TORONTO, ONTARIO -- (Marketwire) -- 12/13/12 -- (All dollar amounts in this news release are expressed in Australian dollars unless otherwise indicated.)
Cerro Resources NL ("Cerro") (ASX: CJO)(TSX VENTURE: CJO) today announces that it has entered into a definitive agreement (the "Agreement") with Primero Mining Corp. ("Primero") (TSX: P)(NYSE: PPP) aimed at progressing the planned Cerro del Gallo gold/silver heap leach mine in Mexico, under which:
-- Primero will acquire all issued and outstanding ordinary shares of Cerro by way of a scheme of arrangement (the "Share Arrangement") under the Australian Corporations Act 2001 ("Act"), at the ratio of 0.023 of a Primero share for each 1 Cerro share ("Share Ratio");-- the terms of all issued and outstanding options of Cerro will be amended by way of a scheme of arrangement (the "Option Arrangement") under the Act, so that on exercise of the Cerro options, the optionholders will receive Primero shares based on the Share Ratio; and-- a new company ("Spinco") will be created to retain Cerro's non-Cerro del Gallo projects and interests. Existing Cerro shareholders will receive 80.01% of the ordinary shares in Spinco. Primero will fund Spinco in the amount of $A4M and will receive a 19.99% stake in Spinco with anti- dilution rights for 2 years and be entitled to appoint one director to Spinco's board.
The Share Arrangement represents a 77% premium to the spot closing price of Cerro shares on the ASX on December 13, 2012, excluding additional value through the creation of Spinco.
Cerro currently owns 69%(1) of the Cerro Del Gallo feasibility stage project in Guanajuato, Mexico, a gold-silver deposit with 1.15 million ounces of in-pit gold equivalent proven and probable reserves and 1.58 million ounces of in-pit gold equivalent measured and indicated resources (excluding P&P reserves).(2) Cerro also owns 100% interests in the Namiquipa silver and Espiritu Santo gold/silver exploration projects in Mexico, as well as Australian project/investment assets.
Primero operates the 100,000oz Gold eq pa San Dimas gold/silver mine in Durango State Mexico, currently under expansion to 160,000oz Gold eq pa. Primero currently has a $133M pro-forma cash position and last traded at $C6.63 per share for a market capitalisation of $C650M.
Post transaction, the business combination would see:
-- the merged 'Primero' entity positioned as a leading mid-tier gold growth stock, with a forecast 24% annualised production growth rate to at least 260,000 ounces of gold production by 2016, while-- "Spinco" will be focused on unlocking the high value potential Namiquipa silver and Espiritu Santo gold/silver Mexican exploration projects, with approximately $A4 million in cash funding.
For current Cerro shareholders, the merger offer represents an implied 62% premium to Cerro's 20-day volume weighted average price ("VWAP") and a 77% premium to the spot closing price on the ASX at December 13, 2012 - not including a 'Spinco' valuation.
Upon completion, Cerro securityholders will own approximately 15% of the issued common shares of pro-forma Primero. The total transaction value is approximately C$119 million.