looking information in this press release is made as of the
date of this press release, and Northgate and Primero disclaim any
intention or obligation to update or revise such information, except as
required by applicable law.
Cautionary Note to US Investors Regarding Mineral Reporting Standards:
Northgate and Primero prepare their disclosure in accordance with the
requirements of securities laws in effect in Canada, which differ from
the requirements of US securities laws. Terms relating to mineral
resources in this press release are defined in accordance with National
Instrument 43-101-Standards of Disclosure for Mineral Projects under
the guidelines set out in the Canadian Institute of Mining, Metallurgy,
and Petroleum Standards on Mineral Resources and Mineral Reserves. The
Securities and Exchange Commission (the "SEC") permits mining
companies, in their filings with the SEC, to disclose only those
mineral deposits that a company can economically and legally extract or
produce. Northgate and Primero use certain terms, such as, "measured
mineral resources", "indicated mineral resources", "inferred mineral
resources" and "probable mineral reserves", that the SEC does not
recognize (these terms may be used in this press release and are
included in the public filings of each of Northgate and Primero which
have been filed with securities commissions or similar authorities in
Canada).
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.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/July2011/13/c5058.html
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