U.S. Silver Board Recommends Rejection of Hecla Offer and Reaffirms Recommendation for Combination Transaction with RX Gold


TORONTO, July 30, 2012 /CNW/ - U.S. Silver Corporation (TSX: USA) ("U.S. Silver" or the "Company") announced that its Board of Directors unanimously recommends that U.S. Silver shareholders REJECT the unsolicited cash offer from Hecla Mining Company ("Hecla") to acquire all of the outstanding common shares of U.S. Silver (the "Hecla Offer").

Commenting on the offer, Gordon Pridham, Chairman & Interim CEO of U.S. Silver said, "the Board continues to believe that the proposed strategic combination transaction with RX Gold is in the best interest of shareholders and continues to recommend that U.S. Silver shareholders vote in favour of the combination transaction at the August 7th shareholders' meeting. Valuation multiples in the precious metals sector are at or near all-time lows - the Hecla Offer is simply not compelling enough for us to abandon our strategic plan going forward."

The Board of Directors, with the assistance of its legal and financial advisors, carefully considered and reviewed the terms and conditions of the Hecla Offer and recommends that U.S. Silver shareholders REJECT the Hecla Offer and instead vote their U.S. Silver shares IN FAVOUR of the proposed combination transaction with RX Gold & Silver Inc. ("RX Gold") for a number of reasons, including the following:

  • The Hecla Offer is inadequate from a financial point of view to U.S. Silver shareholders. Cormark Securities Inc. has delivered an opinion to the Board of Directors that the consideration offered pursuant to the Hecla Offer is inadequate, from a financial point of view, to U.S. Silver shareholders.

  • The Hecla Offer is not supported by Sprott nor by U.S. Silver's directors and officers. Sprott, U.S. Silver's largest shareholder, and U.S. Silver's directors and officers have confirmed that they continue to support the combination transaction with RX Gold.

  • The Hecla Offer is highly opportunistic and does not provide U.S Silver shareholders with an adequate change of control premium. The Board of Directors believes that the Hecla Offer is opportunistically timed to take advantage of a recent period during which silver prices, and the share price of companies in the silver industry, have been at a low point. If successful, the Hecla Offer would deny U.S. Silver shareholders the opportunity to participate in future value accretion as the silver price recovers. The Hecla Offer is for C$1.80 per U.S. Silver common share in cash, which represents a 13%premium to the 90-day volume weighted average share price, and a 10% discount to the 180-day volume weighted average share price, of the U.S. Silver common shares ending July 24, 2012. These premiums are well below premiums paid in other unsolicited metals and mining transactions, which have been on average substantially higher on completed transactions over $100 million since 2005.

  • The Hecla Offer does not fully reflect value for U.S. Silver's current assets and organic growth opportunities. The Board of Directors believes that there are significant organic growth opportunities available to the Company within its current property portfolio. A plan to fill the Company's mills, which are currently operating at approximately 60% capacity, is currently underway. Achievement of this plan would increase production and reduce cash operating costs. Further, the Company has a large (state area covered) and dominant land position in the Silver Valley that has not seen exploration in the Company's past due to working capital being directed to mine production efficiencies. With the Company's improved cash position, exploration programs are underway and showing encouraging progress. The Board of Directors also does not believe that the Hecla Offer adequately recognizes potential value from the Coeur, Calladay and the Company's other highly prospective exploration properties.

  • The Board of Directors continues to believe that the proposed combination transaction with RX Gold will provide long term value to U.S. Silver in excess of the consideration being offered under the Hecla Offer. In the first half of 2012, RX Gold's Drumlummon property, operating with a small miners permit, produced approximately 860,000 silver equivalent ounces. Together with U.S. Silver's steady commercial production (1.2 million silver equivalent ounces in the first half of 2012), the combined company's current growth plan is expected to be funded without diluting existing U.S. Silver shareholders.  In addition, under the proposed combination transaction, U.S. Silver shareholders will have a 70% share of the $10 million per year of expected combined synergies that have been currently identified.

  • The Hecla Offer does not fairly compensate U.S. Silver shareholders for the synergies and strategic benefits available to Hecla upon acquiring U.S. Silver. The Board of Directors believes that significant synergies and strategic benefits would accrue to Hecla upon the acquisition of U.S. Silver because of the proximity of the companies' respective assets and the Company's large and dominant land position in the Silver Valley. Such synergies and benefits include, among others, better mill sequencing, economies of scale, and greater access to labour. The Board of Directors believes that the Hecla Offer fails to fairly compensate U.S. Shareholders for a portion of such synergies and benefits.

  • The Hecla Offer takes advantage of U.S. Silver's existing cash balances to finance its offer. U.S. Silver has approximately C$29 million in working capital on its balance sheet as of June 30, 2012, which represents approximately 26% of the funding requirements of the Hecla Offer, and as such, the Hecla Offer effectively values U.S. Silver's operating assets at C$1.39 per share.

  • Combination transaction with RX Gold preserves benefits of expected rise in price of silver and precious metals companies. The proposed combination transaction with RX Gold is a strategic plan recommended by the Board of Directors.  The combination with RX Gold is expected to preserve the ability of current shareholders of U.S. Silver to maximize the value of the cash-flowing assets of both companies, and future shareholders in the combined company to capture the benefits of an anticipated near to medium term increase in the price of precious metal companies. Consummation of the combination transaction with RX Gold does not preclude the ability of the combined company from engaging in a change of control transaction in the future.

  • Pursuant to the terms of the combination agreement with RX Gold, the Company has not solicited proposals from third parties to compete with the Hecla Offer.

The Board of Directors' recommendation to U.S. Silver shareholders that they REJECT the Hecla Offer and instead vote their U.S. Silver shares IN FAVOUR of the proposed combination transaction, as well as a more detailed discussion of the reasons for rejecting the Hecla Offer and the inadequacy opinion provided by U.S. Silver's financial advisor, shall be set out in the Directors' Circular that will be mailed in due course to each of U.S. Silver's shareholders in compliance with applicable securities laws and filed with Canadian securities regulatory authorities. The Directors' Circular will be available on SEDAR at www.sedar.com and on U.S. Silver's website at www.us-silver.com. Shareholders are advised to read the Directors' Circular carefully and in its entirety, as it will contain important information regarding U.S. Silver and the Hecla Offer. If Shareholders have any questions or require more information they are encouraged to contact the Company's proxy solicitation agent, Phoenix Advisory Partners, toll-free at 1-800-240-2133 or outside North America at 201-806-2222 or via email at inquiries@phoenixadvisorypartners.com.

This press release is specifically deemed to be incorporated by reference in U.S. Silver's management information circulated dated July 9, 2012, which has been mailed to shareholders and available on SEDAR at www.sedar.com and on U.S. Silver's website at www.us-silver.com.

How to Vote IN FAVOUR of the Combination Transaction with RX Gold

Any U.S. Silver shareholder that has already voted IN FAVOUR of the proposed combination transaction with RX Gold need not take any action, as their votes will be counted. Any U.S. Silver shareholder who has voted AGAINST the proposed combination transaction is encouraged to change its vote and vote IN FAVOUR of the proposed combination transaction.

Registered shareholders of U.S. Silver are requested to complete, date, sign and return the form of proxy that accompanied the Company's management information circular. To be valid, the form of proxy must be signed and received by the proxy department of U.S. Silver's transfer agent, Valiant Trust Company, by mail at 310-606 4 Street SW, Calgary, Alberta, T2P 9Z9, or by facsimile at 1-855-375-6916 or toll-free in North America at 1-866-313-1872, not later than 5:00 p.m. (Toronto time) on August 2, 2012.

Non-registered shareholders who receive voting instructions from their intermediary should carefully follow the instructions provided by their intermediary to ensure their vote is counted. Non-registered shareholders are encouraged and can vote via internet at www.proxyvote.com.

If you have any questions that are not answered by U.S. Silver's management information circular, or would like additional information, you should contact your professional advisors. You can also contact Phoenix Advisory Partners, the proxy solicitation firm engaged by U.S. Silver, toll-free at 1-800-240-2133 or outside North America at 201-806-2222 or by email at inquiries@phoenixadvisorypartners.com should you have any questions regarding voting of your shares.

How to REJECT the Hecla Offer and Withdraw Tendered Shares

To reject the Hecla Offer, you should do nothing. The Hecla Offer is open for acceptance until August 31, 2012. Shareholders who have already tendered their shares to the Hecla Offer can withdraw them at any time before they have been taken up and accepted for payment by Hecla. Shareholders holding shares through a dealer, broker or other nominee should contact such dealer, broker or nominee to withdraw their U.S. Silver shares. Shareholders may also contact the information agent retained by U.S. Silver, Phoenix Advisory Partners, toll-free at 1-800-240-2133 or outside North America at 201-806-2222 or via email at inquiries@phoenixadvisorypartners.com.

About U.S. Silver

U.S. Silver, through its wholly owned subsidiaries, owns and/or operates the Galena, Coeur, Caladay and Dayrock silver-lead-copper mines in Shoshone County, Idaho, with the Galena mine being the second most prolific silver mine in U.S. history. Total silver production from U.S. Silver's mining complex has exceeded 217 million ounces of silver production since 1953. U.S. Silver controls a land package now totalling approximately 14,000 acres in the heart of the Coeur d'Alene Mining District. U.S. Silver is focused on expanding the production from existing operations as well as exploring and developing its extensive Silver Valley holdings in the Coeur d'Alene Mining District.

Forward Looking Statements

Certain statements in this release may be considered forward-looking statements, which reflect the board and management's current beliefs and expectations and which involve assumptions about expected future events or results that are subject to inherent risks and uncertainties. There is significant risk that assumptions and other forward-looking statements will not prove to be accurate. Many factors could cause actual future results, conditions or events to differ materially from the results or outcomes expressed, including risks and uncertainties related to: receipt of the requisite shareholder and court approvals for the combination transaction with RX Gold, foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits; the possibility that future exploration, development or mining results will not be consistent with the Company's expectations; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations; uncertain political and economic environments; changes in laws or policies, foreign taxation, delays or the inability to obtain necessary governmental permits; and other risks and uncertainties, including those described in the Company's public disclosure record. The foregoing list of factors is not exhaustive. Accordingly, investors should not place undue reliance on forward-looking information. U.S. Silver includes in publicly available documents filed from time to time with securities commissions and the Toronto Stock Exchange, a thorough discussion of the risk factors that can cause anticipated outcomes to differ from actual outcomes. Forward-looking information is provided as of the date of this news release only, it should not be relied upon as of any other date, and U.S. Silver assumes no obligation to update or revise this information to reflect new events or circumstances, except as expressly required by law. There can be no assurance that the proposed combination transaction with RX Gold will receive the required shareholder and court approvals or that any other alternative transaction, including the Hecla Offer, will be completed.

SOURCE: U.S. Silver Corporation

For further information:

U.S. Silver Corporation 
Gordon Pridham, Chairman & Interim CEO, or Chris Hopkins, CFO
info@us-silver.com (www.us-silver.com)

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U.S. Silver Corporation

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