Strategic Investment
February 19 2008 - 2:02AM
UK Regulatory
RNS Number:2640O
Hochschild Mining PLC
19 February 2008
______________________________________________________________________
19 February 2008
Hochschild Mining plc acquires a 19.99% stake in Lake Shore Gold Corp.
for C$64.6 million
Key Highlights:
- Hochschild Mining plc ("Hochschild") announces a strategic investment
in Lake Shore Gold Corp. ("Lake Shore"), a Toronto listed gold company with
prime exploration and development projects in the Abitibi belt of the Timmins
region, Ontario, Canada
- Initial purchase of 19.99% with the right for Hochschild to increase
its interest to 40% by the end of 2008 (up to 35% through financings and the
balance through the market)
- Total cash consideration of C$64.6 million, funded entirely through
existing cash
- Price of C$2.30 per share represents 30% premium to five day volume
weighted average price
- Proceeds will be used by Lake Shore to continue advancing projects
towards production and accelerating their aggressive exploration campaign
Eduardo Hochschild, Executive Chairman of Hochschild Mining plc, commented;
"At a time when gold companies are struggling to find profitable, high-grade
gold resources, our strategic investment in Lake Shore allows Hochschild to
capture significant exposure to a high-grade, long-life asset in a mining
friendly jurisdiction, without the costs associated with establishing a
greenfield operation. Lake Shore is a well run Canadian mining company with
significant progress towards production and a strong portfolio of projects in a
prolific gold mining region in Canada."
"This step marks a key milestone towards a deepening and mutually beneficial
relationship between the two companies, acknowledging the complementary
strengths of Hochschild's underground mining expertise and Lake Shore's existing
asset base and wealth of geological knowledge of the region. We continue to
invest in high quality assets which we believe will maximize value for our
shareholders in the long term at the same time as offering exciting prospects in
the short term."
Alan Moon, Chairman of Lake Shore Gold Corp., commented;
"This investment by Hochschild is a strong endorsement of Lake Shore's assets
and management. Forming the strategic alliance with Hochschild provides Lake
Shore access to the investment dollars required to become a significant gold
producer, and it also provides access to Hochschild's experience and expertise,
and their extensive network of industry connections, all of which will help Lake
Shore achieve its goals."
"With this commitment of funds from Hochschild, Lake Shore is now positioned to
complete the advanced underground exploration program at Timmins West, the
refurbishment of the Bell Creek mill and dewatering and refurbishing the Bell
Creek mine. This investment and the investment contemplated to bring Hochschild
to 35% will carry Lake Shore into production and expand our exploration
programs."
Hochschild announces that it has made a strategic investment in Lake Shore, a
Toronto listed gold company with prime exploration and development projects in
the Abitibi belt of the Timmins region, Ontario, Canada. This investment will
enable Hochschild to build its exposure to high-grade, long-life gold resources
through a structure that offers significant exploration potential and long term
growth. Lake Shore will direct the proceeds to advancing projects towards
production and accelerating their aggressive exploration campaign.
Hochschild has initially purchased by way of a private placement 28,172,302
common shares representing approximately 19.99% of the non-diluted common shares
of Lake Shore subject to satisfaction of certain conditions. Hochschild has the
right to increase its ownership to 40% (up to 35% through financings and the
balance through the market) on a fully diluted basis by the end of 2008, subject
to Lake Shore shareholder approval. Lake Shore's Board has irrevocably agreed
to support Hochschild's ability to increase its participation beyond the initial
19.99% investment by seeking shareholder approval within the next 60 days.
As part of the overall agreement, Hochschild is subject to a standstill for five
years but is able to make an offer for Lake Shore's remaining outstanding shares
if supported by Lake Shore's Board or if made in response to an offer for Lake
Shore from a third party.
The total cash consideration of C$64.6 million or C$2.30 per share represents a
30% premium over the volume weighted average price of Lake Shore's shares over
the previous five day trading period. Hochschild will finance this amount from
its existing cash.
As part of the agreement, Hochschild has the right to appoint two
representatives to the Lake Shore Board (currently comprising seven members)
and, going forward, will have the right to board representation in proportion to
its ownership interest. In addition, for as long as it maintains its 19.99%
interest in Lake Shore, Hochschild has a right of first offer over any new
property in Canada that Lake Shore decides to joint venture.
Lake Shore provides Hochschild with a foothold into long-life gold deposits in
the Timmins mining district of Northern Ontario, where more than 67 million
ounces of gold have been produced over the past 100 years. In addition to Lake
Shore's exposure to high-quality gold projects, it has an experienced management
team with technical and community relations expertise. Furthermore, Lake Shore
provides Hochschild with significant exploration potential and an impressive
pipeline of projects at various stages of exploration, from grass roots through
to pre-feasibility and a proprietary database of exploration targets.
The strategic investment does not require approval of Hochschild's shareholders.
The strategic investment has been made by private agreement through a
wholly-owned subsidiary within the Hochschild Group. Hochschild does not own
any other shares in Lake Shore.
Hochschild's purchase of 19.99% of the issued share capital of Lake Shore gives
it a proportional interest in the assets of Lake Shore and will be equity
accounted under IFRS.
ends
___________________________________________________________________________
A conference call will be held at 09:30 am (London time) on Tuesday 19 February
for the investment market and a presentation can be found at our website
www.hochschildmining.com under Reports and Presentations.
Dial in details as follows:
UK
+44 20 7162 0125
International
+1 334 323 6203
A recording of the conference call will be available following its conclusion,
accessible from the following telephone numbers:
UK
+44 20 7031 4064
International
+1 954 334 0342
Access code
785748
Enquiries:
Hochschild Mining plc
Wray Barber
+44 (0)20 7152 6014
Head of Investor Relations
Finsbury
Robin Walker
+44 (0)20 7251 3801
Public Relations
Notes to Editors:
About Hochschild
(www.hochschildmining.com)
Hochschild Mining plc (HOCM.L for Reuters / HOC LN for Bloomberg) is a leading
precious metals company listed on the London Stock Exchange with a primary focus
on the exploration, mining, processing and sale of silver and gold. Hochschild
currently operates five underground epithermal vein mines, four located in
southern Peru and one in southern Argentina and one open pit mine in northern
Mexico. Hochschild also has one early stage development project in Mexico and
fifteen long-term prospects throughout Latin America. Hochschild has over forty
years experience in the mining of precious metal epithermal vein deposits.
About Lake Shore
(www.lsgold.com)
Lake Shore Gold Corp. (LSG.TO for Reuters / LSG CN for Bloomberg) is a Toronto
listed mineral exploration company focused on the acquisition, exploration and
development of mineral properties with prospects for hosting economic gold
deposits in the Canadian Shield in Ontario and Quebec. Lake Shore is currently
exploring six high-grade deposits in northern Ontario (Timmins West, Bell Creek,
Vogel/Schumacher, Thunder Creek and Blakelock). The principal and most advanced
property, Timmins West, is located at the west end of the Timmins gold mining
district, 18 kilometres west of the city of Timmins and north of the main
Porcupine-Destor Fault Zone. The Bell Creek complex provides production
capacity and the proximity of the plant to Timmins West, Vogel and Schumacher
helps facilitate Lake Shore's bringing into production profitable ounces quickly
and with minimal capital costs.
Timmins West
Assuming capacity of 1,000 tonnes per day, Timmins West currently has an 11 year
mine life based on reserves. At Timmins West, a pre-feasibility study was
completed by SRK in 2007 and indicated annual production of 71,400 ounces of
gold (using cut reserves) at an estimated cash cost of US$234 per ounce (uncut)
and US$319 per ounce (cut).
Bell Creek
Lake Shore acquired the Bell Creek complex from Goldcorp in 2007. Currently in
care and maintenance, Bell Creek is located immediately adjacent to the Vogel
and Schumacher properties also in the Timmins gold mining district and is only
40 kilometres from the Timmins West property. At Bell Creek, there is an
existing shaft that extends to a depth of 280 metres, and the mill has a nominal
capacity of processing up to 1,500 tonnes per day utilizing gravity
concentration, cyanide leaching and carbon-in-pulp gold absorption process.
Reserves & resources
---------------------
Tonnes Grade (g/t Au) Ounces
---------- ---------- ----------
Timmins West
--------------
Probable reserves (1):
Uncut 3,600,000 10.40 1,200,000
Cut 3,400,000 7.60 830,000
-------------------- ---------- ---------- ----------
Indicated resources (2):
Uncut 3,268,000 12.29 1,291,000
Cut 3,268,000 8.62 905,000
-------------------- ---------- ---------- ----------
Inferred resources (2):
Uncut 968,000 5.79 207,000
Cut 968,000 5.54 174,700
-------------------- ---------- ---------- ----------
Bell Creek (3)
-------------
Indicated resources 190,900 8.25 50,641
Inferred resources 346,000 7.70 85,888
-------------------- ---------- ---------- ----------
Vogel (4)
--------
Measured & indicated resources 642,000 12.2 261,200
Inferred resources 933,800 12.2 379,800
-------------------- ---------- ---------- ----------
Schumacher (5)
-------------
Measured & indicated resources (uncut) 156,000 5.99 30,043
---------- ---------- ----------
--------------------
(1) August 2007 - SRK Consulting and 43-101 compliant
(2) November 2006 - Audited Watts, Griffis and McOuat Limited
(3) 43-101 Compliant, 2004
(4) 1999 CIM Historic Resource
(5) 1997 Historic Resource
For more information on Lake Shore's assets please visit www.lsgold.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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