TORONTO, May 21, 2014 /CNW/ - Rio Alto Mining Limited ("Rio Alto" or the "Company") (TSX & BVL: RIO, NYSE: RIOM) and Sulliden Gold Corporation Ltd. ("Sulliden") (TSX & BVL: SUE, OTCQX: SDDDF) jointly announce that they have signed a binding letter agreement (the
"Agreement") to combine their respective businesses (the "Transaction")
and create a new, leading mid-tier gold producer with operations
focused in a world-class gold mining district in Peru.
The Transaction combines Rio Alto's currently producing, low cost La
Arena gold oxide mine and adjoining sulphide copper-gold deposit with
Sulliden's low cost, scalable Shahuindo gold development project
located in Cajabamba, northern Peru. The Transaction will create a
leading, mid-tier gold producer with near-term production potential of
approximately 300,000 ounces of gold per year and the opportunity to
materially expand production in the near-term while maintaining
attractive and sustainably low cash costs. Sulliden completed a
feasibility study on Shahuindo in September 2012 (based on $1,415/oz
gold and $27.00/oz silver) outlining a 10,000 tonnes per day (tpd) open
pit heap leach mine that would see annual production of approximately
85,000 ounces of gold over an estimated ten year mine life at cash
costs of approximately $550 per ounce, based on mining 40% of the
defined measured and indicated gold oxide resource.
Pursuant to the Agreement, Rio Alto will acquire each outstanding
Sulliden common share for 0.525 of a Rio Alto common share (the
"Exchange Ratio"). In addition, as part of the Transaction, Sulliden
shareholders will receive 0.10 of a common share in a newly
incorporated company ("SpinCo") for each Sulliden common share held.
SpinCo will hold Sulliden's 100% interest in the East Sullivan Property
in Val-d'Or, Quebec and will be capitalized with approximately C$25
million in cash which at Rio Alto's option may be provided entirely in
cash or C$15 million in cash and C$10 million in common shares of Rio
Alto. Following completion of the Transaction, each outstanding
warrant and stock option to purchase Sulliden common shares will be
exercisable to purchase 0.525 of a Rio Alto common share and 0.10 of a
SpinCo common share in lieu of each Sulliden share.
The Exchange Ratio represents consideration to Sulliden shareholders of
C$1.12 per Sulliden common share based on the closing price of Rio Alto
common shares of C$2.13 per share on the Toronto Stock Exchange as at
May 20, 2014. This value implies a 43.4% premium over the May 20, 2014
closing price of Sulliden's common shares of C$0.78 and a 46.8% premium
calculated on the 20-day volume weighted average price ("VWAP") of each
respective company as of May 20, 2014.
Upon completion of the Transaction, Rio Alto shareholders and Sulliden
shareholders will own approximately 52% and 48%, respectively, of the
outstanding Rio Alto common shares, on a basic basis. The implied
transaction value, before ascribing any value to SpinCo, is
approximately C$300 million.
Highlights of the Transaction
Creates a leading mid-tier gold producer with a strong portfolio of
assets in Peru - a world-class mining district: Current gold production of between 200,000 and 220,000 ounces from Rio
Alto's La Arena gold mine based on 2014 guidance with Sulliden's
Shahuindo gold project targeted to produce first gold by late 2015 /
Leading production growth profile with attractive and decreasing cash
costs: Significant production growth of approximately 40% from 2014E to 2016E
based on analyst consensus estimates with clear potential for
additional expansion at Shahuindo supported by a robust resource base
with significant exploration upside.
Comparable low risk mining operations: Addition of a construction ready, long-life gold oxide heap leach
project located 30 kilometers from La Arena with low capital intensity
and attractive cash costs.
Proven management team to leverage the strong track record of building
and operating La Arena: Rio Alto's management team has demonstrated its capabilities to
successfully build and operate La Arena with a track record of
consistently meeting or exceeding expectations.
Opportunity for significant synergies, creating a unique re-valuation
opportunity: The proximity of the two companies' operations, located only 30
kilometers from one another, provides the opportunity to unlock
considerable value through capital, operational and other regional
Strong financial position: Enhanced market capitalization of $664 million with approximately $45
million in cash, strong and growing cash flow from La Arena and greater
access to low-cost capital to fund the construction and expansion of
the Shahuindo mine.
Strong value proposition: New Rio Alto will have an attractive valuation compared to its peers on
a price to net asset value and price to cash flow basis. With low cost
production and cash flow, a strong balance sheet, superior growth and a
proven operating team, the combined company supports the potential for
a substantial re-rating to a multiple in line with or superior to other
mid-tier gold producers.
Enhanced market presence: The combined company will have increased trading liquidity with far
greater market and analytical following to improve market profile and
broadened investor appeal.
Alex Black, President and Chief Executive Officer of Rio Alto, stated,
"This transaction represents a logical combination for Rio Alto given
the complementary nature and proximity of our respective operations.
We are looking forward to expanding upon the excellent work completed
to date by the management team of Sulliden and believe the development
of Shahuindo leverages our core strengths as an organization and is
analogous in many respects to our La Arena mine, which was built on
time and on budget and has continuously outperformed expectations.
This acquisition positions Rio Alto on solid footing with material
current production, substantial growth and a significant resource base
able to support a long operating mine life. We have successfully
demonstrated through our development and operational track record that
our management team is capable of generating solid returns to
shareholders and we see the opportunity to do that again with
Shahuindo. We already see several opportunities to unlock significant
value for shareholders at Shahuindo through potential capital,
operational and social synergies, which is very rare in the mining
Stan Bharti, Co-Chairman and Founder of Sulliden, states, "Sulliden is
another example of the successful Forbes & Manhattan business model of
identifying undervalued assets and successfully capitalizing,
de-risking and advancing them, creating value for all stakeholders and
investors. It has been a pleasure working with Alex and the entire Rio
Alto team who are the best partner for Sulliden given their in country
expertise, success at La Arena and ongoing professionalism. We are also
very enthusiastic to continue the success of the Sulliden management
team with the new SpinCo. Sulliden management and insiders plan on
completing a non-brokered private placement of up to C$10 million in
equity of SpinCo concurrent with the completion of this Transaction."
Peter Tagliamonte, Chief Executive Officer and Co-Chairman of Sulliden,
stated, "We are very excited about the prospects of Rio Alto going forward and
strongly believe this is the right transaction for our shareholders.
Our shareholders will receive a substantial premium, as well as a
meaningful ownership position in Rio Alto and all the benefits that
come along with that as La Arena continues its track record of
outperformance and the Shahuindo project is developed into the high
quality mining operation that we envisioned."
Benefits to Rio Alto's Shareholders
The acquisition of Sulliden establishes Rio Alto as a leading mid-tier
gold producer with a strong portfolio of producing and near-producing
assets. Rio Alto shareholders stand to realize the potential benefits
set out below in both the near and longer term as a result of the
Addition of a high quality, long-life, low-cost heap leach gold oxide
project with scalable production, a substantial resource base and
strong exploration potential located only 30km away from La Arena.
Provides a combined long term gold production base of approximately
300,000 gold ounces per year through the addition of Shahuindo, which
has a large oxide resource with expansion potential and exploration
Ability to leverage Rio Alto's expertise and successful track record at
La Arena to accelerate production at Shahuindo and bring forward
scalable development to 30,000 tpd.
Combined oxide operations provide the critical mass and cash flow to
support the future development of the La Arena sulphide copper-gold
The Transaction is accretive to key long term per share metrics
including production and cash flow once Shahuindo is in production.
Opportunity to capitalize on real capital, operating and social
synergies to further enhance per share metrics, project economics and
Improved market presence and attractive valuation and provides a
significant multiple re-rating opportunity as a mid-tier producer with
a proven operating team, a superior growth profile and significant
Enhanced market capitalization expected to appeal to a broader
shareholder base, increase analyst coverage and improve share trading
Benefits to Sulliden's Shareholders
Sulliden shareholders stand to realize potential benefits in both the
near and longer term as a result of the Transaction.
Significant and immediate premium of 43.4% to the current share price
and 46.8% based on the 20-day VWAP of each company's share price on the
Exposure to immediate low cost production from the La Arena gold mine
that is currently generating unencumbered positive operating and free
Better access to capital through a financially stronger combined company
with the resources to efficiently develop and operate Shahuindo.
Strong re-rate potential from the reclassification of Rio Alto as a
leading, low-cost mid-tier gold producer.
Access to a proven management team with a successful track record of
building and operating La Arena and the ability to leverage Rio Alto's
existing relationships with local contractors in Peru.
Ownership in a new, well capitalized, exploration company created to
leverage Sulliden management's exploration and generative expertise in
the proven mining district of Val-d'Or, Quebec.
Recommendations of Boards of Directors
Both companies' Boards of Directors have determined that the proposed
Transaction is in the best interests of their respective shareholders
based on a number of factors, including fairness opinions received from
their respective financial advisors. Each company's Board of Directors
approved the terms of the proposed Transaction and recommends that
their respective shareholders vote in favour of the Transaction. GMP
Securities L.P. has provided a fairness opinion to the Board of
Directors of Rio Alto. Cormark Securities Inc. provided a fairness
opinion to the Board of Directors of Sulliden and National Bank
Financial Inc. provided an independent fairness opinion to the Special
Committee of the Board of Directors of Sulliden.
Each of the officers and directors of Sulliden and certain other
shareholders of Sulliden, including Aberdeen International Inc., have
agreed to enter into voting support agreements with Rio Alto supporting
the Transaction pursuant to which they will vote their common shares
held in favour of the approval of the arrangement. Each of the officers
and directors of Rio Alto have agreed to enter into voting support
agreements with Sulliden supporting the Transaction pursuant to which
they will vote their common shares held in favour of the approval of
the issuance of Rio Alto common shares in the arrangement.
The Transaction will be carried out by way of court-approved plan of
arrangement and will require the approval of at least 66⅔% of the votes
cast in person or by proxy of the shareholders of Sulliden at a special
meeting of Sulliden shareholders to be held no later than July 30,
2014. The Transaction is also subject to obtaining approval by a
majority of votes cast by the shareholders of Rio Alto at a special
meeting of Rio Alto shareholders expected to take place on or about the
same date as the Sulliden meeting. In addition to shareholder
approvals, the Transaction is also subject to the negotiation and
execution of a definitive arrangement agreement to give effect to the
Transaction, the receipt of all necessary regulatory, court and other
approvals and the satisfaction of certain other closing conditions
customary for a transaction of this nature.
The Agreement includes customary deal protection provisions including,
among other things, reciprocal non-solicitation covenants, subject to
"fiduciary out" provisions that entitle a party to consider and accept
a superior proposal and a right in favour of the other party to match
any superior proposal. The Agreement provides for a reciprocal C$15
million termination fee payable and a cost reimbursement fee of C$2
million payable by one party to the other in certain circumstances if
the Transaction is not completed.
Upon completion of the Transaction, two nominees of Sulliden will be
appointed to the Rio Alto Board of Directors, with the existing seven
directors of Rio Alto continuing as directors.
Upon completion of the Transaction, Rio Alto will have approximately 340
million common shares issued and outstanding, with former Sulliden
shareholders holding approximately 48% of the basic shares outstanding
of the combined company.
Meeting materials regarding the Transaction are expected to be mailed to
the shareholders of Rio Alto and Sulliden in special meetings to take
place in late July, with closing expected to occur as soon as
reasonably practicable following the shareholders' votes and regulatory
A copy of the Agreement, the arrangement agreement and the meeting
materials and related documents will be filed under the SEDAR profile
of both Rio Alto and Sulliden at www.sedar.com.
Rio Alto's financial advisor is GMP Securities L.P. and its legal
counsel is Davis LLP.
The financial and legal advisors to Sulliden and its Board of Directors
are Cormark Securities Inc. and Cassels Brock & Blackwell LLP,
respectively. The financial and legal advisors to the Special
Committee of the Board of Directors of Sulliden are National Bank
Financial Inc. and Norton Rose Fulbright Canada LLP, respectively.
Mr. Enrique Garay, MSc. P. Geo (AIG Member), Vice President Geology of
Rio Alto, is a Qualified Person as defined under National Instrument
43-101 ("NI 43-101"). All of the scientific and technical disclosure
contained in this news release regarding the La Arena gold oxide mine
and adjoining sulphide copper-gold deposit was reviewed and approved by
Mr. Garay. For additional information regarding the La Arena gold mine,
including key parameters, assumptions and risks associated with its
mineral resource and reserve estimates, see Rio Alto's Annual
Information Form dated March 28, 2014 and Rio Alto's independent
technical report entitled "La Arena Project, Peru" dated effective
December 31, 2013, copies of which documents are available on SEDAR
under Rio Alto's SEDAR profile at www.sedar.com.
Mr. Stéphane Amireault, MScA, P. Eng, Vice President, Exploration of
Sulliden and Mr. Joseph Milbourne, Vice President, Technical Services
of Sulliden are both qualified persons as defined by NI 43-101. All of
the scientific and technical disclosure contained in this news release
regarding the Shahuindo gold project was reviewed and approved by
Messrs. Amireault and Milbourne. For additional information regarding
the Shahuindo gold project, including key parameters, assumptions and
risks associated with its mineral resource and reserve estimates, see
Sulliden's Annual Information Form dated July 25, 2013 and Sulliden's
independent technical report entitled "Technical Report on the
Shahuindo Heap Leach Project, Cajabamba, Peru" dated effective
September 26, 2012 (the "Sulliden Technical Report"), copies of which
documents are available on SEDAR under Sulliden's SEDAR profile at www.sedar.com.
Mineral resources that are not mineral reserves do not have demonstrated
A conference call will be held on Wednesday, May 21, 2014, at 10 a.m.
(Toronto) / 7 a.m. (Vancouver) to discuss the Transaction. Please use
the following information to access the call:
Canada & USA Toll Free Dial In: 1-800-319-4610
Peru-Lima Local Dial-In: +51 1 708 6135
Peru Toll Free Dial In: 0 800 54 115
Vancouver Local Dial In: 1-604-638-5340
Outside of Canada & USA call: 1-604-638-5340
Callers should dial in five to ten minutes prior to the scheduled start
time and ask to join our call. There will be a question and answer
session following management presentations during the call.
A replay of the audio webcast will be available at www.rioaltomining.com or alternatively at www.sulliden.com.
A copy of the presentation detailing the Transaction can be accessed on
the Rio Alto website at www.rioaltomining.com/investor/presentations/
About Rio Alto Mining Limited
Rio Alto Mining Limited is a Canadian based resource company focused on
the development of the 21,000 ha La Arena gold / copper project located
in north central Peru, the most prolific gold mining district in the
country that is home to a number of world-class gold mines. La Arena
contains total measured and indicated resources of 5.2 million ounces
gold comprised of 1.3 million gold ounces in the oxide resource (100.2
million tonnes at 0.41 g/t gold) and 3.8 million gold ounces in the
sulphide resource (561.7 million tonnes at 0.21 g/t gold) and 3.7
billion pounds copper (561.7 million tonnes at 0.3% copper). First gold
production at La Arena occurred on May 6, 2011 and 214,742 ounces of
gold were poured in 2013. Rio Alto is also in the business of
acquiring, exploring, and developing gold resources and advanced stage
exploration projects in Peru and Latin America. The Company has
assembled a highly experienced team with a proven history of
developing, financing, and operating mining projects in Latin America.
With a focused strategy of mine production and development and an
exploration strategy to discover additional mineral resources, Rio Alto
is strongly positioned to generate significant value for its
shareholders. To learn more about Rio Alto Mining Limited, please
visit: www.rioaltomining.com or Rio Alto's SEDAR profile at www.sedar.com.
About Sulliden Gold Corporation Ltd.
Sulliden is a mineral exploration and development company focused on
advancing its flagship Shahuindo project to production. Currently in
its permitting phase, this low-cost heap leach gold and silver project
is located in a prolific gold-producing district in northern Peru and
has recently received its EIA (environmental permit) approval. A
September 2012 Feasibility Study (based on $1,415 Gold and $27 Silver)
on the foundation phase of the project estimates an initial CAPEX of
$131.8 million that will support an annual mining rate of 3.65 million
tonnes producing approximately 90,000 of gold equivalent ounces for
10.4 years at cash operating costs of $552/oz. This initial mine
scenario features a pre-tax IRR of 52.2% and post-tax IRR of 37.8%. The
technical study considers only approximately 40% of the defined
measured and indicated gold oxide mineral resource. Additional mineral
resource growth is anticipated from a number of highly prospective
exploration targets on the property that remain largely unexplored.
Sulliden is led by a proven management team with hands-on experience
developing and operating mines in Latin America. To learn more about
Sulliden, please visit: www.sulliden.com or Sulliden's SEDAR profile at www.sedar.com.
Cautionary Statement on Forward-Looking Information
This news release contains forward-looking statements and
forward-looking information within the meaning of United States and
Canadian securities laws, respectively. The use of any of the words
"expect", "potential", "target", "anticipate", "continue", "estimate",
"objective", "may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward-looking information or statements. More particularly and
without limitation, this news release contains forward-looking
statements and information concerning: the anticipated benefits of the
Arrangement to Rio Alto, Sulliden and their respective shareholders,
the timing and anticipated receipt of required regulatory, court, and
shareholder approvals for the Arrangement; the ability of Rio Alto,
Sulliden and SpinCo to satisfy the other conditions to, and to
complete, the Arrangement; the anticipated timing of the mailing of the
information circular regarding the Arrangement, the closing of the
Arrangement, the development of the Shahuindo gold mine, the future
gold production of Rio Alto and Sulliden, future cash costs of
production, the gold resources and reserves of Rio Alto and Sulliden
and the development of the La Arena sulphide copper gold project.
In respect of the forward-looking statements and information concerning
the anticipated completion of the proposed Arrangement and the
anticipated timing for completion of the Arrangement, Rio Alto and
Sulliden have provided them in reliance on certain assumptions that
they believe are reasonable at this time, including assumptions as to
the time required to prepare and mail shareholder meeting materials,
including the required information circular; the ability of the parties
to receive, in a timely manner, the necessary regulatory, court,
shareholder and other third party approvals; and the ability of the
parties to satisfy, in a timely manner, the other conditions to the
closing of the Arrangement. These dates may change for a number of
reasons, including unforeseen delays in preparing meeting materials,
inability to secure necessary shareholder, regulatory, court or other
third party approvals in the time assumed or the need for additional
time to satisfy the other conditions to the completion of the
Arrangement. Accordingly, readers should not place undue reliance on
the forward-looking statements and information contained in this news
release concerning these times.
With respect to the forward looking statements of Sulliden and/or Rio
Alto, the future gold production of Rio Alto and Sulliden, future cash
costs of production, the gold resources and reserves of Rio Alto and
Sulliden, the development of the Shahuindo gold mine and/or the La
Arena sulphide copper-gold project are subject to various key
assumptions described in their Annual Information Forms and Technical
Reports referred to herein.
Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risk that the transaction may not
close when planned or at all or on the terms and conditions set forth
in the arrangement agreement; the failure to obtain the necessary
shareholder, Court, regulatory and other third party approvals required
in order to proceed with the transaction; the synergies expected from
the Transaction not being realized; business integration risks;
operational risks in development, exploration and production for
precious metals; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserve and resource estimates; uncertainties inherent to feasibility
and other economic studies; health, safety and environmental risks;
gold price and other commodity price and exchange rate fluctuations;
marketing and transportation; loss of markets; environmental risks;
competition; incorrect assessment of the value of acquisitions; ability
to access sufficient capital from internal and external sources; and
changes in legislation, including but not limited to tax laws,
royalties and environmental regulations and risks inherent to operating
in developing countries. In addition, the failure of a party to comply
with the terms of the Agreement may result in that party being required
to pay a non-completion or other fee to the other party, the result of
which could have a material adverse effect on the paying party's
financial position and results of operations and its ability to fund
growth prospects and current operations.
Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on other risks and factors that
could affect the operations or financial results of Rio Alto and
Sulliden are included in reports on file with applicable securities
regulatory authorities, including but not limited to, Rio Alto's Annual
Information Form for the fiscal year ended December 31, 2013 which may
be accessed on Rio Alto's SEDAR profile at www.sedar.com and Sulliden's Annual Information Form for the fiscal year ended April
30, 2013 which may be accessed on Sulliden's SEDAR profile at www.sedar.com.
Management has included the above summary of assumptions and risks
related to forward looking information provided in this news release in
order to provide shareholders with a more complete perspective on the
proposed transaction and such information may not be appropriate for
other purposes. Actual results, performance or achievement could differ
materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance can be given
that any of the events anticipated by the forward looking statements
will transpire or occur, or if any of them do so, what benefits may be
derived there from.
The forward-looking statements and information contained in this news
release are made as of the date hereof and neither Rio Alto nor
Sulliden undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of new
information, future events, or results or otherwise, other than as
required by applicable securities laws.
"Cash costs" per ounce figures are non-GAAP measures. This data is
furnished to provide additional information and is a non-IFRS measure.
Cash costs presented do not have a standardized meaning under IFRS and
may not be comparable to similar measures presented by other mining
companies. It should not be considered in isolation as a substitute
for measures of performance prepared in accordance with IFRS.
This announcement is for informational purposes only and does not
constitute an offer to purchase, a solicitation of an offer to sell the
share or a solicitation of a proxy.
ON BEHALF OF THE BOARD OF
RIO ALTO MINING LIMITED
ON BEHALF OF THE BOARD OF
SULLIDEN GOLD CORPORATION LTD.
President, CEO and Director
Chairman & CEO
SOURCE: Sulliden Gold Corporation Ltd.
For further information:
RIO ALTO MINING LIMITED:
Alex Black, President & CEO
Phone: +511 625 9900
Alejandra Gomez, Investor Relations
SULLIDEN GOLD CORPORATION LTD.:
65 Queen Street West, Suite 800
Toronto, Ontario M2H 2M5
Calle San Martin 845, oficina 201
Miraflores - Lima 18