TIDMHOC
RNS Number : 4854P
Hochschild Mining PLC
02 October 2013
2 October 2013
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN OR INTO THE UNITED STATES. THIS ANNOUNCEMENT DOES NOT CONSTITUTE
OR FORM A PART OF ANY OFFER TO SELL OR SOLICITATION OF AN OFFER TO
PURCHASE OR SUBSCRIBE FOR SECURITIES IN THE UNITED STATES,
AUSTRALIA, CANADA, SOUTH AFRICA, JAPAN JERSEY OR PERU OR ANY
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.
Hochschild Announces Proposed Acquisition of Pallancata and
Inmaculada Minorities
Highlights
-- Proposed acquisition of IMZ's 40% stake in the Pallancata
mine and Inmaculada Advanced Project for a total value of
approximately $280 million, including net cash consideration of
$271 million
-- Transaction to be structured as an acquisition of the IMZ
common shares not currently held by Hochschild, after the spin-out
of the remaining assets to existing IMZ shareholders
-- Consolidates minority shareholding in assets already controlled and operated by Hochschild
-- Reduces average unit cost
-- Equity placing of between 4.99% - 9.99% of Hochschild's
outstanding share capital, representing approximately $48 - $96
million[1], of which Eduardo Hochschild has irrevocably undertaken
to subscribe for the lower of 4.99% of the total issued share
capital of the Company and $50 million (see concurrent 2 October
2013 Placing Announcement for further details).
-- $340 million acquisition bridge financing facility arranged,
subject to cancellation of the $140 million Suyamarca loan
facility
-- Crespo project to be deferred to focus capex spend on Inmaculada Project
The Acquisition
Hochschild Mining plc ("Hochschild" or the "Company") is pleased
to announce that it has entered into a binding agreement to acquire
the 40% interests held by International Mineral Corporation ("IMZ")
in the Pallancata mine and Inmaculada Advanced Project in Peru (the
"Peruvian Assets", and collectively the "Acquisition"). The
transaction will be executed by way of a court-approved Plan of
Arrangement under the Business Corporations Act (Yukon) (the
"Canadian Act"). Prior to the Acquisition, Hochschild holds a 60%
interest in the Peruvian Assets.
In connection with the Acquisition, each IMZ shareholder (other
than Hochschild or its affiliates) will receive a cash payment of
$2.38 per IMZ share (for aggregate cash consideration of $271
million) and each IMZ shareholder (including Hochschild or its
affiliates) will receive one common share of a newly incorporated
British Columbia, Canada company ("SpinCo") per share. Under the
terms of the Acquisition, Hochschild will acquire the Peruvian
Assets for a total value of approximately $280 million, taking into
account the cash payment of $271 million, the undisturbed market
value of Hochschild's existing 3.2% shareholding in IMZ, and the
3.2% shareholding in SpinCo which Hochschild will retain.
Assuming all conditions are satisfied or waived (where
applicable), Hochschild currently expects the Acquisition to be
completed by the end of Q4 2013.
Financing
As the first stage of a broader corporate refinancing
initiative, Hochschild:
-- Has raised commitments for a $340 million acquisition bridge
financing facility (the "Facility"), subject to cancellation of the
$140 million Suyamarca loan facility; and
-- Is undertaking an equity placing to institutional investors,
including Eduardo Hochschild, of between 4.99% - 9.99% of
Hochschild's outstanding share capital, representing approximately
$48 - $96 million[2] (the "Placing").
These new resources are in addition to Hochschild's existing
cash balance of $275 million (at 31 July 2013) and its remaining
21.1% stake in Gold Resource Corporation (as described in
Hochschild's 2013 Interim Results). These facilities have been
sized to provide Hochschild with the requisite funding to fully
support the Company's anticipated capital expenditure at Inmaculada
of $230 million and to provide capacity to satisfy the Company's
upcoming convertible bond maturity in October 2014.
A review of bond and bank refinancing alternatives for the
second stage of Hochschild's balance sheet refinancing is being
undertaken by Hochschild and its advisors.
Ignacio Bustamante, Chief Executive Officer, commented:
"We are excited to be announcing today a strategic milestone for
Hochschild by consolidating ownership in Pallancata, currently our
biggest cash flow generator and Inmaculada, our most exciting
growth project. This step is consistent with our strategy of value
accretive acquisitions with significant geological potential in a
jurisdiction in which Hochschild has almost 50 years of
experience.
Hochschild and IMZ have enjoyed an excellent relationship over
the last few years and the joint venture has benefited greatly from
each other's respective skill sets. However, thistransaction
represents an important opportunity to increase our exposure to our
southern Peru cluster, reduce our overall operating cost position
and to potentially enhance our cash flow generating potential at no
additional ongoing administrative cost."
This summary should be read in conjunction with the full text of
this announcement.
______________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
BofA Merrill Lynch +44 (0)20 7628 1000
Omar Davis
Ken McLaren
Edward Peel (Corporate Broking)
Matthew Blawat (Corporate Broking)
Goldman Sachs International +44 (0)20 7774 1000
Richard Cormack
Dominic Lee
Adrian Beidas
Duncan Stewart
RBC Capital Markets +1 416 842 7588
Justin Barr
Timothy Loftsgard
J.P. Morgan Cazenove +44 (0)20 7777 2000
Ben Davies
RLM Finsbury
Charles Chichester (Public Relations) +44 (0)20 7251 3801
______________________________________________________________________
A live conference call & audio webcast will be held at
8:30am (London time) on Wednesday 2 October 2013 for analysts and
investors. Details as follows:
For a live webcast of the presentation please click on the link
below:
http://www.media-server.com/m/p/hf9z4hgp
Conference call dial-in details:
UK: +44 (0)20 3427 0503 (Please use the following confirmation
code: 6781983).
A recording of the conference call will be available for one
week following its conclusion, accessible from the following
telephone number:
UK: +44 (0)20 3427 0598 (Access code: 6781983)
The On Demand version of the webcast will be available within
two hours after the end of the presentation and is accessible using
the same webcast link.
Notes and Disclaimers:
Note: All dollar amounts in this announcement refer to U.S.
dollars.
This announcement may contain certain forward-looking statements
with respect to Hochschild's expectation and plans, strategy,
management's objectives, future performance, production, costs,
revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that may occur in the future.
There are a number of factors which could cause actual results or
developments to differ materially from those expressed or implied
by these forward looking statements and forecasts. The statements
have been made with reference to forecast price changes, economic
conditions and the current regulatory environment. Nothing in this
presentation should be construed as a profit forecast. Past share
performance cannot be relied on as a guide to future performance.
Except as required by applicable law or regulation, the Group does
not undertake any obligation to update or change any
forward-looking statements contained in this announcement or any
other forward-looking statement it may make.
This announcement does not constitute or form part of an offer
or solicitation to purchase or subscribe for shares in the capital
of the Company in the United States. The securities referred to
herein have not been and will not be registered under the United
States Securities Act of 1933, as amended (the "Securities Act") or
with any securities regulatory authority of any state or other
jurisdiction of the United States and may not be offered, sold,
resold, transferred or delivered, directly or indirectly, in the
United States except pursuant to registration under, or an
exemption from the registration requirements of, the Securities
Act. The Placing securities referred to in this announcement are
being offered and sold only outside the United States in "offshore
transactions" (as defined in Regulation S) meeting the requirements
of Regulation S and may be made within the United States to
institutional investors who are qualified institutional buyers
within the meaning of Rule 144A under the Securities Act in
transactions that are exempt from, or not subject to, the
registration requirements under the Securities Act. There will be
no public offering of securities in the United States.
Merrill Lynch International ("BofA Merrill Lynch"), which is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority, is acting exclusively for Hochschild and no-one else in
connection with the Acquisition and the Placing. Merrill Lynch
International will not regard any other person as its client in
relation to the Acquisition or the Placing and will not be
responsible to anyone other than Hochschild for providing the
protections afforded to its clients, nor for providing advice in
relation to the Acquisition, the Placing, the contents of this
announcement or any transaction, arrangement or other matter
referred to herein.
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority, is
acting for Hochschild and no one else in connection with the
distribution of this document and will not be responsible to anyone
other than Hochschild for providing the protections afforded to
clients of Goldman Sachs International nor for providing advice in
connection with the Acquisition or the Placing.
J.P. Morgan Cazenove, which is authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority, is acting for
Hochschild and no one else in connection with the distribution of
this document and will not be responsible to anyone other than
Hochschild for providing the protections afforded to clients of
J.P. Morgan Cazenove nor for providing advice in connection with
the Acquisition or the Placing.
RBC Capital Markets is a trading name used by subsidiaries of
the Royal Bank of Canada including RBC Dominion Securities Inc.,
RBC Capital Markets LLC and RBC Europe Limited (collectively, "RBC
Capital Markets"). RBC Europe Limited, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority, is
acting for Hochschild and no one else in connection with the
distribution of this document and will not be responsible to anyone
other than Hochschild for providing the protections afforded to
clients of RBC Europe Limited nor for providing advice in
connection with the Acquisition or the Placing.
Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA"), is a Spanish
Bank authorised and regulated by the Bank of Spain, is acting
exclusively for Hochschild and no-one else in connection with the
Acquisition and the Placing. BBVA will not regard any other person
as its client in relation to the Acquisition or the Placing and
will not be responsible to anyone other than Hochschild for
providing the protections afforded to its clients, nor for
providing advice in relation to the Acquisition, the Placing, the
contents of this announcement or any transaction, arrangement or
other matter referred to herein.
Hochschild Announces Proposed Acquisition of Pallancata and
Inmaculada Minorities
1. Overview of the Acquisition
Hochschild is pleased to announce that it has entered into a
binding agreement to acquire the 40% interests held by IMZ in the
Peruvian Assets. The transaction will be executed by way of a
court-approved Plan of Arrangement under the Canadian Act. Prior to
the Acquisition, Hochschild holds a 60% interest in the Peruvian
Assets.
In connection with the Acquisition, each IMZ shareholder (other
than Hochschild or its affiliates) will receive a cash payment of
$2.38 per IMZ share (for aggregate cash consideration of $271
million) and each IMZ shareholder (including Hochschild or its
affiliates) will receive one common share of SpinCo per share.
Under the terms of the Acquisition, Hochschild will acquire the
Peruvian Assets for a total value of approximately $280 million,
taking into account the cash payment of $271 million, the
undisturbed market value of Hochschild's existing 3.2% shareholding
in IMZ, and the 3.2% shareholding in SpinCo which Hochschild will
retain.
2. Information on IMZ and the Peruvian Assets
IMZ is a Canadian public company headquartered in Scottsdale,
Arizona, with interests in gold and silver properties, both
producing and under development, in Peru and the USA. The company
currently is listed on the Toronto and Swiss stock exchanges under
the symbol "IMZ" and quoted on the Frankfurt stock exchange under
the symbol "MIW". 117,636,376 common shares are issued and
outstanding, 3,755,746 shares (3.2%) of which are owned by
Hochschild.
Hochschild is primarily acquiring IMZ's 40% interests in two
mineral assets in Peru:
-- Pallancata, an underground mine principally producing silver
since 2007, with current annual production of 7.4 million ounces of
silver and 26,230 ounces of gold and an estimated resource mine
life of 7.4 years based on existing measured and indicated
resources; and
-- Inmaculada, an underground gold and silver deposit scheduled
for production in Q4 2014. It has an expected total production of
approximately 12 million silver equivalent ounces per annum and an
estimated mine life of at least 6.3 years based on existing
resources. On 20 September 2013, Hochschild announced that the
Peruvian government had approved the mill construction permit for
Inmaculada. This represents completion of the final stage of the
project's construction permitting process with commissioning on
track for Q4 2014.
Hochschild owns the remaining 60% in each asset and operates
both assets. Consolidating 100% of both assets will increase the
Company's geographic production exposure to Peru to approximately
85% once Inmaculada is at full production.
3. Rationale for the Acquisition
The Board of Hochschild believes that the Acquisition will have
the following effect on the Company:
-- The acquisition of the IMZ minority interests will allow a
low risk consolidation of well understood assets already controlled
and operated by Hochschild. The Pallancata mine has, since its
commissioning in 2007, grown to become Hochschild's biggest current
cash flow generator and one of the most important contributing
assets in the portfolio with strong potential to continue to expand
the resource life-of-mine as well as the incorporation of
additional higher grade veins. The Inmaculada project has been
progressed through Hochschild's project pipeline since the
acquisition of a controlling stake from IMZ in 2010 and a
feasibility study was published in January 2012. Following the
recent approval of the final construction permit by the Peruvian
government, the project is moving into its final phase of plant
construction and is on track to commission in Q4 2014. The
consolidation of the IMZ assets is also expected to deliver tax
efficiencies going forward arising from the intended merging of the
Compania Minera Ares and Suyamarca entities, which is expected to
be executed following completion of the Acquisition.
-- The consolidation of the IMZ assets will deliver production
growth in a familiar, low risk jurisdiction at no additional
administrative cost to the Company. Hochschild has been operating
in the south west of Peru for almost 50 years, a region with
increasingly strong government support for the mining industry. Its
cluster strategy has allowed it to build up a strong local
reputation and amongst the local governments, communities and
suppliers in remote areas. As well as the Pallancata mine and the
Inmaculada project, Hochschild also operates the original Arcata
mine, the Selene plant close to Pallancata and the smaller Ares
operation.
-- The Inmaculada mine is expected to be the lowest cost
producer in the Hochschild portfolio. The feasibility study
estimated the operating costs of the Inmaculada operation to be in
line with those of Pallancata. Initial production set to be mined
from the single wide 'Angela' vein, extraction is expected to be
relatively simple with reduced dilution and overall operating costs
and sustaining capital expenditure expected to be the lowest of all
of Hochschild's operating assets. In addition, the consolidation of
the Pallancata mine, which is currently Hochschild's lowest cost
operation will also contribute to the lowering of the Company's
average cash cost.
-- The acquisition of the IMZ minority stake increases exposure
to the exciting Inmaculada project with strong geological upside
potential. The feasibility study details a base case average annual
production of approximately 12 million silver equivalent ounces per
annum. However, Hochschild strongly believes that the mineable
resource base will be expanded by upgrading the inferred mineral
resources in the south west and north east extensions of the Angela
vein, into the reserve category through additional definition
drilling work. In addition, the Inmaculada district hosts over 25
kilometres of gold/silver-bearing quartz veins of the low
sulphidation type which remain largely untested.
4. Structure of the Acquisition
In connection with the Acquisition, each IMZ shareholder (other
than Hochschild or its affiliates) will receive a cash payment of
$2.38 per IMZ share (for aggregate cash consideration of $271
million) and each IMZ shareholder (including Hochschild or its
affiliates) will receive one common share of SpinCo per share.
As a condition to the completion of the Acquisition, IMZ will
transfer all of its assets (other than the Peruvian Assets) and all
of its liabilities (other than the liabilities related to the
Peruvian Assets), to SpinCo that will initially be a wholly-owned
subsidiary of IMZ (the "IMZ Internal Re-organisation"). The IMZ
Internal Re-organisation will be effected pursuant to the terms of
a master re-organisation agreement among IMZ, SpinCo and the
directly-held, non-Peruvian subsidiaries of IMZ. The following
non-Peruvian assets and liabilities of IMZ will be transferred to
SpinCo prior to closing: (i) IMZ's remaining cash and receivables
(estimated at approximately $58 million) and (ii) IMZ's
non-Peruvian (primarily Nevada) subsidiaries and related
liabilities.
As required by Canadian securities laws, IMZ has obtained a
formal, independent valuation of the IMZ shares and SpinCo shares.
The formal valuation results are required to be included in the
notice and materials for the IMZ shareholder meeting.
SpinCo intends to apply to have its shares listed on a Canadian
stock exchange and IMZ's shareholders (including Hochschild through
an affiliate) will receive shares of SpinCo by way of a plan of
arrangement under the Canadian Act in proportion to their existing
shareholdings in IMZ. Any listing will be subject to meeting the
initial listing requirements of such exchange, and there can be no
assurance as to if, or when, the SpinCo shares will be listed or
traded on any such stock exchange.
Hochschild (through a newly established Canadian acquisition
subsidiary) will acquire 100% of the common shares of IMZ (which
will, at this stage, hold only the Peruvian Assets and liabilities
related to the Peruvian Assets) that it does not already own by way
of the plan of arrangement under the Canadian Act. In connection
with the Acquisition of the Peruvian Assets, Hochschild will be
acquiring and retaining the current listed company, IMZ. SpinCo has
indemnified the Company and certain other entities with respect to
all damages that they may suffer or incur as a result of, or
arising directly or indirectly out of, or in connection with, or
from the failure of SpinCo to satisfy any assumed liability, which
includes liabilities and obligations of IMZ related to the
non-Peruvian companies being transferred to SpinCo as well as
change of control payments, the termination fee, and taxes which
may become payable as a result of the re-organisation or the
distribution of SpinCo shares, as well as tax liabilities for
taxation years ending prior to the acquisition. To the extent that
the indemnity is insufficient or unenforceable, the Company or IMZ
may be liable for such liabilities after the acquisition.
In connection with and for the sole purpose of implementing the
plan of arrangement under the Canadian Act, Hochschild and IMZ will
enter into an arrangement agreement under Canadian law (the
"Arrangement Agreement") which will contain customary terms and
conditions of a transaction of this nature including, but not
limited to: (a) unanimous and unqualified support of both
Hochschild's and IMZ's board of directors and a positive
recommendation from each respective board of directors to its
shareholders, (b) usual representations, warranties and covenants,
including to carry-on business in the ordinary course, conditions
and completion mechanics for the Acquisition, and (c) a
non-solicitation covenant on the part of IMZ, subject to customary
"fiduciary out" provisions, that entitles IMZ to consider and
accept a superior proposal, and a right in favor of Hochschild to
match any superior proposal within five business days, during which
time it may (but is not required) to amend the terms of this
transaction to match or better any superior proposal that may
arise.
If the Arrangement Agreement is terminated in certain
circumstances, including: (a) if IMZ enters into an agreement with
respect to a superior proposal; (b) if the Board of Directors
withdraws or modifies its recommendation with respect to the
proposed transaction; or (c) IMZ shareholders do not approve the
Acquisition, a termination fee of $10 million would be payable by
IMZ to Hochschild. A termination fee of $10 million would be
payable by Hochschild to IMZ should the transaction not close in
the event of material adverse change in the price of gold or
silver.
It is intended that IMZ will de-list from the TSX and the SIX
Swiss Exchange and end the quotation of its shares on the Frankfurt
stock exchange upon the closing of the Acquisition.
5. Hochschild Irrevocable Undertaking
The Acquisition is treated as a Class 1 transaction for
Hochschild under the Listing Rules of the United Kingdom, and
therefore Hochschild is required to obtain shareholder approval for
the Acquisition in an extraordinary general meeting. The
Acquisition also constitutes a related party transaction under
chapter 11 of the Listing Rules of the United Kingdom. As such,
completion of the Acquisition is also conditional, amongst other
things, on approval being received from the shareholders of
Hochschild at the extraordinary general meeting of Hochschild. An
extraordinary general meeting of Hochschild will be held for the
purposes of approving the Acquisition. A notice convening the
extraordinary general meeting will be set out in the circular to
Hochschild shareholders, which will be published and posted to
Hochschild shareholders in due course.
Eduardo Hochschild, Executive Chairman of Hochschild Mining plc,
has provided an irrevocable undertaking to vote all his current
issued shares in Hochschild, representing, in aggregate,
182,415,206 shares, or 54.0% of the currently issued share capital,
as well as all shares that he indirectly subscribes to as part of
the Placing, in favour of the acquisition at an extraordinary
general meeting of Hochschild shareholders that will be convened in
due course to approve the Acquisition.
The Hochschild Board considers the Acquisition to be in the best
interests of the Company's Shareholders as a whole. Accordingly,
the Board unanimously recommends the Company's Shareholders to vote
in favour of the Acquisition, as each individual Director intends
to do in respect of their own beneficial holdings, at the
extraordinary general meeting of Hochschild to be held in due
course.
6. IMZ Voting Arrangements
Approval of the Acquisition will require the favourable vote of
IMZ securityholders of at least: (a) 66 2/3% of the votes cast by
IMZ securityholders, and (b) a simple majority of the votes cast by
minority shareholders of IMZ (excluding Hochschild's 3.76 million
shares and any other shares of any other shareholders to be
excluded pursuant to applicable Canadian securities laws) who vote
in person or by proxy at an annual and special meeting of IMZ.
Customary voting agreements for a Canadian transaction of this
nature have also been entered into between the Company and
directors and officers of IMZ, pursuant to which such shareholders
have agreed to support and vote in favour of the Acquisition at the
annual and special meeting of IMZ in relation to the Acquisition.
Locked--up common shares held by directors and officers of IMZ
represent in the aggregate approximately 2.4% of the common shares
of IMZ calculated on a non--diluted basis. Taking into account
Hochschild's indirect 3.2% shareholding in IMZ, it is expected that
approximately 5.6% of the common shares of IMZ outstanding on a
non--diluted basis shall be voted in favour of the Acquisition
pursuant to voting agreements. Further, following the public
announcement of this proposed transaction, IMZ has undertaken to
use commercially reasonable efforts to obtain support for the
Acquisition by obtaining signed voting agreements from
non-management IMZ shareholders. Acceptance of a superior proposal
(as defined in the Arrangement Agreement) by IMZ automatically
terminates the obligations under the above voting agreements with
Hochschild.
7. Financing
As the first stage of a broader corporate refinancing
initiative, Hochschild has raised commitments for a $340 million
senior secured bridge loan facility, subject to cancellation of the
$140 million Suyamarca loan facility and is today undertaking an
equity placing to institutional investors, including Eduardo
Hochschild, of between 4.99% - 9.99% of Hochschild's outstanding
share capital, representing approximately $48 - $96 million[3] (see
concurrent 2 October 2013 Placing Announcement).
The Facility has been entered into via a commitment letter with
BofA Merrill Lynch, BBVA and Goldman Sachs (the "Lenders" or "Lead
Arrangers"). The Facility will be made available to Compañía Minera
Ares, S.A.C. a Peruvian sociedad anónima cerrada (the "Borrower"),
a wholly-owned subsidiary of Hochschild, by the Lenders, with
Hochschild, Hochschild Mining (Perú) S.A. and Minera Suyamarca
S.A.C., among others, as Guarantors, subject to satisfactory
completion of final loan documentation and other customary
conditions, and may be further syndicated. The closing date is
expected to occur substantially concurrently with the closing of
the Acquisition (the "Closing Date").
The Facility will have two tranches: (i) $270 million to finance
the acquisition of all of the equity interests in IMZ not then
owned by the Borrower and its affiliates, and (ii) $70 million
available until 31 January 2014, to finance working capital and
other general corporate purposes. The aggregate principal amount of
the Facility is up to $340 million at an initial coupon of LIBOR
plus a margin between 250 - 475 basis points, dependent on (i)
rating, (ii) a market flex mechanism and (iii) an increasing
ratchet over time between three and 16 months post-closing to a
maximum margin of 600 - 800 basis points. The Borrower shall also
pay the lenders under the Facility a commitment fee at a rate per
annum equal to 35% of the then Applicable Margin on the daily
average amount of the commitments of the Senior Lenders in respect
of the Facility and will commence to accrue on the date on which
the credit agreement evidencing the Facility is executed, and shall
cease to accrue on the date on which the commitments in respect of
the Facility terminate.
The Facility contains customary terms pursuant to which the Lead
Arrangers can require the issuance of debt instruments to refinance
the Facility subject to certain caps on yield dependent on whether
the Company has obtained a credit rating and, if so, the level of
the rating obtained. Such conversion may be required at any point
from 1 February 2014, and the highest yield at which such take-out
financing could be set is fixed at a rate equal to the indicative
yield the Company would pay to issue debt securities if it were to
issue them on signing of the Facility, plus a spread of 275 basis
points.
All interest and fees payable by the Borrower to the Lenders
under the Facility will be payable in U.S. Dollars. The Facility
will be secured by, among others, a valid and perfected first
priority lien and security interest in favour of the senior lenders
in all shares of capital stock of, and equity rights in the
Borrower and each Guarantor, other than Hochschild (the
"Collateral"). The Facility will mature on the 12 month anniversary
of the Closing Date, but may be extended by the Borrower for an
additional 4 months. The Facility can be repaid prior to
maturity.
The Company is also undertaking an equity placing of between
4.99% - 9.99% of Hochschild's outstanding share capital,
representing approximately $48 - $96 million[4] at the time of
announcement of the Acquisition. The Placing is not conditional
upon completion of the Acquisition. Therefore subject to the
conditions of the Placing being satisfied and the placing agreement
not being terminated, the net proceeds of the Placing will be
collected before completion of the Acquisition. Eduardo Hochschild
has irrevocably undertaken to subscribe, through Inversiones
Pacasmayo S.A. (an entity controlled by him), for the lower of: (i)
such number Placing Shares as is equal to an amount representing
not more than 4.99 per cent. of the total issued share capital of
the Company prior to completion of the Placing and (ii) such number
of Placing Shares as results in an aggregate consideration of an
amount equal to not less than $50,000,000 being payable for such
Placing Shares such that immediately following completion of the
Placing, Eduardo Hochschild will indirectly hold not less than
50.1% of the total issued share capital of the Company on a fully
diluted basis. This commitment is subject to the Placing proceeding
in accordance with the terms of the Placing Agreement and the
Placing Agreement not being terminated prior to admission. Further
details of the Placing can be found in the Placing Announcement to
be announced separately today.
These new resources are in addition to Hochschild's existing
cash balance of $275 million (at 31 July 2013) and its remaining
21.1% stake in Gold Resource Corporation (as described in
Hochschild's interim results). These facilities have been sized to
provide Hochschild with the requisite funding to fully support the
Company's anticipated capital expenditure at Inmaculada of $230
million and to provide capacity to satisfy the Company's upcoming
convertible bond maturity in October 2014.
A review of bond and bank refinancing alternatives for the
second stage of Hochschild's balance sheet refinancing is being
undertaken by Hochschild and its advisors.
8. Financial Effects
Hochschild expects the Acquisition to be earnings enhancing in
the first full year of ownership.
The Pallancata and Inmaculada operations are currently fully
consolidated in Hochschild's accounts. As a result, the primary
impact of the Acquisition on Hochschild's profits before
subtracting non-controlling interests will be an increase in
finance costs, and the only impact on Hochschild's balance sheet
other than a reduction in non-controlling interests will be a
change to the Company's cash and debt position as a result of the
acquisition financing. Profit attributable to non-controlling
interests will reduce materially, with the 49% stake not held in
the San Jose operations representing Hochschild's only material
remaining non-controlling interest.
The consolidation of the IMZ assets is expected to deliver tax
efficiencies going forward arising from the intended merging of the
Compania Minera Ares and Suyamarca entities, which is expected to
be executed following completion of the Acquisition.
The Acquisition increases the Company's pro forma cash flow and
capital cost from the existing operations at Pallancata and the
development cost of Inmaculada. However, the additional leverage
reduces the Company's ability to take on further debt financing for
the purposes of additional strategic capital allocation. Subject to
the Acquisition's completion, the strategy with regards to Crespo,
as approved by the Board, is to delay the project in order to
better sequence capital allocation, with the focus now firmly on
the construction of the Inmaculada project with the increased
resulting capital expenditure. This is expected to postpone
approximately $80 million of remaining Crespo project expenditure.
Despite the prioritisation of Inmaculada, Crespo remains an
important component of the company's portfolio of development
assets. It is the management's intention that in the event that
precious metals markets show sustained improvement, this would
allow the Company to re-allocate capital to the Crespo project and
potentially re-initiate development sooner than would be otherwise
anticipated.
As a consequence of the Acquisition and of the Crespo delay, the
Company is targeting an attributable production capacity profile
going forward following completion of the acquisition of:
Production Capacity* 2013 2014 2015 2016 2017
------------------------- ----- ----- ----- ----- -----
Attributable Production
Capacity (Moz Ag
eq.)** 20.0 21.0 28.0 32.0 34.7
------------------------- ----- ----- ----- ----- -----
* There can be no assurance that actual production will match
expected production capacity
** Forward looking production capacity figures are presented on
the basis of existing public disclosure. Existing operations are
expected to maintain current production, ageing operations are
expected to maintain their declining trend and Advanced Projects
are expected to achieve their previously stated production targets
on the basis of the latest development phasing (assuming Inmaculada
ramp-up to two-thirds of full production capacity in 2015). 2017
production forecast includes an indicative contribution from the
delayed Crespo project.
9. Current Trading
On 21 August 2013, Hochschild published its Interim Results for
the six months ended 30 June 2013. Hochschild is of the view that
there has been no significant change to the Group's trading and
prospects since that date. Hochschild remains on track to produce
20 million attributable silver equivalent ounces in 2013. In
addition, since Hochschild's results, there has been no material
change to the overall level of cost savings expected to be
delivered as part of the Company's cash flow optimisation
programme, first announced in May 2013.
10. Other Conditions to Completion
Completion of the Acquisition is also subject to the shares of
SpinCo being conditionally listed on the TSX, the approval of the
Plan of Arrangement by the Supreme Court of Yukon, any anti-trust
or foreign investment approvals (if required), there being no
material adverse effect to IMZ, the Peruvian Assets or IMZ's
Peruvian subsidiaries([5]) , and the Swiss Take-Over Board either
confirming that Swiss take-over laws do not apply to the
transaction or exempting Hochschild from the application of Swiss
take-over laws and that the Swiss Take-Over Board's relevant
decision becoming final and binding. In addition, pursuant to the
terms of the Arrangement Agreement, the Acquisition must be
completed prior to 31 January 2014.
Applicable Canadian law also grants shareholders of IMZ the
right to dissent and to be paid fair value in cash, as determined
by the Supreme Court of Yukon, if they do not support the
transaction and if they strictly follow the dissent requirements of
the Canadian Act. It is a condition to completion of the
Acquisition that shareholders holding no more than 5% of the IMZ
shares exercise dissent rights, otherwise Hochschild will have the
right (but not the obligation) to terminate the Arrangement
Agreement.
Assuming all conditions are satisfied or waived (where
applicable), Hochschild currently expects the Acquisition to be
completed by the end of Q4 2013.
11. Advisors
RBC Capital Markets is acting as financial advisor to Hochschild
in respect of the Acquisition and Stikeman Elliott LLP is acting as
the Company's Canadian legal advisor.
BofA Merrill Lynch is acting as financial advisor, sponsor and
corporate broker to Hochschild in relation to the Acquisition and
joint bookrunner in relation to the Placing.
Goldman Sachs is acting as financial advisor to Hochschild in
relation to the Acquisition and joint bookrunner in relation to the
Placing.
J.P. Morgan Cazenove is joint corporate broker to
Hochschild.
Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA") is acting as
co-manager in relation to the Placing.
______________________________________________________________________
Enquiries:
Hochschild Mining plc
Charles Gordon +44 (0)20 7907 2934
Head of Investor Relations
BofA Merrill Lynch +44 (0)20 7628 1000
Omar Davis
Ken McLaren
Edward Peel (Corporate Broking)
Matthew Blawat (Corporate Broking)
Goldman Sachs International +44 (0)20 7774 1000
Richard Cormack
Dominic Lee
Adrian Beidas
Duncan Stewart
RBC Capital Markets +1 416 842 7588
Justin Barr
Timothy Loftsgard
J.P. Morgan Cazenove +44 (0)20 7777 2000
Ben Davies
RLM Finsbury
Charles Chichester (Public Relations) +44 (0)20 7251 3801
______________________________________________________________________
About Hochschild Mining plc
Hochschild Mining plc is a leading precious metals company
listed on the London Stock Exchange (HOCM.L / HOC LN) with a
primary focus on the exploration, mining, processing and sale of
silver and gold. Hochschild has almost fifty years' experience in
the mining of precious metal epithermal vein deposits and currently
operates four underground epithermal vein mines, three located in
southern Peru and one in southern Argentina. Hochschild also has
numerous long-term projects throughout the Americas.
Notes and Disclaimers:
Note: All dollar amounts in this announcement refer to U.S.
dollars.
This announcement may contain certain forward-looking statements
with respect to Hochschild's expectation and plans, strategy,
management's objectives, future performance, production, costs,
revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that may occur in the future.
There are a number of factors which could cause actual results or
developments to differ materially from those expressed or implied
by these forward looking statements and forecasts. The statements
have been made with reference to forecast price changes, economic
conditions and the current regulatory environment. Nothing in this
presentation should be construed as a profit forecast. Past share
performance cannot be relied on as a guide to future performance.
Except as required by applicable law or regulation, the Group does
not undertake any obligation to update or change any
forward-looking statements contained in this announcement or any
other forward-looking statement it may make.
This announcement does not constitute or form part of an offer
or solicitation to purchase or subscribe for shares in the capital
of the Company in the United States. The securities referred to
herein have not been and will not be registered under the United
States Securities Act of 1933, as amended (the "Securities Act") or
with any securities regulatory authority of any state or other
jurisdiction of the United States and may not be offered, sold,
resold, transferred or delivered, directly or indirectly, in the
United States except pursuant to registration under, or an
exemption from the registration requirements of, the Securities
Act. The Placing securities referred to in this announcement are
being offered and sold only outside the United States in "offshore
transactions" (as defined in Regulation S) meeting the requirements
of Regulation S and may be made within the United States to
institutional investors who are qualified institutional buyers
within the meaning of Rule 144A under the Securities Act in
transactions that are exempt from, or not subject to, the
registration requirements under the Securities Act. There will be
no public offering of securities in the United States.
Merrill Lynch International ("BofA Merrill Lynch"), which is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority, is acting exclusively for Hochschild and no-one else in
connection with the Acquisition and the Placing. Merrill Lynch
International will not regard any other person as its client in
relation to the Acquisition or the Placing and will not be
responsible to anyone other than Hochschild for providing the
protections afforded to its clients, nor for providing advice in
relation to the Acquisition, the Placing, the contents of this
announcement or any transaction, arrangement or other matter
referred to herein.
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority, is
acting for Hochschild and no one else in connection with the
distribution of this document and will not be responsible to anyone
other than Hochschild for providing the protections afforded to
clients of Goldman Sachs International nor for providing advice in
connection with the Acquisition or the Placing.
J.P. Morgan, which is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the
Prudential Regulation Authority, is acting for Hochschild and no
one else in connection with the distribution of this document and
will not be responsible to anyone other than Hochschild for
providing the protections afforded to clients of J.P. Morgan nor
for providing advice in connection with the Acquisition or the
Placing.
RBC Capital Markets is a trading name used by subsidiaries of
the Royal Bank of Canada including RBC Dominion Securities Inc.,
RBC Capital Markets LLC and RBC Europe Limited (collectively, "RBC
Capital Markets"). RBC Europe Limited, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority, is
acting for Hochschild and no one else in connection with the
distribution of this document and will not be responsible to anyone
other than Hochschild for providing the protections afforded to
clients of RBC Europe Limited nor for providing advice in
connection with the Acquisition or the Placing.
BBVA, is a Spanish Bank authorised and regulated by the Bank of
Spain, is acting exclusively for Hochschild and no-one else in
connection with the Acquisition and the Placing. BBVA will not
regard any other person as its client in relation to the
Acquisition or the Placing and will not be responsible to anyone
other than Hochschild for providing the protections afforded to its
clients, nor for providing advice in relation to the Acquisition,
the Placing, the contents of this announcement or any transaction,
arrangement or other matter referred to herein.
[1] Based on Hochschild share price at closing on 1 October
2013
[2] Based on Hochschild share price at closing on 1 October
2013
[3] Based on Hochschild share price at closing on 1 October
2013
[4] Based on Hochschild share price at closing on 1 October
2013
[5]"Material Adverse Effect" means any change, event,
occurrence, effect or circumstance that is or could reasonably be
expected to be material and adverse to the business, financial
condition, or results of operations of the Peruvian Assets and/or
the Peruvian subsidiaries, but excluding changes, effects, or
circumstances that (a) are the result of economic factors affecting
the economy as a whole, or that are the result of factors generally
affecting the industry or specific market in which IMZ or its
subsidiaries operate, (b) arise out of or result from matters
contemplated by the parties in connection with the Arrangement
Agreement, (c) arise out of or result from actions of IMZ or its
subsidiaries requested by Hochschild, (d) arise out of or result
from actions taken by Hochschild or its affiliates in connection
with Hochschild's operation of the Suyamarca assets, (e) arise out
of or result from changes in law, (f) arise out of or result from
changes in generally accepted accounting principles, (g) arise out
of or result from acts of war or terrorism or (h) are attributable
to the announcement or performance of the transactions contemplated
by the Arrangement Agreement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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