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TheStreet Open House

Primero To Acquire Brigus Gold And Create A Diversified, Americas Based Mid-tier Gold Producer

Stock quotes in this article: BRD, P, PPP

TSX:P    NYSE:PPP    ASX:PPM  TSX:BRD    NYSE:BRD

(Please note that all dollar amounts in this news release are expressed in U.S. dollars unless otherwise indicated.)

TORONTO, Dec. 16, 2013 /PRNewswire/ - Primero Mining Corp. ("Primero" or the "Company") (TSX:P, NYSE:PPP, ASX:PPM) and Brigus Gold Corp. ("Brigus") (NYSE:BRD; TSX:BRD) today announced that they have entered into an arrangement agreement (the "Arrangement Agreement") whereby Primero will acquire all outstanding common shares of Brigus pursuant to a plan of arrangement (the "Arrangement") to create a diversified, Americas based mid-tier gold producer.

Pursuant to the Arrangement, Primero will acquire each outstanding Brigus common share for 0.175 of a Primero common share (the "Exchange Ratio"). In addition, Brigus shareholders will receive 0.1 of a common share in a newly incorporated company ("SpinCo") for each Brigus common share as part of the Arrangement. SpinCo will hold Brigus' interests in the Goldfields project in Saskatchewan and the Ixhuatán and Huizopa projects in Mexico and will be capitalized with approximately C$10 million in cash. Upon completion of the Arrangement, Brigus shareholders will hold, in aggregate, a 90.1% interest in SpinCo and Primero will hold the remaining 9.9% interest in SpinCo. All outstanding options to purchase Brigus common shares will be exchanged for options to purchase Primero common shares based upon the Exchange Ratio pursuant to the Arrangement.  Following completion of the Arrangement, each outstanding warrant to purchase a Brigus common share will be exercisable to purchase 0.175 of a Primero common share and 0.1 of a SpinCo common share.

The Exchange Ratio represents C$0.91 per Brigus common share, based on the closing price of Primero common shares (C$5.22) on the Toronto Stock Exchange as at December 13, 2013.  This value implies a 43% premium to Brigus' 20-trading day volume weighted average price ("VWAP") and a 45% premium to Brigus' closing price, both as at December 13, 2013 on the Toronto Stock Exchange, before ascribing any value to SpinCo. Upon completion of the Arrangement, Brigus will be a wholly-owned subsidiary of Primero and existing Primero shareholders and Brigus shareholders will own approximately 73.4% and 26.6%, respectively, of the outstanding Primero common shares, on a fully diluted in-the-money basis, before ascribing any value to SpinCo.  The implied transaction value, before ascribing any value to SpinCo, is approximately C$220 million.

Highlights of the Transaction

  • Diversified production base:  The proposed transaction transforms two single production asset companies into a single entity with operations in geo-politically stable jurisdictions, industry supportive infrastructure and prospective regional geology;
  • Critical production scale:  Two producing gold mines with 250,000 to 270,000 gold equivalent ounces in 2014 at below industry average cash costs 1, which could potentially increase to approximately 400,000 ounces in 2017 with the addition of the production from the Cerro del Gallo development project and a further expansion at San Dimas 2;
  • Enhanced market capitalization of approximately $720 million: Expected to appeal to a broader shareholder base, increase analyst coverage and improve share trading liquidity;
  • Leading growth profile:  Expected production growth of over 100% from 2013 to 2015 placing the combined company amongst the leaders of its peer group 1,2;
  • Solid financial position and cash flow:  Sufficient capital to repay all debt and invest in organic growth plus strong operating cash flow of approximately $760 million over the next five years at current consensus commodity pricing 1,2,3;
  • Leverages technical expertise:  Leverages Primero's underground mining technical expertise;
  • Exploration opportunity : Combines two companies with demonstrated exploration upside, close to existing mine infrastructure (see recent exploration updates by both companies);
  • Re-valuation opportunity:  With diversified production and cash flow, a strong balance sheet, a superior growth profile and a proven operating team, the combined company creates the potential for a re-rating to a multiple in line with other mid-tier gold producers. 

"This acquisition is immediately accretive to our production and cash flow," stated Joseph F. Conway, President and Chief Executive Officer.  "It also diversifies Primero geographically, into a very prospective and proven mining jurisdiction that our team is excited to operate in.  Primero has the financial resources to invest in the development and expansion opportunities at the Black Fox mine to realize its full potential.  We believe that with further investment, the Black Fox mine will grow and continue to create significant value for shareholders.  Primero also has the financial and management resources necessary to advance the adjacent Grey Fox project at the same time as developing the Cerro del Gallo project in Mexico. Furthermore, this transaction represents an opportunity for Brigus shareholders to participate in the tremendous potential of the combined company."

"We are pleased to be combining with another established producer, to diversify and build our financial strength and technical expertise while, at the same time, unlocking value for Brigus shareholders.  Brigus shareholders will benefit from Primero's strong balance sheet and cash flow, enabling further investment in the Black Fox mine to realize its full potential and the advancement of the Grey Fox project.  The combined company will also benefit from improved market liquidity and Primero's proven management team with a demonstrated track record of successfully growing precious metals mining companies," stated Wade Dawe, Chairman and Chief Executive Officer of Brigus.

The combined company is expected to provide Primero and Brigus shareholders with the following benefits:

Benefits for Primero Shareholders:

  • Adds a high quality producing gold mine in a proven and mining friendly jurisdiction;
  • Diversifies production with over 100,000 gold equivalent ounces per year, an approximately 65% increase in expected 2014 production, at below industry average cash costs 4;
  • Significantly increases reserves and measured and indicated resources;
  • Leverages Primero's underground mining technical expertise;
  • Provides accretive production and cash flow 2;
  • Improves market presence and provides a multiple re-rating opportunity as a mid-tier producer with a proven operating team, a superior growth profile and significant exploration upside.

Benefits for Brigus Shareholders:

  • Attractive premium for Brigus shareholders, representing 45% to the closing price and 43% to the 20 trading day VWAP of Brigus common shares both as at December 13, 2013 on the Toronto Stock Exchange;
  • Immediate exposure to financial resources sufficient to repay debt and invest in the Black Fox mine, as well as finance further growth opportunities including the Grey Fox and Cerro del Gallo projects;
  • Accretive on a net asset value basis;
  • Improves market presence and provides a multiple re-rating opportunity as a mid-tier producer with a proven operating team, a superior growth profile and significant exploration upside;
  • Allows continuing shareholder participation in non- Ontario exploration assets through 90.1% ownership of SpinCo.

Transaction Summary

The proposed transaction will be completed pursuant to a court-approved plan of arrangement and will require approval by at least 66⅔% of the votes cast by the shareholders of Brigus at a special meeting.  The issuance of Primero common shares in connection with the proposed transaction will require the approval of a majority of the shareholders of Primero voting at a special meeting.  Goldcorp Inc., which holds approximately 27% of the outstanding Primero common shares, has agreed to vote in favour of the proposed transaction. The directors and senior officers of each of Primero and Brigus have also entered into support agreements pursuant to which they have agreed to vote in favour of the proposed transaction. It is anticipated that the shareholder meetings will be held in February 2014.  Full details of the proposed transaction will be included in management information circulars to be mailed to the shareholders of Primero and Brigus as soon as practicable.

In addition to shareholder and court approvals, the proposed transaction will be subject to applicable regulatory approvals and the satisfaction of certain other customary conditions.  The Arrangement Agreement includes customary provisions, including mutual covenants not to solicit other acquisition proposals, mutual rights to match any superior proposal and reciprocal termination fees payable in certain circumstances.

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