OceanaGold to acquire Pacific Rim in share exchange
2013-10-08 04:40 ET - News Release
See News Release (C-OGC) OceanaGold Corp
Mr. Michael Wilkes of Pacific Rim reports
OCEANAGOLD AGREES TO ACQUIRE PACIFIC RIM MINING
OceanaGold Corp. and Pacific Rim Mining Corp. have entered into a definitive agreement pursuant to which OceanaGold has agreed to acquire all of the issued and outstanding common shares of Pacific Rim in an all-share transaction to be completed by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia). Pacific Rim's principal asset is the high-grade El Dorado gold project in El Salvador.
Benefits for OceanaGold shareholders
- The transaction adds the El Dorado high-grade gold-silver resource with significant exploration upside potential. El Dorado has a measured and indicated resource of 1,430,500 ounces gold equivalent (AuEq) grading 10.4 grams AuEq per tonne and an inferred resource of 282,400 ounces AuEq grading 10.47 grams AuEq per tonne.
- The transaction aligns well with OceanaGold's strategy to invest in high-quality, low-cost assets and utilize its proven mine developing capabilities and experience to advance the El Dorado project.
- The transaction presents an accretive transaction based on an acquisition value of approximately $7 (U.S.) per ounce gold equivalent using Pacific Rim's previously stated total resources.
- The transaction provides a first-mover advantage opportunity into a very prospective jurisdiction for precious metals.
Benefits for Pacific Rim shareholders
- The transaction provides an opportunity to participate in a leading gold producer through an all-share transaction that allows continued exposure to the development of the El Dorado project in El Salvador with stronger financial stability.
- The transaction provides Pacific Rim shareholders with a 50-per-cent premium to the 20-day VWAP (volume-weighted average price) as at Oct. 7, 2013.
- The transaction diversifies Pacific Rim's asset risk profile and provides exposure to OceanaGold's diversified portfolio of producing gold mines in New Zealand and the Philippines.
- The transaction obtains access to OceanaGold's proven skill set to build and operate gold mines internationally in environmentally sensitive and socially complex regions.
Catherine McLeod-Seltzer, chairman of Pacific Rim, stated, "We are very pleased to have negotiated a transaction with OceanaGold that we believe reduces risk for our shareholders while providing them with continued participation in the high-grade El Dorado gold project and the upside that comes with OceanaGold's existing operations and forward trajectory." Tom Shrake, president and chief executive officer of Pacific Rim added: "OceanaGold is a technically savvy and eminently capable mine builder with a demonstrated long-range commitment to developing and operating mines in challenging environments with the utmost consideration for social and environmental stewardship. We believe OceanaGold is the perfect company to take the reins on behalf of our shareholders and are confident in their ability to bring the El Dorado project to fruition."
Mick Wilkes, managing director and chief executive officer of OceanaGold, commented: "We believe this transaction will provide OceanaGold shareholders with potential exposure to a high-grade gold-silver resource located in a very prospective region. This project has the potential to be an economic engine for El Salvador much like how our recently commissioned world-class Didipio mine has been for northern Luzon in the Philippines. This transaction aligns well with our strategy to create value through investment in high-quality, low-cost assets and utilizing the OceanaGold's experience in building and operating gold mines in an environmentally and socially sustainable manner. El Dorado further complements our high-grade gold-copper Didipio mine in the Philippines and we will look to replicate the successes we've achieved in New Zealand and the Philippines in El Salvador. OceanaGold looks forward to working with our local community and government partners in establishing a road map to unlock the opportunity at El Dorado for El Salvador."
Highlights of the arrangement
Under the arrangement, OceanaGold will acquire all of the common shares of Pacific Rim that it does not already own, in exchange for issuing to Pacific Rim shareholders 0.04006 of a common share of OceanaGold for each Pacific Rim common share, resulting in OceanaGold issuing approximately 6.76 million OceanaGold common shares to Pacific Rim shareholders. The consideration to Pacific Rim shareholders pursuant to the arrangement equates to 6.0497 cents per Pacific Rim common share, representing a 50-per-cent premium over Pacific Rim's 20-day volume-weighted average trading price on the Toronto Stock Exchange and a 73-per-cent premium over Pacific Rim's Toronto Stock Exchange closing price on Oct. 7, 2013. The proposed arrangement is valued at $10.2-million (based on Oct. 7, 2013, closing price).
The arrangement has been unanimously approved by the boards of directors of OceanaGold and Pacific Rim (other than one common director of Pacific Rim and OceanaGold who has a disclosable interest in the transaction and, accordingly, abstained from voting). The arrangement will be subject to customary conditions for transactions of this nature, and is required to be approved by at least 66-2/3rds per cent of the votes cast by the Pacific Rim shareholders at a special meeting of Pacific Rim shareholders to be called shortly. Pursuant to Multilateral Instrument 61-101 -- protection of minority security holders in special transactions -- the arrangement must also be approved by a simple majority of votes cast by shareholders excluding shares beneficially owned, or over which control or direction is exercised, by OceanaGold and any of its related parties. The arrangement is subject to applicable regulatory and exchange approvals, and the approval of the Supreme Court of British Columbia.
The agreement also includes non-solicitation covenants from Pacific Rim of alternative proposals, rights for OceanaGold to match any superior proposals and fiduciary out provisions. Additionally, the agreement provides for the payment of a termination fee of $500,000 to OceanaGold upon the occurrence of certain events.
Canaccord Genuity Corp. is acting as financial adviser to Pacific Rim and Evans & Evans Inc. has provided a formal valuation and an opinion to Pacific Rim that, subject to the assumptions, limitations and qualifications in such opinion, the consideration to be received by Pacific Rim shareholders (other than OceanaGold) is fair, from a financial point of view, to Pacific Rim shareholders (other than OceanaGold). The board of directors of Pacific Rim, and a special committee of independent directors of Pacific Rim established to review and consider the transaction, has determined the arrangement is in the best interest of Pacific Rim's shareholders, and have recommended that holders of Pacific Rim shares vote in favour of the arrangement. All of the executive officers and directors of Pacific Rim have entered into lock-up and support agreements with OceanaGold under which they have agreed to vote in favour of the arrangement.
The board of directors of Pacific Rim will include the recommendation that Pacific Rim shareholders vote in favour of the arrangement in its management information circular that is expected to be filed with the regulatory authorities and mailed to Pacific Rim shareholders in October, 2013, in relation to the special meeting of Pacific Rim shareholders expected to be held in November, 2013. Full details of the arrangement will be included in the circular. The arrangement is expected to close in November, 2013.
OceanaGold currently owns 42.15 million Pacific Rim common shares, which represent 19.98 per cent of the issued and outstanding common shares.
Bridge financing
In connection with the arrangement, OceanaGold has also agreed to advance to Pacific Rim an aggregate of up to $1-million, to be drawn by Pacific Rim as needed for working capital purposes. These advances will be made with an interest rate of 10 per cent per YEAr with a maturity date of Oct. 7, 2014, subject to early repayment in certain circumstances. This loan is also secured by a first priority pledge over 10 per cent of Pacific Rim's holdings in its wholly owned subsidiary, Pacific Rim Cayman LLC.
Current status of the international arbitration
In 2009, Pacific Rim filed an arbitration claim with the International Centre for the Settlement of Investment Disputes (ICSID) in Washington, seeking monetary compensation under the Investment Law of El Salvador. This follows the passive refusal of the government of El Salvador to issue a decision on Pacific Rim's application for environmental and mining permits for the El Dorado project. The matter is now in the final phase of arbitration and Pacific Rim filed its statement of claim in March, 2013. The next step of the final phase of arbitration is a submission by the government of El Salvador by Jan. 10, 2014, followed by written rebuttals by both parties and oral testimonies by mid-calendar year 2014. A decision is then expected after the submissions and testimonies. Notwithstanding the current arbitration, OceanaGold will also continue to seek a negotiated resolution to the El Dorado permitting impasse.
Counsel
Fasken Martineau DuMoulin LLP is acting as legal counsel to OceanaGold. DuMoulin Black LLP is acting as legal counsel to Pacific Rim.