New Gold Agrees to Acquire Silver Quest Resources – Consolidates Ownership of Blackwater Project in British Columbia
PR Newswire
VANCOUVER, Oct. 17, 2011
(All figures are in Canadian dollars unless otherwise indicated)
VANCOUVER, Oct. 17, 2011 /PRNewswire/ – New Gold Inc. (“New Gold”) (TSX:NGD)
(AMEX:NGD) and Silver Quest Resources Ltd. (“Silver Quest”) (TSX.V:SQI)
today jointly announce a binding letter agreement whereby New Gold will
acquire, through a plan of arrangement (the “Arrangement”), all of the
outstanding common shares of Silver Quest. Under the terms of the
Arrangement, Silver Quest shareholders will receive 0.09 of a New Gold
share (the “Share Consideration”) for each Silver Quest share held and
one common share in a new Yukon-focused precious metals exploration
company, McIntyre Minerals Inc. (“McIntyre”) for every three Silver
Quest shares held (the “Spinco Consideration”). The offer values Silver
Quest at $1.32 per share, representing a 52% premium based on the
combination of:
-
The Share Consideration of $1.06 per share, representing a 22% premium
based on New Gold and Silver Quest’s October 14, 2011 closing prices on
the TSX and TSX.V, respectively, implying an equity offer value of
approximately $131 million on a fully diluted basis and a transaction
value of $121 million, net of the cash to be received from the exercise
of Silver Quest’s dilutive instruments -
The Spinco Consideration of $0.26 per share, representing an additional
30% premium based on Silver Quest’s October 14, 2011 closing price on
the TSX.V, implying a value of approximately $35 million
Upon closing of the Arrangement, which is expected in December 2011, New
Gold will acquire Silver Quest’s 25% interest in the Davidson Property,
which forms the northern half of the Blackwater Project and in which
New Gold currently holds the remaining 75% interest. Silver Quest’s
share of the Blackwater mineral resource includes 0.56 million ounces
of indicated and 0.21 million ounces of inferred gold mineral
resources. In addition, New Gold will acquire a 100% interest in the
Capoose Property which covers over 41,000 hectares of land and has an
established gold and silver indicated and inferred mineral resource.
The Capoose Property is located approximately 25 kilometres west of the
Blackwater Project.
As part of the Arrangement, New Gold will purchase, on a private
placement basis, $3.5 million of McIntyre shares at a price of $0.78
per share ($0.26 per share value adjusted for the three Silver Quest
for one McIntyre share exchange), which will result in New Gold holding
9.9% of the shares outstanding of McIntyre, with current Silver Quest
shareholders holding the remaining 90.1% upon completion of the
Arrangement. Including the proceeds from the New Gold private
placement, it is expected McIntyre will have approximately $15 million
in cash to fund an aggressive two year exploration program focused on
Silver Quest’s 3Ts Gold Project in central British Columbia and a
number of Yukon exploration properties.
Transaction Highlights – New Gold
-
Consolidates New Gold’s ownership of the Blackwater Project in British
Columbia adding 0.56 million ounces of indicated and 0.21 million
ounces of inferred gold mineral resources -
Adds significant landholding with established gold and silver mineral
resource in close proximity to Blackwater Project with the Capoose
Property -
Provides New Gold shareholders with a strategic ownership position in
McIntyre
“The acquisition of Silver Quest’s Davidson interest and the Capoose
Property consolidates our ownership of the Blackwater Project and
expands our presence significantly in the area,” stated Randall
Oliphant, New Gold Executive Chairman. “We also look forward to
continuing our relationship with Silver Quest as a shareholder in
McIntyre given their team’s track record of delivering value for
shareholders.”
Transaction Highlights – Silver Quest
-
Immediate and attractive premium recognizing both the current value and
potential value of the Davidson Property -
All-share deal – shareholders retain exposure to the Blackwater Project
and gain exposure to New Gold’s diversified gold production base and
strong growth profile -
Maintain exposure to Silver Quest’s 3Ts Gold Project and Yukon
properties through shares in McIntyre which will be fully funded for an
aggressive two year exploration program
“This transaction delivers an immediate and attractive premium to our
shareholders while allowing them to continue to share in the potential
at the Blackwater Project through their New Gold shares,” stated Randy
Turner, President and Chief Executive Officer of Silver Quest. “We are
pleased that our shareholders are able to retain their exposure to an
exciting portfolio of exploration properties in the Yukon and British
Columbia through their McIntyre shares with New Gold as a supportive
shareholder.”
McIntyre Minerals
-
McIntyre will be led by the existing management team and Board of Silver
Quest, who have significant experience in building companies focused on
mineral exploration -
McIntyre will be a well funded exploration company with sufficient cash
for aggressive exploration programs in 2012 and 2013 -
Exploration in British Columbia will be focused on the 3Ts Gold Project
which covers an epithermal gold-silver vein system within which 12
individual mineralized veins, up to 650 metres in strike length and up
to 15 metres in true width, have been identified
-
3Ts Gold Project covers approximately 3,100 hectares with an established
inferred mineral resource (942,600 tonnes at 4.89 g/t Au and 77 g/t Ag)
covering more than 93,000 hectares, including extensive land holdings
in the White Gold District
“McIntyre will be well funded to continue to advance its portfolio of
exploration properties,” stated Randy Turner. “As the McIntyre team
evaluates the preliminary results from work completed in the Yukon
during the 2011 field season, the team looks forward to executing a
robust and targeted program in 2012.”
Blackwater Project
The Blackwater Project is a bulk-tonnage gold project located in central
British Columbia. New Gold owns 100% of the southern Dave and Jarrit
claims within the Blackwater deposit and 75% of the northern Davidson
claim where Silver Quest owns the remaining 25%. On September 19, 2011,
New Gold and Silver Quest announced an updated resource estimate for
the Blackwater Project which is summarized below.
Blackwater Deposit – September 2011 Resource Estimates by Property at
0.4 g/t Au Cut-off grade
| Property | Indicated | Inferred | ||||||||||
| Tonnes 000’s | Grade | NGD Share Contained Gold (Moz) | SQI Share Contained Gold (Moz) | Total Contained Gold (Moz) | Tonnes 000’s | Grade | NGD Share Contained Gold (Moz) | SQI Share Contained Gold (Moz) | Total Contained Gold (Moz) | |||
| Gold (g/t) | Silver (g/t) | Gold (g/t) | Silver (g/t) | |||||||||
| Dave and Jarrit (100% New Gold) | 87,226 | 1.12 | 6.0 | 3.13 | — | 3.13 | 9,533 | 1.13 | 6.5 | 0.35 | — | 0.35 |
| Davidson (75% New Gold/ 25% Silver Quest) | 77,929 | 0.89 | 4.1 | 1.66 | 0.56 | 2.22 | 29,226 | 0.88 | 4.2 | 0.61 | 0.21 | 0.82 |
| Total Blackwater | 165,155 | 1.01 | 5.1 | 4.79 | 0.56 | 5.35 | 38,759 | 0.94 | 4.8 | 0.96 | 0.21 | 1.17 |
Terms of Offer
-
Silver Quest shareholders will receive 0.09 of a New Gold common share
for each Silver Quest share held and one common share of McIntyre for
every three Silver Quest shares held -
Values Silver Quest at $1.32 per share including Spinco Consideration,
based on New Gold’s October 14, 2011 closing price and the estimated
New Gold private placement subscription price -
Transaction unanimously approved by the Boards of Directors of both New
Gold and Silver Quest -
Directors and Officers of Silver Quest, representing approximately 7.7%
of the fully diluted shares outstanding have entered into voting
agreements in support of the Arrangement - $5 million break fee
- New Gold retains a right to match any superior proposal
The acquisition of Silver Quest by New Gold is expected to be completed
by way of a court approved plan of arrangement. The maximum number of
New Gold shares to be issued, including all options and warrants, would
be approximately 11.1 million, in which case New Gold would also
acquire approximately $10 million in cash from option and warrant
proceeds. Silver Quest’s stock options outstanding on the effective
date of the Arrangement will be exchanged for New Gold and McIntyre
shares on a cashless exercise basis in accordance with the terms of the
Arrangement. Silver Quest warrants will be adjusted or exchanged for
new warrants entitling their holders to acquire common shares of New
Gold and McIntyre. The transaction is targeted to close in December
2011.
The Special Committee comprised of independent directors of Silver Quest
established to review the transaction received a verbal opinion from
Paradigm Capital Inc. that the consideration to be received by the
Silver Quest shareholders under the terms of the transaction is fair
from a financial point of view to the shareholders of Silver Quest.
Silver Quest directors have determined that the transaction is in the
best interest of Silver Quest and its shareholders and have unanimously
approved the transaction. The directors intend to recommend, in the
information circular for the shareholder meeting, that Silver Quest
shareholders vote in favour of the transaction. Directors and Officers
of Silver Quest have entered into lock-up agreements with New Gold
under which they have agreed to vote in favour of the Arrangement,
their Silver Quest shares and options, which represent approximately
7.7% of Silver Quest’s fully diluted shares outstanding. The
Arrangement has been approved unanimously by the Board of Directors of
both New Gold and Silver Quest and will be subject to, among other
things, the favourable vote of 66 2/3% of the votes cast by Silver
Quest shareholders and option holders voting as a single class at a
special meeting called to approve the transaction which is expected to
take place in December 2011.
In the event that the Arrangement is not completed, Silver Quest has
agreed, under certain circumstances, to pay New Gold a termination fee
equal to $5 million. Silver Quest has also provided New Gold with
certain other customary rights, including a right to match competing
offers.
Silver Quest securityholders and other interested parties are advised to
read the materials relating to the proposed Arrangement that will be
filed by Silver Quest with securities regulatory authorities in Canada
when they become available. Anyone may obtain copies of these documents
when available free of charge at the Canadian Securities
Administrators’ website at www.sedar.com.
This announcement is for informational purposes only and does not
constitute an offer to purchase, a solicitation of an offer to sell the
shares or a solicitation of a proxy.
New Gold’s financial advisor is Canaccord Genuity Corp. and its legal
advisor is Cassels Brock & Blackwell LLP. Silver Quest’s financial
advisor is Paradigm Capital Inc. and its legal advisor is Gowling
Lafleur Henderson LLP. The legal advisor for the Special Committee of
Silver Quest is DuMoulin Black LLP.
Technical Information
The Blackwater mineral resource estimate and other scientific and
technical information contained in this news release related to
Blackwater were prepared by Mr. Ronald Simpson, P. Geo, President of
Geosim Services Inc., an independent “Qualified Person” under National
Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI
43-101”). See New Gold’s news release dated September 19, 2011 for
details of key assumptions and parameters relating to these resource
estimates. The NI 43-101 technical report in respect of the mineral
resource estimate disclosed will be filed on SEDAR by November 3, 2011.
The scientific and technical information in this news release related to
Blackwater has been reviewed by Mark Petersen, a Qualified Person under
National Instrument 43-101 and employee of New Gold.
Capoose – Indicated and Inferred Resource Estimates with Gold Equivalent
Cut-Off
| Cut-off g/t AuEq | Indicated | Inferred | ||||||||
| Tonnes 000’s | Grade | Contained Gold (koz) | Contained Silver (Moz) | Tonnes 000’s | Grade | Contained Gold (koz) | Contained Silver (Moz) | |||
| Gold (g/t) | Silver (g/t) | Gold (g/t) | Silver (g/t) | |||||||
| 0.3 | 38,605 | 0.34 | 23.7 | 419.4 | 29.4 | 49,548 | 0.32 | 21.2 | 508.6 | 33.8 |
| 0.4 | 31,216 | 0.38 | 26.5 | 383.8 | 26.6 | 37,256 | 0.37 | 24.6 | 443.2 | 29.5 |
| 0.5 | 24,727 | 0.43 | 29.5 | 343.2 | 23.5 | 29,555 | 0.42 | 27.1 | 395.2 | 25.7 |
Gold equivalent (AuEq) is calculated as the sum of the gold content plus
0.015 times the silver content, based upon prices of US$1025/oz. for gold and US$15.50/oz. for silver
The indicated and inferred mineral resource estimate for Capoose has
been prepared in compliance with the standards of National Instrument
43-101 by Dr. A. Armitage, P. Geol., and J. Campbell, B.Sc., P. Geo.,
of GeoVector Management Inc. an Ottawa, Ontario consulting firm
specializing in mineral resource estimation, project assessment and
project management. Dr. Armitage acted as the Qualified Person, as
defined in National Instrument 43-101 and is independent of Silver
Quest.
David Pawliuk, P. Geo., Vice-President Exploration for Silver Quest is
the Qualified Person, as defined by National Instrument 43-101, for the
Capoose Project and has reviewed the technical information in this
release.
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About New Gold Inc.
New Gold is an intermediate gold mining company. The company has a |
|
About Silver Quest Resources Ltd.
Silver Quest is a gold and silver exploration company, whose main areas |
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this news release, including any
information relating to New Gold’s and/or Silver Quest’s future
financial or operating performance may be deemed “forward looking”. All
statements in this news release, other than statements of historical
fact, that address events or developments that New Gold/Silver Quest
expects to occur, are “forward-looking statements”. Forward-looking
statements are statements that are not historical facts and are
generally, but not always, identified by the words “expects”, “does not
expect”, “plans”, “anticipates”, “does not anticipate”, “believes”,
“intends”, “estimates”, “projects”, “potential”, “scheduled”,
“forecast”, “budget” and similar expressions, or that events or
conditions “will”, “would”, “may”, “could”, “should” or “might” occur.
All such forward-looking statements are based on the opinions and
estimates of the relevant management as of the date such statements are
made and are subject to important risk factors and uncertainties, many
of which are beyond New Gold/Silver Quest’s ability to control or
predict. Forward-looking statements are necessarily based on estimates
and assumptions (including that the Arrangement will be completed
successfully on the terms agreed upon by the parties and that the
business of Silver Quest will be integrated successfully in the New
Gold organization) that are inherently subject to known and unknown
risks, uncertainties and other factors that may cause actual results,
level of activity, performance or achievements to be materially
different from those expressed or implied by such forward-looking
statements. In the case of New Gold, such factors include, without
limitation: significant capital requirements; fluctuations in the
international currency markets and in the rates of exchange of the
currencies of Canada, the United States, Australia, Mexico and Chile;
price volatility in the spot and forward markets for commodities;
impact of any hedging activities, including margin limits and margin
calls; discrepancies between actual and estimated production, between
actual and estimated reserves and resources and between actual and
estimated metallurgical recoveries; changes in national and local
government legislation in Canada, the United States, Australia, Mexico
and Chile or any other country in which New Gold currently or may in
the future carry on business; taxation; controls, regulations and
political or economic developments in the countries in which New Gold
does or may carry on business; the speculative nature of mineral
exploration and development, including the risks of obtaining and
maintaining the validity and enforceability of the necessary licenses
and permits and complying with the permitting requirements of each
jurisdiction that New Gold operates, including, but not limited to,
Mexico, where New Gold is involved with ongoing challenges relating to
its environmental impact statement for the Cerro San Pedro Mine; the
lack of certainty with respect to the Mexican and other foreign legal
systems, which may not be immune from the influence of political
pressure, corruption or other factors that are inconsistent with the
rule of law; the uncertainties inherent to current and future legal
challenges the company is or may become a party to, including the third
party claim related to the El Morro transaction with respect to New
Gold’s exercise of its right of first refusal on the El Morro
copper-gold project in Chile and its partnership with Goldcorp Inc.,
which transaction and third party claim were announced by New Gold in
January 2010; diminishing quantities or grades of reserves;
competition; loss of key employees; additional funding requirements;
actual results of current exploration or reclamation activities;
changes in project parameters as plans continue to be refined;
accidents; labour disputes; defective title to mineral claims or
property or contests over claims to mineral properties. In the case of
Silver Quest, such risks include, among other risks, the approvals of
regulators, availability of funds, the results of financing and
exploration activities, the interpretation of drilling results and
geological data, project cost overruns or unanticipated costs and
expenses. In addition, there are risks and hazards associated with the
business of mineral exploration, development and mining, including
environmental hazards, industrial accidents, unusual or unexpected
formations, pressures, cave-ins, flooding and gold bullion losses (and
the risk of inadequate insurance or inability to obtain insurance to
cover these risks) as well as “Risk Factors” included in New Gold’s and
Silver Quest’s continuous disclosure documents filed on and available
at www.sedar.com. Forward-looking statements are not guarantees of future performance,
and actual results and future events could materially differ from those
anticipated in such statements. All of the forward-looking statements
contained in this news release are qualified by these cautionary
statements. New Gold/Silver Quest expressly disclaims any intention or
obligation to update or revise any forward-looking statements, whether
as a result of new information, events or otherwise, except in
accordance with applicable securities laws.
Cautionary Note to U.S. Readers Concerning Estimates of Measured,
Indicated and Inferred Mineral Resources
Information concerning the properties and operations discussed herein
has been prepared in accordance with Canadian standards under
applicable Canadian securities laws, and may not be comparable to
similar information for United States companies. The terms “Mineral
Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource”
and “Inferred Mineral Resource” used in this news release are Canadian
mining terms as defined in accordance with NI 43-101 under guidelines
set out in the Canadian Institute of Mining, Metallurgy and Petroleum
(“CIM”) Standards on Mineral Resources and Mineral Reserves adopted by
the CIM Council on December 11, 2005. While the terms “Mineral
Resource”, “Measured Mineral Resource”, “Indicated Mineral Resource”
and “Inferred Mineral Resource” are recognized and required by Canadian
regulations, they are not defined terms under standards of the United
States Securities and Exchange Commission. Under United States
standards, mineralization may not be classified as a “reserve” unless
the determination has been made that the mineralization could be
economically and legally produced or extracted at the time the reserve
calculation is made. As such, certain information contained in this
news release concerning descriptions of mineralization and resources
under Canadian standards is not comparable to similar information made
public by United States companies subject to the reporting and
disclosure requirements of the United States Securities and Exchange
Commission. An “Inferred Mineral Resource” has a great amount of
uncertainty as to its existence and as to its economic and legal
feasibility. It cannot be assumed that all or any part of an “Inferred
Mineral Resource” will ever be upgraded to a higher category. Under
Canadian rules, estimates of Inferred Mineral Resources may not form
the basis of feasibility or other economic studies. Readers are
cautioned not to assume that all or any part of Measured or Indicated
Resources will ever be converted into Mineral Reserves. Readers are
also cautioned not to assume that all or any part of an “Inferred
Mineral Resource” exists, or is economically or legally mineable. In
addition, the definitions of “Proven Mineral Reserves” and “Probable
Mineral Reserves” under CIM standards differ in certain respects from
the standards of the United States Securities and Exchange Commission.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
SOURCE New Gold Inc.
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