SCOTTSDALE, AZ, July 29, 2014 /CNW Telbec/ - Chaparral Gold Corp. ("Chaparral" or the "Company") (TSX: CHL) announced today that it has filed with the Canadian regulators, and has mailed to its shareholders (the "Shareholders"), an updating notice of change to the Company's directors' circular (the "Notice of Change") in response to the revised hostile take-over bid (the "Revised Offer") made by Waterton Precious Metals Fund II Cayman, LP ("Waterton") on July 17, 2014 to acquire 100% of the common shares of the Company (the "Common Shares") at C$0.55 per share in cash.
The Notice of Change contains the unanimous recommendation of the Company's board of directors (the "Board") that the Chaparral Shareholders REJECT the Revised Offer by Waterton and DO NOT TENDER their Common Shares.
The Board's recommendation to Shareholders to REJECT THE REVISED OFFER is based on numerous factors, including the recommendation of the special committee of independent directors (the "Special Committee") and an opinion provided by the Company's financial advisor, Maxit Capital LP, with respect to the financial inadequacy of the Revised Offer by Waterton. The full text of the opinion is attached as Schedule "A" to the Notice of Change.
The Board urges the Company's Shareholders to read the Notice of Change in its entirety. A copy of the Notice of Change will be available on SEDAR (www.sedar.com) under the Company's profile.
The following is a summary of the principal reasons listed in the Notice of Change for the Board's recommendation that Shareholders REJECT the Revised Offer by Waterton and DO NOT TENDER their Common Shares:
- The Revised Offer implies INSUFFICIENT value for the Company's mineral properties;
- The Revised Offer is not credible as it implies that the Company's two open-pit, heap leach gold projects in Nevada are immaterial at March 31, 2014 to the Company's value. The Revised Offer, net of the Company's estimated working capital, implies a value of only approximately US$4.8 million for Chaparral's mineral properties. Comparatively, the book value of Chaparral's mineral properties is approximately US$50 million (at March 31, 2014). Effectively, Waterton is using Chaparral's cash and receivables to fund Waterton's proposed acquisition of Chaparral.
- The timing of the Revised Offer is OPPORTUNISTIC;
- Waterton is attempting to acquire Chaparral when Chaparral is negotiating for an acceptable "limited ability to pay" settlement with the US Environmental Protection Agency ("EPA") for the Eureka smelter issue. By minimizing the potential liability associated with this issue by way of such a settlement, it is expected that alternative higher value proposals for the Company will emerge.
- The Revised Offer is highly COERCIVE;
- After eight extensions and never having had more than 1.1% of the Common Shares tendered to its original offer, Waterton is dropping its minimum tender condition, which is highly coercive to shareholders and a clear attempt to secure a minority blocking position to thwart Chaparral's strategic alternative process before Chaparral can reach a settlement with the EPA.
- The Revised Offer fails to recognize the strategic value of the Company's asset base in mining friendly Nevada;
- The Revised Offer is significantly below precedent multiples for similar-scale gold developers;
- The Revised Offer represents an inadequate premium to the share price;
- The Revised Offer is financially inadequate;
- Rejection of the Revised Offer by the Company's directors and officers; and
- The Revised Offer is highly conditional.
For these reasons, the Board unanimously recommends that Shareholders REJECT the Revised Offer and NOT TENDER their Common Shares to the Revised Offer. Shareholders who have already tendered their Common Shares to the Revised Offer and wish to withdraw them, may do so by following the withdrawal procedures provided in Section 7 of the Waterton Offering Circular.
About Chaparral Gold
Chaparral is a Nevada-focused precious metals company actively permitting the 100%-owned Gemfield deposit at the Goldfield property, in central Nevada. In addition, Chaparral holds a 100% interest in the advanced-stage Converse property, also located in Nevada.
Some of the statements contained in this release are "forward-looking statements" within the meaning of Canadian securities law requirements, including statements relating to the Eureka smelter site issue, in respect of potential higher value proposals for the Company and in respect of the Company's Goldfield property. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties such as: risks relating to a potential resolution of the Eureka smelter site issue and permitting activities at Goldfield. Except as required pursuant to applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE: Chaparral Gold Corp
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