Paramount's High-Grade Don Ese Deposit Expected
to Provide Low-Capital, High-Margin, Near-Term Source of Future
Production to Supplement Production from Coeur's Palmarejo Mine
Substantial Development and Operating Synergies
with Coeur's Palmarejo Operation Anticipated to Create Significant
Long-Term Value
Don Ese and Guadalupe Combined Expected to
Produce an Average of Approximately Six Million Ounces of Silver
and 110,000 Ounces of Gold Annually over the Next Eight Years
Coeur Mining, Inc. ("Coeur" or the "Company") (NYSE:CDE) today
announced it has entered into a merger agreement under which Coeur
has agreed to acquire all of the outstanding shares of Paramount
Gold and Silver Corp. ("Paramount") (NYSE MKT:PZG) and (TSX:PZG) in
an all-stock transaction valued at $146 million. Immediately prior
to completion of the merger, Paramount will spin-off to its
existing stockholders a separate, publicly traded company, expected
to be named Paramount Nevada Gold Corp. ("SpinCo"), a subsidiary
that owns the Sleeper Gold Project and other assets in Nevada. As
part of the transaction, Coeur will provide $10 million in cash to
SpinCo and receive a 4.9% common share interest.
Key Highlights
- Paramount's San Miguel Project (which includes the Don Ese
deposit) covers over 121,000 hectares (approximately 299,000 acres)
surrounding Coeur's Palmarejo mine complex in Chihuahua,
Mexico
- The Don Ese deposit extends across a shared property boundary
onto Coeur's land holdings at Palmarejo and is located
approximately 800 meters from Coeur's Guadalupe deposit, which is
currently being developed
- Don Ese consists of significantly higher grade silver and gold
mineralization than Guadalupe, and is not subject to any
non-government third-party royalty or stream obligations
- Don Ese represents the southeast extension of Coeur's
Independencia structure
- Coeur plans to develop Don Ese by a 1,000 meter decline
adjacent to the existing Guadalupe surface infrastructure at an
initial cost next year of approximately $15 million, and
anticipates initial production from Don Ese by the end of 2015,
ramping up to 2,500 tons per day by the end of 2017
- Palmarejo's 6,000 ton-per-day processing facility is expected
to have excess capacity as open pit production ends in 2015 and as
mining activities transition to Guadalupe. As part of Coeur's
diligence on the Don Ese deposit, Coeur anticipates recovery rates
of approximately 80% for silver and 95% for gold from the
deposit
- Assuming utilization of excess processing facility capacity,
Coeur anticipates the combined Don Ese and Guadalupe deposits could
produce an average of approximately six million ounces of silver
and 110,000 ounces of gold annually over the next eight years
- Coeur has identified significant additional exploration
potential on other high-grade structures near the shared property
boundary
- Paramount's San Miguel project also contains several lower
grade deposits which could benefit from cost savings associated
with Palmarejo's existing infrastructure and provides Coeur
stockholders with optionality on any future increases in silver and
gold prices
Mitchell J. Krebs, Coeur's President and Chief Executive Officer
said, "By adding Paramount's San Miguel Project and particularly
the Don Ese deposit to the ongoing mining activities at our
Guadalupe deposit, Palmarejo will be well-positioned to remain one
of the world's top producing silver and gold mines with
significantly higher grades and lower costs. Paramount's Mexican
assets strengthen the long‐term viability of Palmarejo throughout
the price cycle and enhance Coeur's growth profile. We expect the
transaction to lower our overall unit costs, improve our free cash
flow in the current metal price environment, and provide near-term
growth while preserving our liquidity."
Under the terms of the merger agreement:
- Paramount stockholders will receive: 0.2016 Coeur shares per
Paramount share, equal to $0.90 based on Coeur's 20-day volume
weighted average price ("VWAP") of $4.47 as of December 16, 2014,
representing a premium of 19.8% to Paramount's 20-day VWAP of
$0.75; and
- Paramount will spin off its non-Mexican assets and liabilities
and $10 million in cash (to be provided by Coeur as part of the
transaction) to SpinCo, which is anticipated to apply to list its
shares on the NYSE MKT or the Toronto Stock Exchange. Paramount
stockholders will receive a pro rata share of the 95.1% of SpinCo
shares to be distributed to Paramount stockholders.
The exchange of Paramount securities for shares of Coeur common
stock is anticipated to be a non-recognition transaction for U.S.
income tax purposes.
Upon closing of the transaction, it is projected that Coeur will
issue approximately 32.7 million shares of common stock to
Paramount stockholders. Existing Coeur stockholders will own
approximately 76% of the combined entity's outstanding shares and
Paramount stockholders will own the remaining approximately
24%.
In a separate transaction not conditioned on the successful
acquisition of Paramount by Coeur, Coeur has paid $5.25 million for
a 0.7% net smelter returns royalty from Paramount's San Miguel
project.
San Miguel Measured and Indicated Mineralized
Material
|
Short Tons |
Grade (oz/t) |
|
(000s) |
Silver |
Gold |
Measured – Don Ese |
660 |
7.42 |
0.083 |
Measured – All Other |
6,234 |
1.60 |
0.031 |
Indicated – Don Ese |
3,094 |
5.99 |
0.082 |
Indicated – All Other |
37,537 |
1.17 |
0.017 |
M&I Mineralized Material –
Don Ese |
3,754 |
6.24 |
0.082 |
Total M&I Mineralized
Material |
47,525 |
1.62 |
0.024 |
Mineralized material effective July 8, 2014 using a cutoff grade
for the underground deposits of 90 grams per tonne AgEq (2.63
ounces per short ton), a cutoff grade for heap leach material of 9
grams per tonne AgEq (0.26 ounces per short ton), and a cutoff
grade for the open pit deposit of 25 grams per tonne (0.73 ounces
per short tonne). Mineralized material is in addition to mineral
reserves and does not have demonstrated economic viability.
Rounding of tons, as required by reporting guidelines, may result
in apparent differences between tons and grade. For details on the
estimation of mineralized material and reserves, including key
assumptions, parameters and methods used to estimate the
mineralized material, investors should refer to the NI
43-101-compliant Technical Report for San Miguel dated and filed by
Paramount August 22, 2014 at sedar.com.
Palmarejo Reserves and Measured and Indicated
Mineralized Material
|
Short Tons |
Grade (oz/t) |
|
(000s) |
Silver |
Gold |
Underground Reserves: |
|
|
|
Guadalupe |
5,964 |
3.92 |
0.056 |
Palmarejo |
2,355 |
3.98 |
0.073 |
Open-Pit Reserves: |
|
|
|
Guadalupe |
420 |
5.21 |
0.015 |
Palmarejo |
2,497 |
2.70 |
0.022 |
Total Proven and Probable
Reserves |
11,235 |
3.71 |
0.051 |
Underground M&I Mineralized
Material: |
|
|
|
Guadalupe |
2,457 |
5.81 |
0.063 |
Palmarejo |
4,160 |
6.36 |
0.104 |
Open-Pit M&I Mineralized Material: |
|
|
|
Guadalupe |
1,648 |
3.57 |
0.035 |
Palmarejo |
507 |
1.42 |
0.011 |
La Patria |
17,529 |
0.56 |
0.028 |
Total M&I Mineralized
Material |
26,301 |
2.17 |
0.043 |
|
|
|
|
|
Mineral reserves and mineralized material effective December 31,
2013 using metal prices of $25 per silver ounce and $1,450 per gold
ounce for mineral reserves and $29 per silver ounce and $1,600 per
gold ounce for mineralized material. La Patria was calculated at
$33 per silver ounce and $1,700 per gold ounce for mineralized
material. Mineralized material is in addition to mineral reserves
and does not have demonstrated economic viability. Rounding of
tons, as required by reporting guidelines, may result in apparent
differences between tons and grade. For details on the estimation
of mineralized material and reserves, including key assumptions,
parameters and methods used to estimate the mineralized material,
investors should refer to the NI 43-101-compliant Technical Report
for Palmarejo dated January 1, 2013 and filed by Coeur February 28,
2013 at sedar.com.
Conversion
Table |
1 short ton |
= |
0.907185 metric tons |
1 troy ounce |
= |
31.10348 grams |
Timeline and Approvals
Coeur anticipates closing the transaction in the second quarter
of 2015. The transaction requires the approval of Coeur and
Paramount stockholders and is subject to Mexican antitrust approval
and other customary closing conditions. Members of Paramount's
Board and management team and certain stockholders, collectively
representing approximately 18.2% of Paramount's outstanding shares,
have agreed to vote all of their shares of Paramount common stock
in favor of the transaction.
Advisors
Raymond James Ltd. is serving as financial advisor to Coeur on
this transaction and Gibson, Dunn & Crutcher LLP and Goodmans
LLP are serving as U.S. and Canadian legal advisors,
respectively.
Conference Call Information
Coeur will conduct a conference call and webcast at
www.coeur.com to discuss the transaction announcement on December
17, 2014 at 10:00 a.m. Eastern time.
Dial-In Numbers: |
(877) 768-0708 (U.S. and Canada) |
|
(660) 422-4718 (International) |
|
|
Conference ID: |
506 44 810 |
A replay of the call will be available on Coeur's website
through March 17, 2015.
Replay Numbers: |
(855) 859-2056 (U.S. and Canada) |
|
(404) 537-3406 (International) |
|
|
Conference ID: |
506 44 810 |
About Coeur
Coeur Mining is the largest U.S.-based primary silver producer
and a significant gold producer with four precious metals mines in
the Americas employing nearly 2,000 people. Coeur produces from its
wholly owned operations: the Palmarejo silver-gold mine in Mexico,
the San Bartolomé silver mine in Bolivia, the Rochester silver-gold
mine in Nevada and the Kensington gold mine in Alaska. The Company
also has a non-operating interest in the Endeavor mine in Australia
in addition to net smelter royalties on the Cerro Bayo mine in
Chile, the El Gallo complex in Mexico, and the Zaruma mine in
Ecuador. In addition, the Company has two silver-gold projects -
the La Preciosa project in Mexico and the Joaquin project in
Argentina. The Company also conducts ongoing exploration activities
in Alaska, Argentina, Bolivia, Mexico, and Nevada. The Company owns
strategic investment positions in several silver and gold
development companies with projects in North and South America.
Cautionary Statements Regarding Forward-Looking
Statements
This news release contains forward-looking statements within the
meaning of securities legislation in the United States and Canada,
including statements regarding anticipated production, costs,
capital expenditures, recovery rates, exploration and development
efforts including the impact of discovery of new mineralization,
expansion opportunities, grades, and cash flow. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause Coeur's actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include,
among others, the risk that regulatory and stockholder approvals of
the contemplated transaction are not obtained on the proposed terms
and schedule, the risk that the contemplated transaction will not
be consummated, the risk that Coeur will not realize any or all of
the anticipated or expected benefits from the transaction, the risk
that development and operating synergy goals for the transaction
will not be met and that disruptions from the transaction will harm
relationships with customers, employees, suppliers and regulators,
the risk that unexpected costs will be incurred, the outcome of
litigation (including with respect to the transaction) and
regulatory proceedings, the risks and hazards inherent in the
mining business (including risks inherent in developing large-scale
mining projects, environmental hazards, industrial accidents,
weather or geologically related conditions), changes in the market
prices of gold and silver and a sustained lower price environment,
the uncertainties inherent in Coeur's production, exploratory and
developmental activities, including risks relating to permitting
and regulatory delays, ground conditions, grade variability and
recovery rates, any future labor disputes or work stoppages, the
uncertainties inherent in the estimation of gold and silver
reserves and mineralized material, changes that could result from
Coeur's future acquisition of new mining properties or businesses,
reliance on third parties to operate certain mines where Coeur owns
silver production and reserves and the absence of control over
mining operations in which Coeur or its subsidiaries hold royalty
or streaming interests and risks related to these mining operations
including results of mining and exploration activities,
environmental, economic and political risks of the jurisdiction in
which the mining operations are located, the loss of access to any
third-party smelter to which Coeur markets silver and gold, the
effects of environmental and other governmental regulations, the
risks inherent in the ownership or operation of or investment in
mining properties or businesses in foreign countries, each of
Coeur's ability to raise additional financing necessary to conduct
its business, make payments or refinance its debt, as well as other
uncertainties and risk factors set out in filings made from time to
time with the United States Securities and Exchange Commission
("SEC"), and the Canadian securities regulators, including, without
limitation, Coeur's most recent reports on Form 10-K and Form 10-Q.
Actual results, developments and timetables could vary
significantly from the estimates presented. Readers are cautioned
not to put undue reliance on forward-looking statements. Coeur
disclaims any intent or obligation to update publicly such
forward-looking statements, whether as a result of new information,
future events or otherwise. Additionally, Coeur undertakes no
obligation to comment on analyses, expectations or statements made
by third parties in respect of Coeur, its financial or operating
results, or its securities.
Additional Information Regarding Mineral
Properties
Reserves, Resources and Mineralized Material
Coeur Mining, Inc. is subject to the reporting requirements of
the Exchange Act and applicable Canadian securities laws, and as a
result we report our mineral reserves according to two different
standards. Canadian reporting requirements for disclosure of
mineral properties are governed by National Instrument 43-101
Standards of Disclosure for Mineral Projects ("NI 43-101"). The
definitions of NI 43-101 are adopted from those given by the
Canadian Institute of Mining, Metallurgy and Petroleum. U.S.
reporting requirements, however, are governed by the SEC's Industry
Guide 7 (as interpreted by the SEC, "Guide 7"). Both sets of
reporting standards have similar goals in terms of conveying an
appropriate level of confidence in the disclosures being reported,
but embody different approaches and definitions. Under Guide 7,
mineralization may not be classified as a "reserve" unless the
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve determination is made.
In our public filings in Canada and in certain other
announcements not filed with the SEC, we disclose measured,
indicated and inferred resources, each as defined in NI 43-101, in
addition to our mineral reserves. U.S. investors are cautioned
that, while the terms "measured mineral resources," "indicated
mineral resources" and "inferred mineral resources" are recognized
and required by Canadian securities laws, Guide 7 does not
recognize them. The estimation of measured resources and indicated
resources involve greater uncertainty as to their existence and
economic feasibility than the estimation of proven and probable
reserves, and therefore U.S. investors are cautioned not to assume
that all or any part of measured or indicated resources will ever
be converted into Guide 7 compliant reserves.
In this news release, we modify our estimates made in compliance
with NI 43-101 to conform to Guide 7 for reporting in the United
States. In this news release, we use the term "mineralized
material" to describe mineralization in mineral deposits that do
not constitute "reserves" under U.S. standards. "Mineralized
material" is substantially equivalent to measured and indicated
mineral resources (exclusive of reserves) as disclosed for
reporting purposes in Canada, except that the SEC only permits
issuers to report "mineralized material" in tonnage and average
grade without reference to contained ounces. We provide disclosure
of mineralized material to allow a means of comparing our projects
to those of other companies in the mining industry, many of which
are Canadian and report pursuant to NI 43-101, and to comply with
applicable disclosure requirements. We caution you not to assume
that all or any part of mineralized material will ever be converted
into Guide 7 compliant reserves.
Technical Reports and Qualified Person
As required by Canadian securities laws, we hereby notify
Canadian investors that the scientific and technical information
concerning our mineral projects in this news release have been
reviewed and approved by a "qualified person" under NI 43-101,
namely our Vice President, Technical Services, W. David Tyler. For
a description of the key assumptions, parameters and methods used
to estimate mineral reserves included in this news release, as well
as data verification procedures and a general discussion of the
extent to which the estimates may be affected by any known
environmental, permitting, legal, title, taxation, socio-political,
marketing or other relevant factors, Canadian investors may view
technical reports prepared for each of our properties as filed on
SEDAR at www.sedar.com. The scientific and technical information in
relation to the San Miguel mineralized material is derived from the
NI 43-101-compliant Technical Report for San Miguel dated and filed
by Paramount August 22, 2014 at sedar.com and Coeur has not
independently reviewed or confirmed this information.
Neither the technical reports nor the statements of any
qualified person filed with the Canadian securities regulatory
authorities are included in, or incorporated by reference in, this
news release. Because the definitions and standards of NI
43-101 differ from those of Guide 7, investors are cautioned that
information contained in reports prepared pursuant to NI 43-101,
like the technical reports, may not be comparable to similar
information that we can disclose in this news release or the other
reports we file with the SEC.
All tons are reported in U.S. standard short ton units. Grades
reported are troy ounces per short ton.
Additional Information and Where to Find It
The proposed transaction will be submitted to Coeur's
stockholders for their consideration. In connection with the
proposed transaction, Coeur will file with the SEC a registration
statement on Form S-4 that will include a joint proxy statement of
Coeur and Paramount that will also constitute a prospectus of
Coeur. Investors and security holders are urged to read the joint
proxy statement/prospectus and any other relevant documents filed
with the SEC when they become available, because they will contain
important information. Investors and security holders may obtain a
free copy of the joint proxy statement/prospectus and other
documents (when available) that Coeur and Paramount file with the
SEC at the SEC's website at www.sec.gov. In addition, these
documents may be obtained from Coeur free of charge by directing a
request to investors@coeur.com.
Participants in Solicitation
Coeur and certain of its directors and executive officers may be
deemed to be participants in the proposed transaction under the
rules of the SEC. Investors and security holders may obtain
information regarding the names, affiliations and interests of
Coeur's directors and executive officers in Coeur's Annual Report
on Form 10-K for the year ended December 31, 2013, which was filed
with the SEC on February 26, 2014, and its proxy statement for its
2014 Annual Meeting, which was filed with the SEC on March 31,
2014. These documents can be obtained free of charge from the
sources listed above. Additional information regarding the
interests of these individuals will also be included in the joint
proxy statement/prospectus regarding the proposed transaction when
it becomes available.
Non-Solicitation
A registration statement relating to the securities to be issued
by Coeur in the proposed transaction will be filed with the SEC,
and Coeur will not issue, sell or accept offers to buy such
securities prior to the time such registration statement becomes
effective. This document shall not constitute an offer to sell or
the solicitation of an offer to buy, nor shall there be any sale of
such securities, in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to appropriate
registration or qualification under the securities laws of such
jurisdiction.
CONTACT: For Additional Information:
Bridget Freas, Director, Investor Relations
(312) 489-5910
Donna Mirandola, Director, Corporate Communications
(312) 489-5842
Mark Harnett, MacKenzie Partners
(212) 929-5877
Tim Lynch / Meaghan Repko, Joele Frank,
Wilkinson Brimmer Katcher
(212) 355-4449
www.coeur.com
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