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Great Panther Silver Announces Friendly Acquisition of Beadell Resources to Create New Growth Oriented Precious Metals Producer

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Great Panther Silver Announces Friendly Acquisition of Beadell Resources to Create New Growth Oriented Precious Metals Producer

 

 

 

 

 

GREAT PANTHER SILVER LIMITED (TSX: GPR) (NYSE American: GPL) and Beadell Resources Limited (ASX: BDR) are pleased to announce that they have entered into a Scheme Implementation Deed dated September 23, 2018, pursuant to which Great Panther will acquire all of the issued ordinary shares of Beadell by means of a Beadell scheme of arrangement under the Australian Corporations Act 2001.

 

 

Key highlights of the transaction include:

 

  • The creation of a new emerging and growth-oriented precious metals producer;
  • Strong balance sheet;
  • Robust growth profile;
  • Geographic diversity;
  • Diverse asset portfolio including three producing mines, an advanced stage project, and significant exploration potential; and
  • Attractive re-rating potential.

 

 

The directors of Beadell unanimously recommend that shareholders vote in favour of the Scheme in the absence of a superior proposal1 and subject to the independent expert opining that the Scheme is in the best interests of shareholders, and have provided support agreements confirming that they will vote the shares they own or control in favour of the Scheme, subject to the same conditions. Shareholders holding in aggregate 18.06% of Beadell Shares agreed to vote in favour of the Scheme, in the absence of a superior proposal and not to dispose of their Beadell shares, except in respect of a superior proposal. Those shareholders include funds associated with Equinox Partners holding 9.84%, Donald Smith & Co. holding 7.15%, other smaller shareholders, directors and management.

 

 

The transaction will create a new emerging and growth-oriented precious metals producer focused on the Americas with strong geographic diversity across three leading mining jurisdictions, and a diverse asset portfolio including three producing mines, an advanced stage project, and significant exploration potential.

 

 

Beadell operates the 100% owned Tucano Gold Mine in mining-friendly Amapá State, northern Brazil. Tucano is part of an approximate 2,500 square kilometre land package which is highly prospective and located in the under-explored ‘Birimian age’ greenstone terrane. Beadell has a pipeline of high potential in-mine and near-mine resource growth opportunities, including multiple in-mine lease discoveries.

 

 

Beadell has undertaken a number of key initiatives to more fully optimize Tucano. These include the execution of the life of mine contract with U&M Mineração e Construção S/A, which is expected to deliver improved efficiencies resulting in an expected US$100 million in cost savings over the life of mine. In addition, Beadell remains on track for completion of the Tucano plant upgrade by early November 2018. This will result in greater ore type processing flexibility allowing a greater focus on mining for grade rather than ore type.

 

 

James Bannantine, President and CEO of Great Panther, stated: “This is a transformational transaction for the shareholders of Great Panther and Beadell. Great Panther has grown and optimized its operations in Mexico, acquired and advanced its Coricancha project in Peru, and is now positioned to add a sizeable producing mine in Brazil with exceptional exploration potential. Great Panther brings the capital to deliver on Tucano’s substantial near- and long-term resource growth potential and to continue mine optimization initiatives. The combination of assets, capital and management provides a unique opportunity to unlock a significant re-rating potential for the benefit of both existing shareholders and Beadell’s shareholders who will gain a meaningful interest in Great Panther.”

 

 

Dr. Nicole Adshead-Bell, CEO and Managing Director of Beadell, stated: “By undertaking this transaction, Beadell shareholders will benefit from Great Panther’s strong balance sheet, steady cash flow, experienced management team and improved market liquidity via Great Panther’s TSX and NYSE American listings. The combined company will pool resources to expedite the execution of Tucano’s ongoing operational turnaround. Jim Bannantine, the President & CEO of Great Panther, has the technical background and corporate experience, including several years living and working in Brazil, to complement the Tucano mine site team in improving all aspects of operational performance and growing the resource base. I am pleased to announce that I have accepted an invitation to join the Board of Directors of Great Panther on completion of the transaction. This will give me the opportunity to continue to lend guidance and support to extract the full potential of Tucano and the highly prospective mineral tenure.”

 

 

Scheme Summary

 

 

Under the terms of the Scheme, Beadell shareholders will receive 0.0619 common shares of Great Panther for each ordinary share of Beadell resulting in the issuance of approximately 103.6 million Great Panther Shares, exclusive of shares that may be issued in connection with Beadell’s outstanding options and performance rights.2 There will be concurrent arrangements in relation to Beadell’s issued warrants.

 

 

The Exchange Ratio implies consideration of A$0.0863 per Beadell Share (the “Consideration”). The implied equity value for Beadell based on the Consideration is approximately A$144 million (approx. US$105 million), based on the closing price of a Great Panther Share on the NYSE American on September 21, 2018. The Consideration to be received by Beadell shareholders represents a 51% premium over Beadell’s closing share price on the ASX on September 21, 2018, and a 69% premium to Beadell’s volume-weighted average share prices for the 20 trading days up to and including September 21, 2018. Upon completion of the transaction, existing Beadell and Great Panther shareholders are expected to own approximately 38% and 62%, respectively, of the combined company.

 

 

Transaction Highlights

 

 

Creation of a New Emerging Intermediate Precious Metals Producer focused on the Americas: The transaction will result in significant pro forma gold and silver production, with Great Panther contributing 4.0 million silver-equivalent ounces of production in 20184, and Beadell contributing 130,000 gold ounces in 2018 and a further 163,000 ounces in 20195, with potential for further increase upon a positive decision to restart Coricancha. Coricancha has the potential to generate average annual production of 3.1 million ounces silver-equivalent based on the results of a preliminary economic assessment (“PEA”) completed in May 20186. The combined company will also have an increased public float and broadened shareholder base, providing stronger liquidity and augmented scale in the capital markets.

 

 

Extensive Reserve and Resource Base: The combined company is anticipated to have attributable proven and probable reserves of approximately 1.5 million ounces of gold. Beadell will also contribute measured and indicated resources (exclusive of reserves) of approximately 0.8 million ounces of gold and inferred resources of approximately 1.5 million ounces of gold, supplementing Great Panther’s measured and indicated resources of approximately 49.4 million ounces silver-equivalent and inferred resources of approximately 48.5 million ounces silver-equivalent (see Appendix A and B below for details).

 

 

Strong Balance Sheet to Support Complementary Assets: The enhanced balance sheet of the combined company, with a pro forma cash balance of US$74 million as at June 30, 2018, will enable ongoing optimization initiatives at Tucano.

 

 

Diversified Portfolio: The combined company will have three mining operations in Mexico and Brazil along with the Coricancha project located in Peru. Operating risk is expected to be significantly diversified with the inclusion of Brazil as a new core jurisdiction, which will represent 38% of pro forma net asset value7.

 

 

Robust Growth Profile: Coricancha provides near-term optionality with a restart decision expected in early 2019. In addition, the combined company is expected to benefit from near-term resource growth opportunities with multiple in-mine lease discoveries at Tucano and longer-term exploration optionality from Beadell’s 2,500 square kilometre highly prospective land package.

 

 

Attractive Re-Rating Potential: With a diversified portfolio of producing assets, near-term growth opportunities backed by a strong balance sheet and a quality management team, the combined company is well positioned for a re-rating, to the benefit of both Great Panther and Beadell shareholders.

 

 

Benefits to Great Panther Shareholders

 

 

The transaction is expected to have the following benefits for Great Panther shareholders:

 

  • Exposure to substantial value creation from the successful execution of the Tucano
    turn-around which will be enhanced by Great Panther’s strong balance sheet and management’s experience with similar assets in Brazil, most notably CEO James Bannantine’s experience operating mines in Brazil and his fluency in Portuguese;
  • Increased production profile and market capitalization to enhance capital markets profile and trading liquidity of the combined company;
  • Diversifies Great Panther’s asset base to include Brazil as a new core jurisdiction;
  • Accretive on key metrics including NAV, cash flow, production, and resources before anticipated synergies including reduction in pro-forma general and administrative costs;
  • Enhanced optionality via Beadell’s 2,500 square kilometre highly prospective exploration land package; and
  • Ongoing participation in combined company with strong re-rating potential.

 

 

Benefits to Beadell Shareholders

 

 

The transaction has the following benefits for Beadell shareholders:

 

  • Immediate 51% premium to Beadell’s closing share price on September 21, 2018, and 69% premium to Beadell’s 20-day VWAP;
  • Beadell shareholders to maintain meaningful exposure to Tucano via 38% pro forma ownership;
  • Great Panther’s strong balance sheet provides means to continue optimization initiatives at Tucano without resorting to other potentially more dilutive financing alternatives, and also brings the capital to unlock the potential of Beadell’s highly prospective exploration land package;
  • Great Panther’s management team has significant experience operating similar assets in Brazil;
  • Diversifies geographic footprint into Mexico and Peru;
  • Provides near-term growth optionality with the potential restart of Coricancha;
  • Broadened shareholder base and TSX and NYSE American listing will enhance trading liquidity; and
  • Ongoing participation in combined company with strong re-rating potential.

 

 

Board of Directors and Management Team

 

 

Following the completion of the transaction, Great Panther will continue to be headquartered in Vancouver, British Columbia and Dr. Nicole Adshead-Bell will join the Great Panther Board of Directors.

 

 

James Bannantine, current President and Chief Executive Officer of Great Panther, will continue to serve as President and Chief Executive Officer of the combined company. Jim Zadra, current Chief Financial Officer of Great Panther, will continue to serve as Chief Financial Officer of the combined company.

 

 

Transaction Summary

 

 

Pursuant to the Implementation Deed and Scheme:

 

  • Beadell shareholders will receive 0.0619 Great Panther Shares for each Beadell Share held. Upon completion of the transaction, Beadell shareholders will own approximately 103.6 million Great Panther Shares or approximately 38% of the pro forma Great Panther Shares outstanding, exclusive of shares that may be issued in connection with Beadell’s options and performance rights. Beadell options and performance rights must (unless the requirement is waived) have been vested and exercised in exchange for Beadell Shares or have been terminated.
  • Under concurrent arrangements, each Beadell warrantholder will receive a number of Great Panther warrants equal to the number of their Beadell warrants multiplied by the Exchange Ratio at a price adjusted in accordance with the Exchange Ratio, and otherwise on the same terms and conditions as the original warrant.
  • Beadell’s senior secured lenders in Brazil have confirmed that they will consent to the transaction.
  • Completion of the transaction is subject to customary conditions for a transaction of this nature and receipt of applicable regulatory, shareholder and third-party and other creditor approvals and consents on terms satisfactory to Great Panther as may be required to effect and complete the transaction.
  • The Implementation Deed includes customary deal protection provisions, including no solicitation of alternative transactions by Beadell, a right in favour of Great Panther to match any potential superior proposals and reimbursement fees payable by Beadell or Great Panther, as the case may be, in certain events.
  • The Scheme will require approval by at least 75% of the number of votes cast, and 50% of the number of Beadell shareholders present and voting, at the meeting of Beadell shareholders and is also subject to Australian Court approvals.
  • The Scheme will also require approval by the TSX and a simple majority of the Great Panther Shares held by Great Panther Shareholders present in person or by proxy at a Special Meeting of Great Panther Shareholders in accordance with TSX policies.

 

 

A full copy of the Implementation Deed is attached to a separate ASX announcement released by Beadell today and will be filed by Great Panther on SEDAR.

 

 

GMP Securities L.P. has provided an opinion to the Board of Directors of Great Panther that, as of the date of such opinion and based upon and subject to the scope of review, assumptions, limitations, qualifications and other matters described in such opinion, the consideration to be paid by Great Panther in connection with the proposed transaction is fair, from a financial point of view, to Great Panther.

 

 

Great Panther is required to obtain the approval of the TSX and its shareholders in connection with the issuance of common shares under the Scheme. The Great Panther Board unanimously recommends the Great Panther shareholders vote in favour of the issuance of Great Panther Shares contemplated by the Scheme. Each of the directors of Great Panther has agreed to vote any Great Panther Shares in respect of which they have power to vote in favour of the necessary resolutions.

 

 

Beadell’s Board of Directors unanimously recommends that Beadell shareholders vote in favour of the Scheme in the absence of a superior proposal8 and subject to the independent expert opining that the Scheme is in the best interests of shareholders. Beadell will engage an independent expert to provide a report to shareholders on the transaction to assist them in determining their vote at a meeting to approve the Scheme. Each of the directors of Beadell and its Chief Executive Officer and Chief Financial Officer have entered into a support agreement and have agreed to vote in favour of the transaction and not to dispose of their Beadell shares, except in respect of a superior proposal. Shareholders holding in aggregate 18.06% of Beadell Shares agreed to vote in favour of the Scheme, in the absence of a superior proposal and not to dispose of their Beadell shares, except in respect of a superior proposal. Those shareholders include funds associated with Equinox Partners holding 9.84%, Donald Smith & Co. holding 7.15%, other smaller shareholders, directors and management.

 

 

The Beadell shareholder meeting to consider the Scheme is expected to be held in late 2018 and the Scheme is expected to be implemented as soon as practicable thereafter following Australian Court approval in early 2019. The Great Panther shareholder meeting called to approve the issuance of Great Panther Shares to the Scheme is expected to be held concurrently with or before the Beadell Shareholder Meeting.

 

 

Great Panther and Beadell security holders and other interested parties are advised to read the explanatory materials relating to the Scheme, which will be filed by Beadell with securities regulatory authorities in Australia and by Great Panther with securities regulatory authorities in Canada when they become available. Anyone may obtain copies of these documents when available free of charge at the Australian Securities Exchange website at www.asx.com.au. and at the website of the Canadian Securities Administrators at www.sedar.com.

 

 

Advisors and Counsel

 

 

Scotia Capital Inc. is acting as financial advisor to Great Panther. McMillan LLP is acting as Canadian legal counsel and Gilbert + Tobin is acting as Australian legal counsel to Great Panther. GMP Securities L.P. is acting as financial advisor to the Great Panther special committee and McCarthy Tétrault LLP is acting as legal advisor to the special committee.

 

 

CIBC Capital Markets is acting as financial advisor to Beadell. Herbert Smith Freehills is acting as Australian legal counsel and Blakes, Cassels & Graydon LLP is acting as Canadian legal counsel to Beadell.

 

This announcement is for informational purposes only and does not constitute a solicitation or a proxy.

 

 

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws and may not be offered or sold within the United States or to, or for the account or the benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

 

 

About Great Panther

 

 

Great Panther is a primary silver mining and exploration company listed on the Toronto Stock Exchange trading under the symbol GPR, and on the NYSE American under the symbol GPL. Great Panther’s current activities are focused on the mining of precious metals from its two wholly-owned operating mines in Mexico: the Guanajuato Mine Complex and the Topia Mine. The Company is also advancing towards a decision to restart the Coricancha Mine in Peru with the initiation of a bulk sample program following the completion of a positive Preliminary Economic Assessment in May 2018. The Company also continues to pursue the acquisition of additional mining operations or projects in the Americas.

 

 

About Beadell

 

 

Beadell operates the Tucano Gold Mine in mining-friendly Amapá State, northern Brazil. Tucano is located within 2,500 square kilometres of highly prospective and under-explored ‘Birimian age’ greenstone terrane. The Tucano plant is being upgraded to process approximately 3.5 million tonnes per year of oxide-sulphide ore feed in for a range of blends. There is a pipeline of high potential in-mine and near-mine prospects, anchored by several high-grade gold drill intervals over several metres, which represent a near-term opportunity to improve the head grade and prolong the mine life.

 

Posted September 24, 2018

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