Business Combination for Superior Value Creation
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VANCOUVER, July 13, 2011 /PRNewswire/ - (All figures in Canadian dollars, unless otherwise noted) Northgate Minerals Corporation ("Northgate") (TSX: NGX) (NYSE Amex: NXG) and Primero Mining Corp. ("Primero") (TSX: P) are pleased to announce today that they have entered into a definitive arrangement agreement (the "Arrangement Agreement") to combine their respective businesses and create a new, leading mid-tier gold producer with significant value creation opportunities. The combined company will benefit from the current production and expansion potential at the San Dimas mine in Mexico and the Fosterville and Stawell gold mines in Australia, together with the long-life Young- Davidson gold development project in Ontario. The new company will be led by Joe Conway, current President and Chief Executive Officer of Primero. The transaction will create a company with an expected combined market capitalization of approximately $1.2 billion.
Under the terms of the Arrangement Agreement, Northgate will acquire all of the issued and outstanding common shares of Primero for 1.50 Northgate common shares per Primero Share (the "Exchange Ratio"). Each outstanding option of Primero shall be exchanged for options of Northgate that will entitle the holder to receive, upon the exercise thereof, Northgate shares based upon the Exchange Ratio and otherwise on the same terms and conditions as in the original option. Each outstanding warrant of Primero will entitle the holder to receive, upon the exercise thereof, Northgate shares and otherwise on the same terms and conditions as in the original warrant. Northgate's offer represents:
- A value of $4.215 for each Primero common share based on the July 12, 2011 closing price of Northgate common shares ($2.81) on the Toronto Stock Exchange
- A premium of approximately 13.9% to Primero's closing price on July 12, 2011 and a premium of approximately 20.5% and 11.7% calculated on the 10-day and 20-day volume weighted average price (VWAP) of each respective company on the Toronto Stock Exchange
- Diversified production base: Three producing gold mines with 320,000 gold equivalent ounces in 2011E increasing to 550,000 ounces in 2013E coming from the addition of the Young- Davidson development project and expansion at San Dimas, plus exploration pipe-line, all located in pro-mining jurisdictions.
- Leading growth profile: Expected production growth of 72% from 2011E to 2013E and declining cash costs - which will place the combined company amongst the leaders of its expected peer group.
- Strong, complementary management team: Combines proven management with an experienced technical team.
- Solid financial position and cash flow: Fully funded development of the Young- Davidson gold project in Ontario with expected sufficient cash flow to re-pay all corporate debt and pursue accretive opportunities.
- Unique re-valuation opportunity: Currently trading below peer average net asset value and cash flow multiples.
- Enhanced capital markets presence: $1.2 billion market capitalization is expected to appeal to a broader shareholder base, increase analytical following and improve share trading liquidity.