TORONTO, May 30, 2011 /CNW/ - Gran Colombia Gold Corp. (TSX: GCM) and
Medoro Resources Ltd. (TSX: MRS) (together, the "Companies") have re-affirmed their strong commitment to completing a friendly
combination of the Companies, and have rejected the recommendations
contained in two separate reports from Glass, Lewis & Co., LLC ("Glass Lewis"), a professional services firm that provides proxy research and voting
recommendations to institutional investors. The Glass Lewis reports are
in contrast to the positive recommendation of Institutional Shareholder
Services Inc. ("ISS").
The Companies believe the approach used by Glass Lewis to analyze the
combination is fundamentally flawed in several respects and does not
adequately assess the rationale of the transaction. In its analysis,
Glass Lewis failed to address several key factors, including: (1) the
structure of the transaction; (2) the rationale and process of the
transaction; and (3) the Colombia-specific considerations. Furthermore,
the basis for its recommendations has been founded on erroneous facts.
It is inconceivable that the Glass Lewis analyst who authored the two
separate reports came to conclusions totally at odds to each other. The
Medoro shareholders are being told that they are being offered too
little consideration, while Gran Colombia shareholders are being told
that they are offering too much consideration. This analysis is at best
counter intuitive and at worst fundamentally flawed. It defies logic to
think that the same analyst could publish two separate recommendations
in respect of the same transaction with opposite conclusions in terms
of the adequacy of the consideration.
In addition, the original Glass Lewis report to Medoro shareholders did
not take into consideration or assign value to the warrant component of
the offer price. Failing to include the value of the warrants brings
the conclusion of the original report's analysis into serious doubt.
The joint circular clearly states that the consideration warrants will
be issued under the existing Gran Colombia indenture and that such
consideration warrants will be the same warrants currently traded on
the Toronto Stock Exchange (under the ticker symbol "GCM.WT"). The fact
that this was not properly addressed suggests that Glass Lewis did not
fully review the contents of the joint circular and/or did not
understand the basic terms of the transaction. Glass Lewis has since
revised their reports to take into consideration and assign value to
the warrant component of the offer price - however, this omission
nonetheless remains prima facie evidence that the precise details of the transaction have not been
properly reviewed or considered.
The following sets out in greater detail the Companies' position with
respect to the transaction:
Structure: The Glass Lewis reports question this transaction as being a true
"merger of equals", which suggests that Glass Lewis is unable to
properly comprehend this type of transaction. The combination of the
Companies is a true "merger of equals". This is clearly demonstrated by
the following features: (a) following the transaction, current Gran
Colombia shareholders and former Medoro shareholders are anticipated to
each own approximately 50% of the combined entity on a fully-diluted
basis; (b) the board of the combined company will be composed of all
the current directors of Gran Colombia and Medoro; and (c) the
management teams of each company will also be combined.
Of particular note, which supports the view that Glass Lewis does not
understand the merger of equals concept, the Glass Lewis reports
analyze the transaction on the basis of premiums paid. This is not a
metric that is used in a merger of equals approach.
Rationale and Process: Glass Lewis' analysis appears one-dimensional and largely overlooks the
persuasive rationales for the transaction, including, that the
combination of the Companies: (a) provides immediate increased scale,
better liquidity and operational synergies; (b) creates Colombia's
leading gold producer with a 42% cumulative average growth rate between
2011 and 2016; (c) assembles a team capable of addressing critical
issues relating to operating in Colombia; (d) provides a balanced and
sustainable project and development pipeline; and (e) positions the
Companies well for long-term regional consolidation, amongst several
other benefits. Although Glass Lewis refers to some of the benefits in
their reports under the heading entitled "Board Rationale", they
quickly dismiss these highly positive attributes and instead refer back
to one-dimensional arguments. By overlooking these highlights, which
are significant catalysts to create value, the Glass Lewis analyst
illustrates that he has not properly considered all the factors in his
The Glass Lewis report also questions the strategic review process in
addressing alternative transactions and states "[…] we fail to see
compelling reason for shareholders to believe the proposed acquisition
represented the most attractive means by which the Company could
address its "desire to expand rapidly".* The Companies followed a
standard exhaustive process to reach this combination, which is clearly
stated in the joint circular. It is important to note that the merger
between Medoro and Gran Colombia was sparked by numerous overtures from
substantial, sophisticated, resource-focused investors/shareholders in
both Companies, who view this combination as an opportunity to merge
two relatively undervalued companies into a stronger entity that will
be better able to create lasting and long-term shareholder value.
Mr. Frank Holmes, Chief Executive Officer and Chief Investment Officer
of U.S. Global Investors, a shareholder of both Companies, states: "The
merger of these two companies represents an opportunity for
shareholders to benefit from a re-positioning of the combined entity as
the leading gold producer in Colombia. Based on our analysis, this
merger should drive sustainable growth in resources, cash flow and
production, and based on our analysis, this merger should drive
momentum in relative value for the combined company."
Colombia-Specific Considerations: The Glass Lewis reports fail to address the specific leadership
capabilities required to build a mining company in Colombia. A
considerable part of the rationale for this merger is to create a
management and leadership team that can successfully navigate the
political and social issues in Colombia.
In Colombia, political, social and environment considerations are as
important as asset quality. Other companies with attractive deposits
operating in Colombia have failed or incurred material costs and/or
delays for not addressing these issues. The combined leadership team
has the required experience and proven track record to develop these
assets and to maximize shareholder value.
ISS, which is Glass Lewis' closest industry peer, recently released a
recommendation that they support the transaction and an excerpt from
their conclusion illustrates that, unlike Glass Lewis' analysis, ISS
has completed a full review and understands the transaction. In its
report, ISS stated: "The transaction is structured as a merger of
equals. The companies believe the combined company's growth prospects
are greater than either could achieve on their own (42% compound annual
growth rate in production is expected from 2011 to 2016). The companies
expect to realize cost savings from a single human resources and
community relations program as well as production synergies and
economies of scale from more efficient use of facilities. The combined
company will have exposure to two large production and development
projects and is expected to be well positioned to take advantage of
consolidation opportunities. The combined management team is said to be
well-suited to dealing with potential political, social and economic
issues in Colombia."*
It is the view of the Companies that, in this case, Glass Lewis grossly
overlooked several crucial factors needed to make an informed decision
on this merger and that the merits of their recommendation must be
Given the deficiencies identified in the Glass Lewis reports, the
Companies believe that shareholders should ignore these inconsistent
reports and vote FOR the arrangement resolution.
A joint management information circular, dated May 6, 2011, has been
mailed to applicable securityholders and filed on SEDAR (www.sedar.com). The joint circular contains, among other items, details regarding the
arrangement resolution, the terms of the acquisition, the business of
Gran Colombia and Medoro and certain historical and pro forma financial
information relating to Gran Colombia and Medoro.
Securityholders who require assistance voting their proxy should contact
Kingsdale Shareholder Services Inc., the Companies' proxy solicitation
and information agent, by: (i) telephone toll-free in North America at
1-888-518-1563 or 416-867-2272 outside of North America; or (ii) e-mail
*Permission to quote from either the Glass Lewis Reports or the ISS
Report was neither sought nor obtained.
About Gran Colombia Gold Corp.
Gran Colombia is a Canadian-based gold and silver exploration and
development company focused on acquiring, developing and operating
properties of merit in Colombia. Gran Colombia holds 95% of the former
Frontino Gold Mines Ltd. gold and silver assets, including the largest
underground gold and silver mining operation in Colombia. It also owns
four more exploration projects in Colombia for total exploration
acreage of approximately 21,400 hectares. Gran Colombia is committed to
implementing its exploration and development strategy with a
comprehensive environment, safety and community program, meeting
international standards of best practice.
Additional information on Gran Colombia can be found on its website at www.grancolombiagold.com and by reviewing its profile on SEDAR at www.sedar.com.
About Medoro Resources Ltd.
Medoro is a gold exploration, development and mining company with its
primary focus being the development of a large-scale, open-pit mine at
Marmato in Colombia. Medoro also has a 5% interest in the Gran Colombia
properties in Colombia with an option to increase its interest to 50%.
Medoro also holds a 100% interest in the Lo Increible 4A and 4B
concessions in Venezuela, as well as interests in gold exploration
properties in Mali.
Additional information on Medoro can be found on its website at www.medororesources.com and by reviewing its profile on SEDAR at www.sedar.com.
Cautionary Statement on Forward-looking Information
This news release contains "forward-looking information", which may
include, but is not limited to, statements with respect to the future
financial or operating performance of Medoro, Gran Colombia and their
respective projects. Often, but not always, forward-looking statements
can be identified by the use of words such as "plans", "expects", "is
expected", "budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates", or "believes" or variations (including negative
variations) of such words and phrases, or state that certain actions,
events or results "may", "could", "would", "might" or "will" be taken,
occur or be achieved. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of Medoro and Gran Colombia
to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements.
Forward-looking statements contained herein are made as of the date of
this press release based on current expectations and beliefs and Medoro
and Gran Colombia disclaim, other than as required by law, any
obligation to update any forward-looking statements whether as a result
of new information, results, future events, circumstances, or if
management's estimates or opinions should change, or otherwise. There
can be no assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ materially
from those anticipated in such statements. Accordingly, the reader is
cautioned not to place undue reliance on forward-looking statements.
SOURCE Gran Colombia Gold Corp.
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