Alamos Gold Inc. (TSX:AGI)(NYSE:AGI) ("Alamos" or the "Company")
today announced that it will not increase the consideration in its
offer to acquire all of the outstanding shares of Aurizon Mines
Ltd. ("Aurizon"), which expires at 5 p.m. on Tuesday, March 5, 2013
(the "Offer").
"We have reviewed the announcement by the Aurizon board today
regarding its proposed merger with Hecla and strongly believe that
our Offer represents the best available alternative for Aurizon
shareholders," said John A. McCluskey, President and Chief
Executive Officer. "The company that would be created by the
combination of Alamos and Aurizon represents far greater value than
the highly-leveraged, hedged, debt-laden, financially constrained
company proposed by the Aurizon board through the Hecla
merger."
Among the reasons why the Alamos offer represents better value
than the Hecla offer are the following:
-- Hecla Offer is Highly Conditional - The debt financing for the Hecla bid
is conditional upon the merger being approved by 66 2/3% of the Aurizon
shares voted at a meeting for this purpose. Alamos currently owns 16.1%
of the Aurizon shares, and other large shareholders of Aurizon have
confirmed to Alamos today that they are not supportive of the Hecla
transaction, but will support the Alamos Offer, making it impossible for
Hecla to get 66 2/3%.
-- Possible Illegal Break-fee - The Aurizon board has agreed to pay Hecla a
$27.2 million break fee in several scenarios, including where as few as
18% of the Aurizon shares are acquired by Alamos under its existing
offer. Alamos intends to challenge this as it believes this may
constitute an illegal defensive tactic or be otherwise inconsistent with
take-over bid law in Canada. Aurizon shareholders should be free to
determine whether Alamos' offer is superior to the Hecla proposal and
should not be improperly constrained from doing so by the Aurizon board.
-- Hecla is Borrowing Heavily Against Aurizon to Finance the Acquisition -
Alamos can afford this acquisition, while it appears that Hecla cannot.
The company resulting from the Hecla - Aurizon merger proposed by the
Aurizon board will have up to $500 million in debt. Under the Alamos
Offer, the combined company would have no debt.
-- Hecla has Hedged the Gold Production of the Combined Company - Under the
terms of its debt financing for this acquisition, Hecla has agreed to
hedge at least $450 million of revenues from gold production. This
significantly reduces the exposure of Aurizon shareholders to any upside
in the gold price. Under the Alamos Offer, the combined company would be
unhedged.
-- Aurizon Shareholders will receive Hecla Shares - As a result of the pro-
ration mechanism under the Hecla offer, it is likely that all Aurizon
shareholders tendering to the Hecla offer will receive Hecla shares as
consideration, and will not receive cash only.
-- Alamos Low-cost Production - Alamos believes it is a better low-cost
producer with healthy profit margins, earnings, dividends and growth
potential.
-- Alamos Dividend - The Alamos dividend of ten cents per share scheduled
to be paid in April represents a return of cash to shareholders equal in
value on a per share basis to the difference in announced cash value of
the Alamos and Hecla offers of $4.65 and $4.75, respectively.
-- Hecla Environmental Lawsuit - Hecla was required to pay over $263
million plus interest in damages to settle claims stemming from the
release of wastes from its mining operations in Coeur d'Alene, Idaho.
The release of wastes polluted the clean water source, damaging the fish
and wildlife in the area. Hecla has remaining payments of over $70
million in the next two years as part of the settlement.
-- Hecla is not a Gold Company - The Hecla offer would result in
significant silver and base metals exposure to Aurizon shareholders.
Roughly 90% of Hecla's resources, on an in-situ value basis, are
comprised of silver and base metals. Moreover, over 80% of Hecla's
revenues are from silver and base metals (based on 2012 results). The
Hecla offer, if successful, would significantly dilute the exposure of
Aurizon shareholders to gold.
-- Hecla Negative Growth - Since 2009, Hecla has produced less silver year
after year, essentially depriving its shareholders from fully
participating in a period when commodity prices have been at record
highs.
-- Hecla History of Missing Expectations - Hecla has a history of routinely
failing to deliver on targets. In 2012, management provided guidance of
7 million ounces of silver at cash costs of between $1.00 to $2.00 per
ounce. Hecla missed on both metrics, producing only 6.4 million ounces
of silver at cash costs of $2.70 per oz. In 2011, despite initially
guiding to cash costs of zero, revising guidance upwards to $1.00 per
ounce in August 2011 and reiterating it in late November 2011, Hecla
still missed its guidance - posting cash costs of $1.15 per ounce for
2011.
-- Hecla Poor Mine Management - In early 2012, Hecla was ordered by the
United States Department of Labor Mine Safety and Health Administration
("MSHA") to place its Lucky Friday mine on care and maintenance. The
mine was closed for over a year, so that Hecla could remove the sand and
concrete build up on the shaft. Alamos believes the shutdown could have
been averted had Hecla exercised proper shaft maintenance over the
years.
-- Class Action Lawsuit against Hecla - Hecla is currently engaged in a
class action lawsuit which claims that Hecla made false and misleading
statements and omitted certain material information related to the
operational issues at Lucky Friday.
-- Poor Safety Record of Hecla - In 2011 alone, there were 3 separate
occasions where workers were either killed or injured at Hecla's Lucky
Friday mine. The MSHA has fined Hecla on separate occasions over safety
issues.
Alamos believes that the combined company resulting from the
merger of Alamos and Aurizon will be in a far better position to
return value to Aurizon shareholders over the near-, mid- and
long-term, than the company which would result from the Hecla offer
proposed by the Aurizon board. The company resulting from the
proposed merger with Hecla will have far less flexibility
financially and would expose Aurizon shareholders to a much greater
degree of risk than the Alamos Offer.
"We have stated consistently that we are confident that Alamos'
Offer represents full and fair value to Aurizon shareholders. In
pursuing our growth objectives, we will not deviate from the fiscal
discipline that has made us one of the world's most successful gold
miners," said John A. McCluskey, President and Chief Executive
Officer. "Just two weeks ago, we reported by far the best quarter
and year-end results in our history. Alamos is among the
lowest-cost gold producers and has no debt, a robust balance sheet,
excellent cash flow, and an attractive near-term growth
profile.
"Our goals over the next few years include achieving production
that positions us as one of the 25 largest gold mining companies in
the world, while remaining among the 10 lowest-cost mining
companies in the world," Mr. McCluskey said.
How to Tender
Aurizon shareholders are encouraged to continue tendering their
shares by completing the Letter of Transmittal included in the
documents mailed by Alamos. Kingsdale Shareholder Services Inc.
("Kingsdale") is available to assist and can be reached at
1-866-851-3214 (North American Toll Free Number) or 416-867-2272
(outside North America). For shareholders whose certificates are
not immediately available or who cannot deliver the certificates
and all other required documents to Kingsdale prior to the expiry
time, they may accept the Offer by properly completing and duly
executing a Notice of Guaranteed Delivery and returning it to
Kingsdale as specified in the Notice of Guaranteed Delivery. If
Aurizon Shares are held by a broker or other financial
intermediary, Aurizon shareholders should contact such intermediary
and instruct it to tender their Aurizon Shares.
The Offer is open for acceptance until 5:00pm (local time) on
March 5, 2013, unless extended or withdrawn. The Offer is subject
to certain conditions, including, among other things, minimum
acceptance of the Offer by Aurizon shareholders holding, together
with the Aurizon Shares held by Alamos and its affiliates, at least
66 2/3 percent of the outstanding Aurizon Shares calculated on a
fully-diluted basis.
About the Offer
Alamos announced the Offer on January 14, 2013. Alamos filed the
take-over bid circular (the "Circular") and related documents with
the securities regulatory authorities in Canada and the United
States on January 14, 2013. Aurizon shareholders are advised to
read the Circular and the Notice as they contain important
information, including the terms and conditions of the Offer and
the procedures for depositing shares. Additional information about
the Offer or copies of the Circular or the Notice of Extension and
Variation (the "Notice") dated February 19, 2013 may be obtained
free of charge from shareholders' investment advisers, from Dundee
Capital Markets, which is acting as Alamos' dealer manager,
Kingsdale, which is acting as Alamos' depositary and information
agent, at 1-866-851-3214 (North American Toll Free Number) or
416-867-2272 (outside North America) or by directing a request to
the Investor Relations department of Alamos at 416-368-9932 (ext.
401).
On January 14, 2013, Alamos filed with the United States
Securities and Exchange Commission (the "SEC") a Registration
Statement on Form F-10 and a Tender Offer Statement on Schedule TO,
each of which includes the Circular. Alamos encourages shareholders
of Aurizon to read the full details of the Offer set forth in the
Circular and the Notice, which, together, contain the full terms
and conditions of the Offer and other important information as well
as detailed instructions on how Aurizon shareholders can tender
their Aurizon Shares to the Offer. Investors may also obtain a free
copy of the Circular and the Notice and other disclosure documents
filed by Alamos from the System for Electronic Document Analysis
and Retrieval at www.sedar.com and from the SEC's website at
www.sec.gov.
This press release does not constitute an offer to buy or the
solicitation of an offer to sell any of the securities of Alamos or
Aurizon.
About Alamos
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 and Turkey. The Company employs
more than 600 people and is committed to the highest standards of
environmental management, social responsibility, and health and
safety for its employees and neighbouring communities. Alamos has
over US$350 million cash and short-term investments, is debt-free,
and unhedged to the price of gold. As of February 19, 2013, Alamos
had 127,455,786 common shares outstanding (132,326,086 shares fully
diluted), which are traded on the TSX and NYSE under the symbol
"AGI".
Cautionary Note
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.
Note to U.S. Investors
Alamos prepares its disclosure in accordance with the
requirements of securities laws in effect in Canada, which differ
from the requirements of U.S. securities laws. Terms relating to
mineral resources in this presentation 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 United States 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. Alamos
may 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 presentation and are included in the
public filings of Alamos, which have been filed with the SEC and
the securities commissions or similar authorities in Canada).
The TSX and NYSE has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
Contacts: Alamos Gold Inc. Jo Mira Clodman Vice President,
Investor Relations (416) 368-9932 x 401 Kingsdale Shareholder
Services Inc. North American Toll-Free: (866) 851-3214 Outside
North America: (416) 867-2272
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