Alamos Gold Inc. ("Alamos") (TSX:AGI)(NYSE:AGI) and Esperanza
Resources Corp. ("Esperanza") (TSX VENTURE:EPZ)(OTCQX:ESPZF) are
pleased to announce that they have entered into a definitive
agreement (the "Agreement") pursuant to which Alamos has agreed to
acquire all of the issued and outstanding common shares of
Esperanza by way of a court-approved plan of arrangement (the
"Arrangement").
Esperanza is a precious metals exploration and development
company focused on advancing its principal property, the
wholly-owned Esperanza gold project (formerly referred to as the
Cerro Jumil gold project) in Morelos State, Mexico.
Pursuant to the terms of the Agreement, Esperanza shareholders
will receive C$0.85 in cash for each common share of Esperanza
held, representing a premium of approximately 38% to Esperanza's
30-day volume-weighted average price ("VWAP") for the period ending
July 11, 2013. The transaction values Esperanza's equity at
approximately C$69.4 million on a fully diluted in-the-money basis.
In addition, Esperanza shareholders will be issued approximately
five million Alamos warrants in aggregate and existing Esperanza
warrant holders will be issued approximately two million Alamos
warrants in aggregate. The warrants will be listed for trading on
the Toronto Stock Exchange.
"Alamos is very pleased to announce this transaction with
Esperanza" commented Mr. John A. McCluskey, President and Chief
Executive Officer of Alamos. "Esperanza is an excellent strategic
fit within our existing portfolio and in our view, is one of the
best undeveloped opportunities and significant open pit targets in
Mexico. We have followed Esperanza's progress for some time and see
this as a truly compelling opportunity for our shareholders. While
the transaction represents less than 5% of our market
capitalization, it has the potential to grow our production in
Mexico by more than 50%, or nearly 30% on a consolidated
basis."
"This transaction provides an attractive and immediate premium
to our shareholders," said Mr. Greg Smith, President and Chief
Executive Officer of Esperanza. "Further, the cash consideration
provides liquidity and value certainty while the warrants ensure
Esperanza shareholders will retain exposure to the success of the
Esperanza gold project going forward. Alamos Gold is an industry
leader with substantial experience operating in Mexico and the
financial and technical capacity to continue advancing the
Esperanza gold project. Finally, I would like to thank our
employees for their dedication and hard work over the last number
of years and all stakeholders of Esperanza for their support."
Highlights of the Transaction
-- Esperanza gold project is an attractive, open pit, heap leach project
with all in sustaining costs expected to be below $900 per ounce, high
margins and potential for further growth;
-- Adds measured and indicated resources of 1.5 million ounces of gold and
16 million ounces of silver in Mexico, further growing Alamos's presence
in Mexico, a geopolitically stable mining jurisdiction;
-- Esperanza shareholders receive a premium of approximately 38% to
Esperanza's 30-day VWAP;
-- Enhances Alamos's project pipeline by adding an asset with annual
average production potential of over 100,000 ounces, with both total
cash costs and all-in sustaining costs in the lowest quartile;
-- Ability to utilize Alamos's mine permitting and development teams, which
include significant open pit, heap leach expertise, to advance the
Esperanza gold project to production;
-- Ability to fund development and construction of the Esperanza gold
project through Alamos's existing cash resources;
-- Considerable exploration potential on all assets; and
-- Accretive to Alamos NAV, earnings and cash flow with virtually no
dilution to Alamos shareholders.
Overview of Esperanza Gold Project
Upon closing, Alamos will assume ownership of Esperanza's
100%-owned Esperanza gold project well as other various interests
of Esperanza in Mexico and Peru. The Esperanza gold project is an
advanced stage gold project in Morelos, Mexico, with a resource of
1.5 million ounces of gold and 16 million ounces of silver. In
September of 2011 Esperanza completed a Preliminary Economic
Assessment ("PEA") on the Esperanza gold project outlining an
initial six-year mine life with expected production of a total of
0.6 million ounces of gold at an average rate of 103,000 ounces per
year and average cash costs of US$499 per ounce (net of by-product
credits). Applying a conservative gold price assumption of US$1,150
per ounce, the September 2011 PEA base case shows that the
Esperanza gold project has an after-tax internal rate of return of
26% and an after-tax 5% net present value of in excess of C$122
million.
Summary of the Transaction
The acquisition of Esperanza will be completed by way of a
court-approved plan of arrangement, whereby Alamos will acquire
each issued and outstanding share of Esperanza in exchange for
C$0.85 in cash. The aggregate cash consideration to be paid by
Alamos will be approximately $69.4 million based on the currently
issued and outstanding shares of Esperanza as of the date of this
announcement, but will be subject to change depending on the number
of Esperanza options and warrants exercised while the offer is
outstanding.
Pursuant to the Arrangement, Esperanza shareholders will also
receive 0.0625 of a warrant to purchase Alamos common shares at an
exercise price of C$29.48 and expiring on May 24, 2017, resulting
in the issuance of approximately five million Alamos warrants.
Further, each outstanding Esperanza Warrant shall be exchanged for
0.15 of a warrant to purchase Alamos common shares at an exercise
price of C$29.48 and expiring May 24, 2017, resulting in the
issuance of approximately two million Alamos warrants.
The board of directors of Esperanza has unanimously approved the
transaction and will recommend that Esperanza shareholders vote in
favour of the transaction.
Each senior officer and each member of the board of directors of
Esperanza has entered into lock-up agreements with Alamos pursuant
to which each has agreed to vote in favour of the transaction,
which together will represent approximately 6% of the issued and
outstanding common shares of Esperanza.
The terms and conditions of the Agreement will be disclosed in
more detail in the Esperanza management information circular which
is expected to be filed and mailed to Esperanza shareholders in
August, 2013. Completion of the transaction is subject to customary
conditions, including court approvals, a favourable vote of at
least 66 2/3% of the holders of Esperanza common shares voted at a
special meeting of shareholders, and the receipt of all necessary
regulatory and stock exchange approvals. The Agreement includes a
customary non-solicitation clause, right to match covenants and
provides for the payment of a C$2.7 million break fee to Alamos
under certain circumstances.
On July 12, 2013, Esperanza exercised its right to terminate its
agreements with Pan-American Silver dated May 27, 2013 (the "Pan-Am
Agreements") and consequently effective as of the date of such
termination, Esperanza has no further obligations or commitments
under the Pan-Am Agreements and shall not implement the
transactions contemplated therein.
Torys LLP is acting as legal counsel to Alamos.
Haywood Securities Inc. provided a fairness opinion to Esperanza
and its board of directors in connection with the transaction
indicating the transaction is fair from a financial point of view
to the shareholders of Esperanza. Stikeman Elliott LLP is acting as
legal counsel to Esperanza and its board of directors.
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
approximately $490 million in cash and cash equivalents, is
debt-free, and unhedged to the price of gold. As of June 30, 2013,
Alamos had 127,368,986 common shares outstanding (132,016,986
shares fully diluted), which are traded on the TSX and NYSE under
the symbol "AGI".
This news release shall not constitute an offer to sell or a
solicitation of an offer to buy any securities of Alamos or any
other securities, and shall not constitute an offer, solicitation
or sale in any state or jurisdiction in which such an offer,
solicitation or sale would be unlawful. The securities to be
offered by Alamos have not been and will not be registered under
the United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any state securities laws and may not be
offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the U.S.
Securities Act. Alamos intends to offer and sell its securities in
the United States pursuant to the exemption from registration set
forth in Section 3(a)(10) of the U.S. Securities Act.
Cautionary Note
The TSX, TSXV 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.
Each of Alamos and Esperanza 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 news 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 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 and Esperanza 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 news release and are included in the public filings of
Alamos and Esperanza, which have been filed with the SEC and the
securities commissions or similar authorities in Canada).
Contacts: Alamos Gold Inc. Scott K. Parsons Manager, Investor
Relations (416) 368-9932 x 439 www.alamosgold.com Contacts:
Esperanza Resources Corp. Simon Venhuizen Director, Investor
Relations 604-336-8194 or Toll Free:
1-866-890-5509simon@epzresources.com www.epzresources.com
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