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Alamos Gold and AuRico Gold to Combine
2015-04-13 10:30:04.75 GMT
Alamos Gold and AuRico Gold to Combine
PR Newswire
TORONTO, April 13, 2015
Creating Leading Intermediate Gold Producer
TORONTO, April 13, 2015 /PRNewswire/ - Alamos Gold Inc. ("Alamos")
(TSX/NYSE:AGI) and AuRico Gold Inc. ("AuRico") (TSX/NYSE: AUQ) are pleased to
announce that they have entered into a definitive agreement to combine their
respective companies (the "Merger") by way of a plan of arrangement, creating
a new, leading intermediate gold producer ("MergeCo"). The Merger combines two
top-quality, highly-complementary asset portfolios, including two long-life,
cash flow-generating gold mines: AuRico's Young-Davidson mine in Ontario,
Canada and Alamos' Mulatos mine in Sonora, Mexico. The transaction is
structured as a merger of equals with a transaction equity value of
approximately US$1.5 billion.
Under the terms of the Merger, holders of Alamos shares will receive, for each
share held, 1 MergeCo share and US$0.0001 in cash, and holders of AuRico
shares will receive, for each share held, 0.5046 MergeCo shares. Upon
completion of the Merger, former Alamos and AuRico shareholders will each own
approximately 50% of MergeCo (named Alamos Gold Inc.). In addition, a new
company ("SpinCo"), to be named AuRico Metals Inc., will be created to hold
AuRico's Kemess project, a 1.5% net smelter return royalty ("NSR") on the
Young-Davidson mine, AuRico's Fosterville and Stawell royalties, and will be
capitalized with US$20 million of cash. Upon completion of the Merger, MergeCo
will own a 4.9% equity interest in SpinCo. The remaining shares of SpinCo will
be distributed 50% each to former Alamos and AuRico shareholders.
The merger is subject to shareholder and other applicable regulatory approvals
and satisfaction of other customary conditions. The merger is expected to
close in the second quarter of 2015.
A joint conference call and webcast is scheduled for Monday, April 13, 2015
beginning at 8:30 a.m. Eastern Time (details provided below).
Highlights of the Merger
o Creation of a leading intermediate gold producer: Creates a larger,
diversified portfolio of assets located in stable jurisdictions,
underpinned by two top-tier producing mines, Young-Davidson and Mulatos,
and a significant pipeline of high-quality development projects.
o Peer-leading growth profile in safe jurisdictions: Expected to produce 375
- 425 koz of gold in 2015 in Mexico and Canada with the potential to grow
organically to over 700 koz of gold annually. The development portfolio is
anchored by quality, low-cost projects in Turkey as well as three projects
in North America (Esperanza, Lynn Lake and Quartz Mountain).
o Strong financial position: Strong pro-forma cash position of US$427
million, net cash of US$94 million and growing cash flow generation to
support further growth.
o Enhanced capital markets profile: The combined market capitalization of
US$1.5 billion, increased trading liquidity and expanded analyst coverage
is expected to significantly enhance the combined company's capital
markets profile.
o Revaluation opportunity: With diversified production, superior growth
profile, strong balance sheet, greater market profile and proven
management and operating teams, the combined company is well positioned
for a potential value re-rating.
o Potential to unlock significant value through SpinCo: Shareholders of both
Alamos and AuRico will also benefit from the exposure to the significant
value potential of the Kemess project and stable, diversified royalty
revenue via ownership in SpinCo.
John McCluskey, President and CEO of Alamos, stated: "We are very pleased to
bring this transaction forward to the benefit of both sets of shareholders.
Alamos has remained disciplined in its growth initiatives, building and
preserving a robust balance sheet for the right opportunity. We believe the
addition of the flagship, long-life Young-Davidson mine is just that
opportunity. The combination of diversified production from three mines and a
pipeline of low-cost growth projects in safe jurisdictions equate to a leading
gold intermediate and a significant re-rate opportunity for our collective
shareholders."
Scott Perry, President and CEO of AuRico stated: "This merger with Alamos
represents a logical business combination that will create a premier
intermediate gold producer with a diversified asset base that includes three
low-cost producing mines, a significant organic growth profile, a pipeline of
high-quality development projects, all of which is underpinned by a solid
balance sheet and led by an experienced and proven management team. We are
confident that our shareholders will benefit from the value creation
opportunities that will be realized through an expanded and more diversified
asset base and enhanced cash flow generating capabilities. Shareholders will
also benefit from the creation of SpinCo as they retain ongoing exposure to
significant unlocked value in the highly prospective Kemess project, and
stable, diversified sources of royalty revenue."
Benefits to All Shareholders
o Diversified production from three North American mines including the
long-life, flagship Young-Davidson and Mulatos mines.
o Extensive growth portfolio of quality assets in safe jurisdictions.
o Among the strongest balance sheets within its peer group with positive net
cash, as well as significant and growing cash flow generation with which
to fund growth.
o Significant potential synergies in Mexico and Canada.
o Re-rating potential as a leading intermediate gold producer with a strong
growth profile, increased trading liquidity and enhanced capital market
attractiveness.
o Combination of two complementary and highly experienced management and
operating teams.
o Exposure to SpinCo with significant unlocked value in the Kemess project,
diversified royalty revenues and led by a strong management team.
Merger Summary
The proposed transaction will be completed pursuant to a plan of arrangement
and will require the approval of 66⅔% of Alamos shareholders and 66⅔% of
AuRico shareholders. The directors and officers of Alamos and AuRico have
entered into support agreements pursuant to which they agreed to vote their
shares in favor of the proposed transaction.
Alamos and AuRico's Board of Directors have determined that the proposed
transaction is in the best interest of the respective shareholders, having
taken into account advice from their financial advisors, and have unanimously
approved the Merger. Alamos and AuRico's Board of Directors recommend that
their shareholders vote in favor of the proposed transaction.
In addition to shareholder approvals, the proposed transaction will be subject
to applicable regulatory approvals and the satisfaction of other customary
conditions. The Merger includes customary provisions, including fiduciary-out
provisions, covenants not to solicit other acquisition proposals and the right
to match any superior proposals. Termination fees of US$28.4 million will be
paid to Alamos and US$37.5 million will paid to AuRico in certain
circumstances should the Merger not be completed.
Private Placement Transaction
In connection with the Merger, Alamos and AuRico have also agreed that Alamos
will subscribe for approximately 27.9 million common shares of AuRico on a
private placement basis, representing approximately 9.9% of AuRico's
outstanding common shares after giving effect to the private placement. The
common shares will be acquired at a price of US$2.99 per share, equal to
AuRico's closing price on the New York Stock Exchange on April 10, 2015, for
total gross proceeds to AuRico of approximately US$83.3 million. Completion of
the private placement is subject to the satisfaction of certain regulatory
requirements but is not contingent on completion of the Merger.
Management Team and Board of Directors
The senior executive team and the Board of Directors of the combined company
will draw from the extensive experience and expertise of both companies. The
senior executive team and Chairman of the combined company will include:
o Alan Edwards: Chairman (AuRico)
o John McCluskey: CEO (Alamos)
o Peter MacPhail: COO (AuRico)
o Jamie Porter: CFO (Alamos)
The Board of Directors will be comprised of 10 directors with each company
having equal representation of 5 directors, including Scott Perry and John
McCluskey. The remaining directors will be nominated upon completion of the
transaction.
SpinCo
Pursuant to the plan of arrangement, the following assets will be transferred
to SpinCo:
o The Kemess project;
o A newly created 1.5% NSR on the Young-Davidson mine;
o The existing 2.0% NSR on the Fosterville mine;
o The existing 1.0% NSR on the Stawell mine; and
o US$20 million in cash
The senior executive team and Board of Directors of SpinCo will include:
o Scott Perry: Executive Chairman (AuRico)
o Chris Richter: CEO (AuRico)
o Robert Chausse: CFO (AuRico)
o Two director nominees of Alamos
Upon completion of the plan of arrangement, MergeCo will own a 4.9% equity
interest in SpinCo. The remaining shares of SpinCo will be distributed 50%
each to former Alamos and AuRico shareholders.
SpinCo will allow all shareholders to benefit from the advancement of the
Kemess project and stable, diversified revenue generation from three royalty
assets.
Advisors and Counsel
Alamos' financial advisor is Maxit Capital LP and its legal counsel in Canada
and the US is Torys LLP. Maxit Capital LP provided an opinion to Alamos' Board
of Directors that, as of the date thereof and subject to the assumptions,
limitations and qualifications set out therein, the transaction is fair, from
a financial point of view, to the shareholders of Alamos.
AuRico's financial advisor is Scotiabank, its Canadian legal counsel is Fasken
Martineau and its US legal counsel is Paul Weiss. Scotiabank provided an
opinion to AuRico's Board of Directors that, as of the date thereof and
subject to the assumptions, limitations and qualifications set out therein,
the transaction is fair, from a financial point of view, to the shareholders
of AuRico.
Conference Call and Webcast
Alamos and AuRico will host a joint conference call and webcast on Monday,
April 13, 2015 at 8:30 a.m. Eastern time for members of the investment
community to discuss the business combination. Participants may join the
conference call using the following call-in details:
o Local and international: (416) 340-8527
o North American toll-free: (800) 355-4959
A live webcast of the conference call can be accessed via the following link:
www.gowebcasting.com/6474 or via www.alamosgold.com or www.auricogold.com.
A replay of this conference call will be available until May 22, 2015. The
replay numbers are:
o Local and international: (905) 694-9451
o North American toll-free: (800) 408-3053
o Replay passcode: 5616027
An archived version of the webcast will be available via the following link:
www.gowebcasting.com/6474 and via www.alamosgold.com and www.auricogold.com.
About Alamos Gold
Alamos is an established Canadian-based gold producer that owns and operates
the Mulatos Mine in Mexico, and has exploration and development activities in
Mexico, Turkey and the United States. The Company employs more than 500 people
and is committed to the highest standards of sustainable development. As of
March 30, 2015, Alamos had 127,357,486 common shares outstanding (140,164,052
shares fully diluted), which are traded on the TSX and NYSE under the symbol
"AGI".
About AuRico Gold
AuRico Gold is a leading Canadian gold producer with mines and projects in
North America that have significant production growth and exploration
potential. The Company is focused on its core operations including the
cornerstone Young-Davidson gold mine in northern Ontario, and the El Chanate
mine in Sonora State, Mexico. AuRico's project pipeline also includes the
advanced development Kemess Property in northern British Columbia and the Lynn
Lake Gold Camp in northern Manitoba. The Company also has other exploration
opportunities in Canada and Mexico. AuRico's head office is located in
Toronto, Ontario, Canada.
For further information please visit the Alamos and AuRico websites at
www.alamosgold.com and www.auricogold.com or contact:
The TSX and NYSE have not reviewed and do not accept responsibility for the
adequacy or accuracy of this release. No stock exchange, securities commission
or other regulatory authority has approved or disapproved the information
contained herein.
Alamos Cautionary Statement
No stock exchange, securities commission or other regulatory authority has
approved or disapproved the information contained herein. This News Release
includes certain "forward-looking statements". All statements other than
statements of historical fact included in this release, including without
limitation statements regarding forecast gold production, gold grades,
recoveries, waste-to-ore ratios, total cash costs, potential mineralization
and reserves, exploration results, and future plans and objectives of Alamos,
are forward-looking statements that involve various risks and uncertainties.
These forward-looking statements include, but are not limited to, statements
with respect to mining and processing of mined ore, achieving projected
recovery rates, anticipated production rates and mine life, operating
efficiencies, costs and expenditures, changes in mineral resources and
conversion of mineral resources to proven and probable reserves, and other
information that is based on forecasts of future operational or financial
results, estimates of amounts not yet determinable and assumptions of
management.
Exploration results that include geophysics, sampling, and drill results on
wide spacings may not be indicative of the occurrence of a mineral deposit.
Such results do not provide assurance that further work will establish
sufficient grade, continuity, metallurgical characteristics and economic
potential to be classed as a category of mineral resource. A mineral resource
that is classified as "inferred" or "indicated" has a great amount of
uncertainty as to its existence and economic and legal feasibility. It cannot
be assumed that any or part of an "indicated mineral resource" or "inferred
mineral resource" will ever be upgraded to a higher category of resource.
Investors are cautioned not to assume that all or any part of mineral deposits
in these categories will ever be converted into proven and probable reserves.
Any statements that express or involve discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using
words or phrases such as "expects" or "does not expect", "is expected",
"anticipates" or "does not anticipate", "plans", "estimates" or "intends", or
stating that certain actions, events or results "may", "could", "would",
"might" or "will" be taken, occur or be achieved) are not statements of
historical fact and may be "forward-looking statements." Forward-looking
statements are subject to a variety of risks and uncertainties that could
cause actual events or results to differ from those reflected in the
forward-looking statements.
There can be no assurance that forward-looking statements will prove to be
accurate and actual results and future events could differ materially from
those anticipated in such statements. Important factors that could cause
actual results to differ materially from Alamos' expectations include, among
others, risks related to international operations, the actual results of
current exploration activities, conclusions of economic evaluations and
changes in project parameters as plans continue to be refined as well as
future prices of gold and silver, as well as those factors discussed in the
section entitled "Risk Factors" in Alamos' Annual Information Form. Although
Alamos has attempted to identify important factors that could cause actual
results to differ materially, 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.
AuRico Cautionary Statement
This press release contains forward-looking statements and forward-looking
information as defined under Canadian and U.S. securities laws.
All statements, other than statements of historical fact, are forward-looking
statements. The words "expect", "believe", "anticipate", "will", "intend",
"estimate", "forecast", "budget" and similar expressions identify
forward-looking statements. Forward-looking statements include information as
to the timing, success and expected benefits of the Merger and the future
prospectus of MergeCo and Spinco, strategy, plans or future financial or
operating performance, such as AuRico's expansion plans, project timelines,
production plans, projected cash flows or capital expenditures, cost
estimates, projected exploration results, reserve and resource estimates and
other statements that express management's expectations or estimates of future
performance. Forward-looking statements are necessarily based upon a number of
factors and assumptions that, while considered reasonable by management, are
inherently subject to significant uncertainties and contingencies. Known and
unknown factors could cause actual results to differ materially from those
projected in the forward-looking statements, including: uncertainty of
production and cost estimates; fluctuations in the price of gold and foreign
exchange rates; the risk that mining operations do not meet expectations; the
risk that projects will not be developed according to budgets or timelines,
changes in laws in Canada, Mexico and other jurisdictions in which AuRico may
carry on business; risks of obtaining necessary licenses, permits or approvals
for operations or projects; disputes over title to properties; the speculative
nature of mineral exploration and development; risks related to aboriginal or
Ejido title claims; compliance risks with respect to current and future
environmental regulations; disruptions affecting operations; opportunities
that may be pursued by AuRico; employee relations; availability and costs of
mining inputs and labor; the ability to secure capital to execute business
plans; volatility of AuRico's share price; the effect of future financings;
litigation; risk of loss due to sabotage and civil disturbances; the values of
assets and liabilities based on projected future cash flows; risks arising
from derivative instruments or the absence of hedging; adequacy of internal
control over financial reporting; changes in credit rating; and the impact of
inflation. Actual results and developments are likely to differ, and may
differ materially, from those expressed or implied by the forward-looking
statements contained herein. Such statements are based on a number of
assumptions which may prove to be incorrect, including assumptions about:
shareholder and regulatory approvals, anticipated synergies and efficiencies,
business and economic conditions; commodity prices and the price of key inputs
such as labour, fuel and electricity; credit market conditions and conditions
in financial markets generally; revenue and cash flow estimates, production
levels, development schedules and the associated costs; ability to procure
equipment and supplies and ability to do so on a timely basis; the timing of
the receipt of permits and other approvals for projects and operations; the
ability to attract and retain skilled employees and contractors for the
operations; the accuracy of reserve and resource estimates; the impact of
changes in currency exchange rates on costs and results; interest rates;
taxation; and ongoing relations with employees and business partners.
In particular, forward-looking information included in this document includes,
but is not limited to: (1) assumptions and expectations with regard to the
Merger and its completion and the anticipated benefits and advantages of the
Merger, (2) the future prospectus of MergeCo and Spinco and the ability to
unlock value, (3) production estimates and production growth rates, which
assume accuracy of projected ore grade, mining rates, recovery timing and
recovery rate estimates and may be impacted by unscheduled maintenance, labour
and contractor availability; (4) capital expenditures and other cash costs,
which assume foreign exchange rates and accuracy of production estimates, and
may be impacted by unexpected maintenance, the need to hire external resources
and accelerated capital plans; (5) profits and free cash flow, which assume
production and expenditure estimates and may be impacted by gold prices,
production estimates, and the timing of payments, and (6) reserves and
resources which are forward looking statements by their nature involving
implied assessment, and may be impacted by metal prices, future drilling
results, operating costs, mining recoveries and dilution rates. AuRico
disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise,
except as required by applicable law.
SOURCE AuRico Gold Inc.
Website: http://www.gammonlake.com
Contact: Scott Parsons, Director, Investor Relations, Alamos Gold Inc.,
416-368-9932 x439, sparsons@alamosgold.com; Anne Day, Vice President, Investor
Relations & Communications, AuRico Gold Inc., 647-260-8880,
anne.day@auricogold.com
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