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Silver Standard to Acquire Claude Resources

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Silver Standard to Acquire Claude Resources

 

 

 

 

 

Silver Standard Resources Inc. (TSX:SSO) (NASDAQ:SSRI)  and Claude Resources Inc. (TSX:CRJ) (OTCQB:CLGRF) are pleased to announce that they have entered into a definitive agreement whereby Silver Standard will acquire all of the outstanding common shares of Claude Resources pursuant to a plan of arrangement to create a high-quality intermediate precious metals producer with assets in the Americas.

 

 

Under the terms of the Agreement, all of the Claude Resources issued and outstanding common shares will be exchanged on the basis of 0.185 of a Silver Standard common share and C$0.0001 in cash per Claude Resources share, representing total consideration of C$1.65 per share of Claude Resources based on the value of Silver Standard’s common shares as of the close of business on March 4, 2016. This implies an equity valuation of C$337 million for Claude Resources. The consideration represents a premium of approximately 25% based on the 20-day volume weighted average prices of Silver Standard and Claude Resources and 30% to Claude Resources’ closing price of C$1.27 per common share on March 4, 2016. Upon completion of the Transaction, existing Silver Standard and Claude Resources shareholders will own approximately 68% and 32% of the combined company, respectively.

 

 

Transaction Highlights

 

  • Establishes a high-quality intermediate precious metals producer: Combines high-margin precious metals operations with scale and financial strength in attractive mineral belts and political regions.
  • Significant pro forma mining company: In 2016, the combined company is expected to produce approximately 390,000 gold equivalent ounces at cash costs of approximately $735 per equivalent ounce of gold sold 1.
  • Immediately strengthens financial position: Increased free cash flow generation, enhanced credit quality, and improved financial flexibility with combined cash and marketable securities of $330 million as at December 31, 2015.
  • Combines complementary technical skills: Brings safe underground and open pit mining skills together to realize portfolio growth and exploration opportunities.
  • Well positioned to pursue growth: Accelerate exploration of the +19,000 hectare Seabee property while continuing to explore Marigold in Nevada and Pirquitas/Chinchillas properties in Argentina, as well as continuing our disciplined approach to reviewing external project and production opportunities.

 

 

Paul Benson, President and CEO of Silver Standard said, “The addition of the Santoy and Seabee mine complexes to our operating portfolio demonstrates our disciplined acquisition strategy to deliver growth and value to our shareholders. Through this transaction we are adding a third high quality, strong cash flowing operation located in Canada, one of the best places in the world to operate mines. We also acquire a large underexplored land position with significant exploration upside. With financial synergies and our strong balance sheet, the combined company is well positioned to maximize value from our assets and pursue further growth opportunities.”

 

 

Brian Skanderbeg, President and CEO of Claude Resources said, “This transaction provides our shareholders with meaningful ownership of an emerging Americas focused mid-tier precious metals producer. Our long-term production profile, free cash flow, strong balance sheet and significant exploration potential are a great addition to Silver Standard’s portfolio of producing mines and development projects and we are excited that we can share in the growth opportunities that exist going forward.”

 

 

Benefits to Silver Standard Shareholders

 

  • Immediate positive free cash flow from high-margin mining operation.
  • Results in production growth with minimal capital investment and a cash flow accretive transaction.
  • Establishes an operating presence in Canada, providing further geopolitical diversification.
  • Adds underground mining capabilities to our core operating strengths.
  • Provides strong Mineral Resources to Mineral Reserves conversion opportunity.
  • Discovery potential with a large, underexplored land package underpinned by active drill programs.
  • Enhances corporate credit quality, further strengthening our balance sheet.
  • Income tax and G&A synergies with the addition of a Canadian mining operation.

 

 

Benefits to Claude Resources Shareholders

 

  • Results in an immediate premium of 25% based on Silver Standard and Claude Resources’ 20-day volume weighted average prices on March 4, 2016.
  • Immediate premium of 30% to Claude Resources’ closing price of C$1.27 per common share on March 4, 2016.
  • Provides exposure to Silver Standard’s diversified project portfolio.
  • Significantly enhances financial strength and free cash flow generation.
  • Provides equity participation for exposure to future value creation and growth.
  • Increases trading liquidity and capital markets exposure.
  • Presents financial and tax synergies only realized through the combination.
  • Maintains exposure to Claude Resources’ operating and exploration portfolio.

 

 

Transaction Conditions and Timing

 

 

Under the terms of the Agreement, the Transaction will be carried out by way of a court approved plan of arrangement and will require the approval of at least 66 2/3% of the votes cast by the shareholders of Claude Resources at a special meeting. The issuance of shares by Silver Standard under the Agreement is subject to the approval of the majority of votes cast by the Silver Standard shareholders at a special meeting.

 

 

Completion of the Transaction is subject to regulatory approvals and other customary closing conditions. The Transaction includes customary deal-protection provisions, including non-solicitation of alternative transactions, a right to match superior proposals and a C$12 million reciprocal termination fee payable under certain circumstances.

 

 

Full details of the Transaction will be included in the management information circulars of both Silver Standard and Claude Resources to be mailed to their respective shareholders by mid-April 2016. The special shareholder meetings of both companies are expected to be held in mid-May 2016. Upon completion of the Transaction, one Claude Resources Director will be appointed to the Board of Directors of Silver Standard.

 

 

Board of Directors’ Recommendations

 

 

Both companies’ Boards of Directors have determined that the Transaction is in the best interests of their respective shareholders based on, among other factors, the benefits set forth above. Each company’s Board of Directors has unanimously approved the Transaction and will provide a written recommendation that its respective shareholders vote in favor of the Transaction in the management information circulars to be mailed to their respective shareholders in connection with the Transaction.

 

 

Each of the directors and senior officers of Silver Standard and Claude Resources have entered into an agreement to vote in favor of the Transaction at the special meetings of Silver Standard and Claude Resources shareholders, respectively.

 

 

Macquarie Capital Markets Canada Ltd. has provided a fairness opinion to the Board of Directors of Silver Standard. National Bank Financial Inc. and Canaccord Genuity Corp. have provided fairness opinions to the Board of Directors of Claude Resources.

 

 

Advisors and Counsel

 

 

Macquarie Capital Markets Canada Ltd. is acting as financial advisor and Lawson Lundell LLP is acting as legal counsel to Silver Standard and its Board of Directors.

 

 

National Bank Financial Inc. is acting as financial advisor and Blake, Cassels & Graydon LLP is acting as legal counsel to Claude Resources and its Board of Directors. Claude has also engaged Canaccord Genuity Corp. to provide an opinion as to the fairness of the Silver Standard consideration, from a financial point of view, to Claude Resources.

 

About Silver Standard

 

 

Silver Standard is a Canadian-based precious metals producer with two wholly-owned and operated mines, including the Marigold gold mine in Nevada, U.S. and the Pirquitas silver mine in Jujuy Province, Argentina. In 2016, Silver Standard is expected to produce over 320,000 gold equivalent ounces at cash costs of $770 per gold equivalent ounce sold 1. We also have two feasibility stage projects and an extensive portfolio of exploration properties throughout North and South America. We are committed to delivering safe production through relentless emphasis on Operational Excellence. We are also focused on growing production and Mineral Reserves through the exploration and acquisition of assets for accretive growth, while maintaining financial strength.

 

 

About Claude Resources

 

 

Claude Resources Inc. is a public gold exploration and mining company based in Saskatoon, Saskatchewan, with an asset base located entirely in Canada. Its shares trade on the Toronto Stock Exchange (TSX:CRJ) and the OTCQB (OTCQB:CLGRF). Since 1991, Claude Resources has produced over 1,100,000 ounces of gold from its 100 percent owned Seabee Gold Operation in northeastern Saskatchewan. In 2016, Claude Resources is expected to produce between 65,000 and 72,000 ounces gold at cash costs of C$700 to C$770 per ounce gold. The Company also owns 100 percent of the Amisk Gold Project in northeastern Saskatchewan.

 

Posted March 7, 2016

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