VANCOUVER, British Columbia,
Feb. 8, 2016 /CNW/ -- Tahoe
Resources Inc. ("Tahoe") (TSX, BVL: THO, NYSE: TAHO) and Lake Shore
Gold Corp. ("Lake Shore Gold") (TSX: LSG) are pleased to announce
that they have entered into a definitive agreement (the
"Arrangement Agreement") whereby Tahoe will acquire all of the
issued and outstanding shares of Lake Shore Gold (the
"Transaction"). Under the terms of the Arrangement Agreement, all
of the Lake Shore Gold issued and outstanding common shares will be
exchanged on the basis of 0.1467 of a Tahoe common share per each
Lake Shore Gold common share (the "Exchange Ratio"). Upon
completion of the Transaction, existing Tahoe and Lake Shore Gold
shareholders will own approximately 74% and 26% of the pro forma
company, respectively, on a fully-diluted in-the-money basis.
The Exchange Ratio implies a consideration of C$1.71 per Lake Shore Gold common share, based on
the closing price of Tahoe common shares on the Toronto Stock
Exchange (TSX) on February 5, 2016,
representing a 14.8% premium to the closing price of Lake Shore
Gold on February 5, 2016 and a 28.6%
premium to the closing share of Lake Shore Gold on February 4, 2016. Based on each company's 20-day
volume weighted average price on the TSX, the Exchange Ratio
implies a premium of 25.7% and 30.4% to Lake Shore Gold common
shares for the periods ending February 5,
2016 and February 4, 2016,
respectively. The implied equity value (assuming the conversion of
in-the-money convertible debentures) is equal to C$945 million.
Lake Shore Gold operates the low-cost Timmins West and Bell Creek mines in
Timmins, Ontario, Canada. Together
with Tahoe's world class Escobal mine in Guatemala and its low-cost La Arena and
Shahuindo mines in Peru, the
combined company is firmly established as a premier Americas-based
precious metals producer. With a diversified suite of low-cost,
highly prospective assets and a quality pipeline of new development
opportunities, Tahoe is well positioned to sustain and grow its
production base. Further, with zero net debt, sector leading
operating margins, and moderate capital requirements, the combined
company will continue to generate strong free cash flows.
Accordingly, following completion of the Transaction, Tahoe intends
to continue its dividend of US$0.02
cents per share per month.
Highlights of the Transaction
Key investment highlights of the pro forma company include:
- A leading Americas based precious metals producer: The
combined company will have a strong diversified producing platform
anchored by the Escobal mine, one of the largest and highest grade
silver mines globally, and low-cost growing operations in
Peru and Ontario.
- Significant low-cost production: 2016 production
guidance of 18-21 million ounces (mozs) of silver at total cash
costs of US$7.50-US$8.50/oz and
all-in sustaining costs (AISC) of US$10.00-US$11.00/oz and 370,000-430,000 ounces
of gold at total cash costs of US$675-US$725/oz and AISC of US$950-US$1,000/oz. All operations generate free
cash flow in the current commodity price environment.
- Low-risk growth: Growth to be driven by the expansion of
Shahuindo to 36,000 tpd and the advancement of a number of growth
initiatives in Timmins, including
the ramp up of the 144 Gap Deposit, extending the Bell Creek mine
to depth, and the potential for an open-pit mining operation at the
Whitney project.
- Exciting exploration potential: Over 3.4 mozs of M&I
gold resources and 6 mozs of inferred gold resources across 8
exploration projects in Peru and
Canada with strong near-mine
potential to add additional gold resources. Large unexplored land
packages across 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.
Kevin McArthur, Executive Chair
of Tahoe, said, "The combination with Lake Shore Gold
enhances Tahoe's position as the new leader
in precious
metals by adding another low-cost operation
in Timmins, one of the most prolific gold camps in the
world. We are impressed by the long-term presence and see
tremendous regional opportunities going forward. We look
forward to continuing the strong relationships that Lake
Shore Gold has fostered in Timmins with local
stakeholders. Finally, I am very pleased to
welcome Alan Moon, the current Chair of Lake Shore Gold,
to our Board of Directors upon completion of the Transaction, as
well as Tony Makuch, the current CEO
of Lake Shore Gold, to Tahoe's management team as
President of Canadian Operations."
Tony Makuch, President and CEO of
Lake Shore Gold, stated, "The combination with Tahoe represents a
unique opportunity for our shareholders to gain exposure to a
high-quality portfolio of long life producing mines with
substantial mineral reserves. Today's announcement of an initial
resource at our 144 Gap Deposit is a perfect example of the
long-term growth potential of our Timmins portfolio. Tahoe's strong
balance sheet and superior cash generating capabilities will
provide Lake Shore Gold with the financial resources to unlock the
enormous growth potential of our asset base."
Benefits to Tahoe Shareholders
- Establishes a significant presence in Canada with well-established, low-cost
operations, and a talented and focused management team.
- Enhanced high-margin gold production with organic growth
opportunities.
- Strengthens Tahoe's ability to generate strong free cash flow
on a per share basis.
- Addition of significant exploration potential at existing
operations as well as attractive targets in close proximity to
established, well-built mining and milling infrastructure.
- Positions Tahoe to evaluate further consolidation opportunities
in Ontario.
Benefits to Lake Shore Gold Shareholders
- Immediate up-front premium while maintaining meaningful equity
participation.
- Superior financial strength and flexibility to support
advancement of Timmins projects.
- Exposure to a large, long-life reserve base pro forma through
Tahoe's world-class Escobal mine and growing low-cost platform in
Peru.
- Expands operational capabilities, adding proven expertise in
open pit mining.
- Access to an attractive dividend policy.
- Increased trading liquidity, enhanced value proposition and
capital markets profile.
Board of Directors' Recommendations
The Arrangement
Agreement has been unanimously approved by the Boards of Directors
of Tahoe and Lake Shore Gold, and each board recommends that their
respective shareholders vote in favor of the Transaction.
GMP Securities L.P. and BMO Capital Markets have provided
opinions to the Board of Directors of Tahoe and to the Lake Shore
Gold Special Committee, respectively, stating that, and based upon
and subject to the assumptions, limitations, and qualifications set
forth therein, the consideration offered pursuant to the
Transaction is fair, from a financial point of view, to the Tahoe
shareholders and Lake Shore Gold shareholders,
respectively.
Transaction Summary
The proposed business combination
will be effected by way of a Plan of Arrangement completed under
the Canada Business Corporations Act. The Transaction
will require approval by 66 2/3 percent of the votes cast by the
shareholders of Lake Shore Gold at a special meeting of Lake Shore
Gold shareholders. The issuance of Tahoe common shares in
connection with the Transaction will require the approval of a
simple majority of the shareholders of Tahoe voting at a special
meeting. Officers and directors of Lake Shore Gold and Tahoe intend
to enter into voting support agreements, pursuant to which they
will vote their common shares held in favor of the Transaction. 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 includes customary provisions
including non-solicitation provisions, a right to match any
superior proposal and a C$37.8
million termination fee payable to Tahoe under certain
circumstances. A C$20.0 million
termination fee is payable to Lake Shore Gold under certain
circumstances.
A change of control offer will be made for Lake Shore Gold's
outstanding 6.25% convertible senior unsecured debentures (the
"Debentures") in accordance with their trust indenture dated
September 7, 2012. During the 30 day
period following the effective date of the Arrangement Agreement,
Debenture holders will receive notice (the "Debenture Change of
Control Notice") stating that a change of control has occurred
along with an offer to purchase the Debentures at 100% of the
principal amount plus accrued and unpaid interest on the date that
is 30 business days following delivery of the Debenture Change of
Control Notice. As part of the Arrangement Agreement, Lake Shore
Gold has agreed not to purchase any of its outstanding securities.
Accordingly, Lake Shore Gold is suspending its normal course issuer
bid for the Debentures.
Timing
Full details of the Transaction will be
included in the management information circulars of Tahoe and Lake
Shore Gold and are expected to be mailed to their respective
shareholders in early March 2016. It
is anticipated that both shareholder meetings and closing of the
Transaction will take place in early April
2016.
Advisors and Counsel
GMP Securities L.P. and
Canaccord Genuity Corp. acted as financial advisors to Tahoe and
McMillan LLP acted as its legal advisor.
BMO Capital Markets acted as financial advisor to Lake Shore
Gold. Cassels, Brock & Blackwell LLP acted as Lake Shore Gold's
legal advisor.
Conference Call
Tahoe and Lake Shore Gold will host a
joint conference call on Monday, February 8,
2016 at 1:30 p.m. Eastern
Time, or 10:30 a.m. Pacific,
for members of the investment community to discuss the transaction.
The call-in details are as follows:
- Canada & USA toll-free: 1-800-319-4610
- Outside of Canada &
USA: 1-604-638-5340
A copy of the merger investor presentation is also available on
the Tahoe and Lake Shore Gold investor pages at
www.tahoeresourcesinc.com/merger and www.lsgold.com, respectively.
An audio recording of the conference call will be made available
shortly after the call on the Tahoe and Lake Shore Gold investor
pages.
About Tahoe
Tahoe's strategy is to responsibly
operate precious metals mines in the Americas and to deliver
long-term shareholder value through share price appreciation,
shareholder dividends and bottom-line growth. Tahoe is a member of
the S&P/TSX Composite and TSX Global Mining indices and the
Russell 3000 on the NYSE. Tahoe is listed on the TSX and BVL as THO
and on the NYSE as TAHO.
In accordance with IFRS requirements Tahoe is conducting an
annual review of the carrying value of its assets, including
goodwill, for possible impairment charges in the fourth quarter.
The analysis, which is dependent upon various assumptions including
metal price forecasts over the remaining life of the assets, is
expected to be finalized in Q1 for inclusion in the fourth quarter
financial results.
About Lake Shore Gold
Lake Shore Gold is a
Canadian-based gold producer with operations based in the Timmins
Gold Camp of Northern Ontario.
Lake Shore Gold produces gold from two mines, Timmins West and Bell Creek, with material being
delivered for processing to the Bell Creek Mill. In addition to
current mining and milling operations, Lake Shore Gold also has a
number of highly prospective projects and exploration targets, all
located in and around the Timmins Camp. Lake Shore Gold's common
shares trade on the TSX and NYSE MKT under the symbol LSG.
Qualified Person Statement
The technical and
scientific information contained in this news release has been
reviewed and approved by Charlie
Muerhoff, Tahoe's Vice President Technical Services and
Qualified Person as defined by National Instrument 43-101 (NI
43-101) and Eric A. Kallio, P.Geo.,
Lake Shore Gold's Senior Vice President of Exploration and a
Qualified Persons according to the definitions of NI 43-101.
Cautionary Notes
This press release includes certain
non-GAAP financial measures throughout this document which include
total cash costs and all-in sustaining costs per silver and per
gold ounce. These measures are not defined under IFRS and should
not be considered in isolation. Further information regarding the
use of these measures and quantitative reconciliations from such
non GAAP financial measures to the most directly comparable measure
presented in each company's financial statements are provided in
Tahoe's press release dated January 14,
2016 and are referenced in Lake Shore Gold's press release
dated January 8, 2016.
Forward-Looking Statements
This release contains
"forward-looking information" within the meaning of applicable
Canadian securities legislation, and "forward-looking statements"
within the meaning of the United States Private Securities
Litigation Reform Act of 1995 (collectively referred to as
"forward-looking statements"). All statements, other than
statements of historical fact, are forward-looking statements.
Forward-looking statements include, but are not limited to,
statements or information related to: the expected benefits of the
Transaction and the details related to the expected completion of
the Transaction; the Company's dividend policy following completion
of the Transaction; 2016 operations outlook and production guidance
for both Tahoe and Lake Shore Gold, including estimated unit costs
per ounce of silver and gold and estimated capital costs; and the
expected change of control offer for the Lake Shore Gold
convertible debentures.
Forward-looking statements are based on the reasonable
assumptions, estimates, analyses and opinions of management made in
light of its experience and its perception of trends, current
conditions and expected developments, as well as other factors that
management believes to be relevant and reasonable in the
circumstances at the date that such statements are made, but which
may prove to be incorrect. Management believes that the assumptions
and expectations reflected in such forward-looking statements are
reasonable. Assumptions have been made regarding, among other
things: obtaining shareholder, regulatory and court approvals, and
the timing therefor; the Tahoe and Lake Shore Gold's ability to
carry on exploration and development activities, including
construction; the timely receipt of required approvals; the price
of silver, gold and other metals; prices for key mining supplies,
including labor costs and consumables, remaining consistent with
the Company's current expectations; production meeting expectations
and being consistent with estimates; plant, equipment and processes
operating as anticipated; there being no material variations in the
current tax and regulatory environment; the Company's ability to
operate in a safe, efficient and effective manner; the exchange
rates among the Canadian dollar, Guatemalan quetzal, Peruvian nuevo
sol and the United States dollar
remaining consistent with current levels; and the Company's ability
to obtain financing as and when required and on reasonable terms.
Readers are cautioned that the foregoing list is not exhaustive of
all factors and assumptions which may have been used.
Forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that may cause actual
results to be materially different from those expressed or implied
by such forward-looking statements. Such risks, uncertainties and
other factors include but are not limited to: the Company's
dependence on the Escobal and La Arena mines; the fluctuation of
the price of silver, gold and other metals; changes in national and
local government legislation, taxation and controls or regulations;
social unrest, and political or economic instability in
Guatemala and/or Peru; the availability of additional funding
as and when required; the speculative nature of mineral exploration
and development; the timing and ability to maintain and, where
necessary, obtain necessary permits and licenses; the uncertainty
in the estimation of mineral resources and mineral reserves; the
uncertainty in geologic, hydrological, metallurgical and
geotechnical studies and opinions; infrastructure risks, including
access to water and power; the impact of inflation; changes in the
administration of governmental regulation, policies and practices;
environmental risks and hazards; insurance and uninsured risks;
land title risks; risks associated with illegal mining activities
by unauthorized individuals on the Company's mining or exploration
properties; risks associated with competition; risks associated
with currency fluctuations; contractor, labor and employment risks;
dependence on key management personnel and executives; the timing
and possible outcome of pending or threatened litigation; the risk
of unanticipated litigation; risks associated with the repatriation
of earnings; risks associated with negative operating cash flow;
risks associated with the Company's hedging policies; risks
associated with dilution; and risks associated with effecting
service of process and enforcing judgments. For a further
discussion of risks relevant to the Company, see the Company's
Annual Information Form available on SEDAR under the heading
"Description of Our Business – Risk Factors".
Although management has attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward-looking statements, there may be other factors
that cause results not to be as anticipated, estimated or intended.
There is no assurance that forward-looking statements will prove to
be accurate, as actual results and future events could differ
materially from those anticipated in such forward-looking
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. The Company does not undertake to
update any forward-looking statements, except as, and to the extent
required by, applicable securities laws.
For Further Information, Please Contact:
Tahoe Resources Inc.
Ira M.
Gostin, Vice President Investor Relations
investors@tahoeresourcesinc.com
Tel: 775-448-5807
Lake Shore Gold Corp.
Tony Makuch
President & CEO
(416) 703-6298
Mark Utting
Vice-President, Investor Relations
Lake Shore Gold
(416) 703-6298
Website: www.lsgold.com
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SOURCE Tahoe Resources Inc.