Timmins Gold Corp. (TSE:TMM) acquired Newstrike Capital (NES) successfully. A total of 116 million shares were taken up in exchange for the issuance of 0.9 Timmins Gold shares for each NES share held (105 million new TMM shares). Recall the NES deal was originally declared on February 17, 2015, and shareholder approvals from both companies were received last month. Timmins also posted that Mark Backens has joined the TMM board, bringing total directors to nine.
The combination of Timmins Gold and Newstrike will create an emerging intermediate, Mexican-focused gold producer with a portfolio of high-quality production and development assets all based in Mexico. With the San Francisco mine (“San Francisco”) providing a solid base of operations, the combined company will have a leading growth profile driven by what Timmins Gold believes are two economically robust development projects with manageable capital requirements, Newstrike’s Ana Paula gold project (“Ana Paula”) and Timmins Gold’s Caballo Blanco gold project (“Caballo Blanco”). In addition, the combined company will have a strong balance sheet to advance Ana Paula and Caballo Blanco and will benefit from Timmins Gold’s proven track record of delivering growth and value creation for its investors. The boards of directors of both companies have each unanimously approved the terms of the Arrangement Agreement (a common director of Timmins Gold and Newstrike having recused himself) and agreed to recommend that their respective shareholders vote in favour of the proposed Arrangement.
Under the terms of the Arrangement, Newstrike shareholders will receive 0.9 (the “Exchange Ratio”) of a Timmins Gold common share (a “Timmins Gold Share”) and C$0.0001 in cash for each Newstrike common share (a “Newstrike Share”), representing the equivalent of C$1.15 per Newstrike Share and a premium of 20.0% based on the closing prices of the Timmins Gold Shares on the Toronto Stock Exchange (“TSX”) and the Newstrike Shares on the TSX Venture Exchange (“TSX-V”) on February 13, 2015, and C$1.20 per Newstrike Share and a premium of 22.4% based on the 20-day volume-weighted-average-price (“VWAP”) of the Timmins Gold Shares on the TSX and the Newstrike Shares on the TSX-V as of February 13, 2015. The Exchange Ratio implies a total transaction value of approximately C$140 million on a fully-diluted in the money basis. In addition, each outstanding option to purchase a Newstrike Share will be exchanged for an option to purchase a Timmins Gold Share, based upon the Exchange Ratio.
Highlights of the Transaction:
- Creates an emerging, Mexican-focused intermediate gold mining company with a portfolio of high-quality production and development assets all based in Mexico, including a producing mine, San Francisco, and two robust development assets, Ana Paula and Caballo Blanco
- Greatly enhances Timmins Gold’s potential production growth and cash cost profile – life of mine annual average gold production expected to grow approximately 175%, reaching approximately 326,000 ounces of gold assuming both Ana Paula and Caballo Blanco are put into production at the levels estimated in the Ana Paula PEA and the Caballo Blanco PEA; all-in-sustaining cash costs per ounce are expected to be reduced by approximately 21% to less than US$780 per ounce gold
- Timmins Gold believes the capital requirements will be manageable, initially supported by cash flow from San Francisco and the ability to efficiently sequence the development of Ana Paula and Caballo Blanco
- Significant increase in global resource size and grade with 75% increase in total M&I gold resources and 34% increase in average M&I gold grade
- Experienced management team with a proven track record of building and operating open-pit mines and long-standing in-country relationships; supported by a highly-qualified board of directors
- Increased scale of the combined company will enhance its capital markets profile and liquidity and provides for strong re-rating potential
- Strong support from Newstrike’s largest shareholders, two companies controlled by a trust settled by the late Adolf H. Lundin, and Timmins Gold’s largest institutional shareholder Sentry Investments Inc.