New Gold Inc. ("New Gold") (TSX:NGD)(NYSE Amex:NGD) and Silver
Quest Resources Ltd. ("Silver Quest") (TSX VENTURE:SQI) today
jointly announce a binding letter agreement whereby New Gold will
acquire, through a plan of arrangement (the "Arrangement"), all of
the outstanding common shares of Silver Quest. Under the terms of
the Arrangement, Silver Quest shareholders will receive 0.09 of a
New Gold share (the "Share Consideration") for each Silver Quest
share held and one common share in a new Yukon-focused precious
metals exploration company, McIntyre Minerals Inc. ("McIntyre") for
every three Silver Quest shares held (the "Spinco Consideration").
The offer values Silver Quest at $1.32 per share, representing a
52% premium based on the combination of:
-- The Share Consideration of $1.06 per share, representing a 22% premium
based on New Gold and Silver Quest's October 14, 2011 closing prices on
the TSX and TSX.V, respectively, implying an equity offer value of
approximately $131 million on a fully diluted basis and a transaction
value of $121 million, net of the cash to be received from the exercise
of Silver Quest's dilutive instruments
-- The Spinco Consideration of $0.26 per share, representing an additional
30% premium based on Silver Quest's October 14, 2011 closing price on
the TSX.V, implying a value of approximately $35 million
Upon closing of the Arrangement, which is expected in December
2011, New Gold will acquire Silver Quest's 25% interest in the
Davidson Property, which forms the northern half of the Blackwater
Project and in which New Gold currently holds the remaining 75%
interest. Silver Quest's share of the Blackwater mineral resource
includes 0.56 million ounces of indicated and 0.21 million ounces
of inferred gold mineral resources. In addition, New Gold will
acquire a 100% interest in the Capoose Property which covers over
41,000 hectares of land and has an established gold and silver
indicated and inferred mineral resource. The Capoose Property is
located approximately 25 kilometres west of the Blackwater
Project.
As part of the Arrangement, New Gold will purchase, on a private
placement basis, $3.5 million of McIntyre shares at a price of
$0.78 per share ($0.26 per share value adjusted for the three
Silver Quest for one McIntyre share exchange), which will result in
New Gold holding 9.9% of the shares outstanding of McIntyre, with
current Silver Quest shareholders holding the remaining 90.1% upon
completion of the Arrangement. Including the proceeds from the New
Gold private placement, it is expected McIntyre will have
approximately $15 million in cash to fund an aggressive two year
exploration program focused on Silver Quest's 3Ts Gold Project in
central British Columbia and a number of Yukon exploration
properties.
Transaction Highlights - New Gold
-- Consolidates New Gold's ownership of the Blackwater Project in British
Columbia adding 0.56 million ounces of indicated and 0.21 million ounces
of inferred gold mineral resources
-- Adds significant landholding with established gold and silver mineral
resource in close proximity to Blackwater Project with the Capoose
Property
-- Provides New Gold shareholders with a strategic ownership position in
McIntyre
"The acquisition of Silver Quest's Davidson interest and the
Capoose Property consolidates our ownership of the Blackwater
Project and expands our presence significantly in the area," stated
Randall Oliphant, New Gold Executive Chairman. "We also look
forward to continuing our relationship with Silver Quest as a
shareholder in McIntyre given their team's track record of
delivering value for shareholders."
Transaction Highlights - Silver Quest
-- Immediate and attractive premium recognizing both the current value and
potential value of the Davidson Property
-- All-share deal - shareholders retain exposure to the Blackwater Project
and gain exposure to New Gold's diversified gold production base and
strong growth profile
-- Maintain exposure to Silver Quest's 3Ts Gold Project and Yukon
properties through shares in McIntyre which will be fully funded for an
aggressive two year exploration program
"This transaction delivers an immediate and attractive premium
to our shareholders while allowing them to continue to share in the
potential at the Blackwater Project through their New Gold shares,"
stated Randy Turner, President and Chief Executive Officer of
Silver Quest. "We are pleased that our shareholders are able to
retain their exposure to an exciting portfolio of exploration
properties in the Yukon and British Columbia through their McIntyre
shares with New Gold as a supportive shareholder."
McIntyre Minerals
-- McIntyre will be led by the existing management team and Board of Silver
Quest, who have significant experience in building companies focused on
mineral exploration
-- McIntyre will be a well funded exploration company with sufficient cash
for aggressive exploration programs in 2012 and 2013
-- Exploration in British Columbia will be focused on the 3Ts Gold Project
which covers an epithermal gold-silver vein system within which 12
individual mineralized veins, up to 650 metres in strike length and up
to 15 metres in true width, have been identified
-- 3Ts Gold Project covers approximately 3,100 hectares with an established
inferred mineral resource (942,600 tonnes at 4.89 g/t Au and 77 g/t Ag)
-- Exploration on the Yukon properties will be focused on 18 properties
covering more than 93,000 hectares, including extensive land holdings in
the White Gold District
"McIntyre will be well funded to continue to advance its
portfolio of exploration properties," stated Randy Turner. "As the
McIntyre team evaluates the preliminary results from work completed
in the Yukon during the 2011 field season, the team looks forward
to executing a robust and targeted program in 2012."
Blackwater Project
The Blackwater Project is a bulk-tonnage gold project located in
central British Columbia. New Gold owns 100% of the southern Dave
and Jarrit claims within the Blackwater deposit and 75% of the
northern Davidson claim where Silver Quest owns the remaining 25%.
On September 19, 2011, New Gold and Silver Quest announced an
updated resource estimate for the Blackwater Project which is
summarized below.
Blackwater Deposit - September 2011 Resource Estimates by Property at 0.4
g/t Au Cut-off grade
----------------------------------------------------------------------------
Indicated
--------------------------------------------------------------
NGD SQI
Grade Share Share Total
------------------- Contained Contained Contained
Tonnes Gold Silver Gold Gold Gold
Property 000's (g/t) (g/t) (Moz) (Moz) (Moz)
----------------------------------------------------------------------------
Dave and
Jarrit
(100% New
Gold) 87,226 1.12 6.0 3.13 -- 3.13
----------------------------------------------------------------------------
Davidson
(75% New Gold/
25% Silver
Quest) 77,929 0.89 4.1 1.66 0.56 2.22
----------------------------------------------------------------------------
Total
Blackwater 165,155 1.01 5.1 4.79 0.56 5.35
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inferred
--------------------------------------------------------------
NGD SQI
Grade Share Share Total
------------------ Contained Contained Contained
Tonnes Gold Silver Gold Gold Gold
Property 000's (g/t) (g/t) (Moz) (Moz) (Moz)
----------------------------------------------------------------------------
Dave and
Jarrit
(100% New
Gold) 9,533 1.13 6.5 0.35 -- 0.35
----------------------------------------------------------------------------
Davidson
(75% New Gold/
25% Silver
Quest) 29,226 0.88 4.2 0.61 0.21 0.82
----------------------------------------------------------------------------
Total
Blackwater 38,759 0.94 4.8 0.96 0.21 1.17
----------------------------------------------------------------------------
Terms of Offer
-- Silver Quest shareholders will receive 0.09 of a New Gold common share
for each Silver Quest share held and one common share of McIntyre for
every three Silver Quest shares held
-- Values Silver Quest at $1.32 per share including Spinco Consideration,
based on New Gold's October 14, 2011 closing price and the estimated New
Gold private placement subscription price
-- Transaction unanimously approved by the Boards of Directors of both New
Gold and Silver Quest
-- Directors and Officers of Silver Quest, representing approximately 7.7%
of the fully diluted shares outstanding have entered into voting
agreements in support of the Arrangement
-- $5 million break fee
-- New Gold retains a right to match any superior proposal
The acquisition of Silver Quest by New Gold is expected to be
completed by way of a court approved plan of arrangement. The
maximum number of New Gold shares to be issued, including all
options and warrants, would be approximately 11.1 million, in which
case New Gold would also acquire approximately $10 million in cash
from option and warrant proceeds. Silver Quest's stock options
outstanding on the effective date of the Arrangement will be
exchanged for New Gold and McIntyre shares on a cashless exercise
basis in accordance with the terms of the Arrangement. Silver Quest
warrants will be adjusted or exchanged for new warrants entitling
their holders to acquire common shares of New Gold and McIntyre.
The transaction is targeted to close in December 2011.
The Special Committee comprised of independent directors of
Silver Quest established to review the transaction received a
verbal opinion from Paradigm Capital Inc. that the consideration to
be received by the Silver Quest shareholders under the terms of the
transaction is fair from a financial point of view to the
shareholders of Silver Quest. Silver Quest directors have
determined that the transaction is in the best interest of Silver
Quest and its shareholders and have unanimously approved the
transaction. The directors intend to recommend, in the information
circular for the shareholder meeting, that Silver Quest
shareholders vote in favour of the transaction. Directors and
Officers of Silver Quest have entered into lock-up agreements with
New Gold under which they have agreed to vote in favour of the
Arrangement, their Silver Quest shares and options, which represent
approximately 7.7% of Silver Quest's fully diluted shares
outstanding. The Arrangement has been approved unanimously by the
Board of Directors of both New Gold and Silver Quest and will be
subject to, among other things, the favourable vote of 66 2/3% of
the votes cast by Silver Quest shareholders and option holders
voting as a single class at a special meeting called to approve the
transaction which is expected to take place in December 2011.
In the event that the Arrangement is not completed, Silver Quest
has agreed, under certain circumstances, to pay New Gold a
termination fee equal to $5 million. Silver Quest has also provided
New Gold with certain other customary rights, including a right to
match competing offers.
Silver Quest securityholders and other interested parties are
advised to read the materials relating to the proposed Arrangement
that will be filed by Silver Quest with securities regulatory
authorities in Canada when they become available. Anyone may obtain
copies of these documents when available free of charge at the
Canadian Securities Administrators' website at www.sedar.com.
This announcement is for informational purposes only and does
not constitute an offer to purchase, a solicitation of an offer to
sell the shares or a solicitation of a proxy.
New Gold's financial advisor is Canaccord Genuity Corp. and its
legal advisor is Cassels Brock & Blackwell LLP. Silver Quest's
financial advisor is Paradigm Capital Inc. and its legal advisor is
Gowling Lafleur Henderson LLP. The legal advisor for the Special
Committee of Silver Quest is DuMoulin Black LLP.
Technical Information
The Blackwater mineral resource estimate and other scientific
and technical information contained in this news release related to
Blackwater were prepared by Mr. Ronald Simpson, P. Geo, President
of Geosim Services Inc., an independent "Qualified Person" under
National Instrument 43-101 Standards of Disclosure for Mineral
Projects ("NI 43-101"). See New Gold's news release dated September
19, 2011 for details of key assumptions and parameters relating to
these resource estimates. The NI 43-101 technical report in respect
of the mineral resource estimate disclosed will be filed on SEDAR
by November 3, 2011.
The scientific and technical information in this news release
related to Blackwater has been reviewed by Mark Petersen, a
Qualified Person under National Instrument 43-101 and employee of
New Gold.
Capoose - Indicated and Inferred Resource Estimates with Gold Equivalent
Cut-Off
----------------------------------------------------------------------------
Indicated Inferred
----------------------------------------------------------------------------
Cut- Grade Contai Contai Grade Contai Contai
off --------------- -ned -ned --------------- -ned -ned
g/t Tonnes Gold Silver Gold Silver Tonnes Gold Silver Gold Silver
AuEq 000's (g/t) (g/t) (koz) (Moz) 000's (g/t) (g/t) (koz) (Moz)
----------------------------------------------------------------------------
0.3 38,605 0.34 23.7 419.4 29.4 49,548 0.32 21.2 508.6 33.8
----------------------------------------------------------------------------
0.4 31,216 0.38 26.5 383.8 26.6 37,256 0.37 24.6 443.2 29.5
----------------------------------------------------------------------------
0.5 24,727 0.43 29.5 343.2 23.5 29,555 0.42 27.1 395.2 25.7
----------------------------------------------------------------------------
The indicated and inferred mineral resource estimate for Capoose
has been prepared in compliance with the standards of National
Instrument 43-101 by Dr. A. Armitage, P. Geol., and J. Campbell,
B.Sc., P. Geo., of GeoVector Management Inc. an Ottawa, Ontario
consulting firm specializing in mineral resource estimation,
project assessment and project management. Dr. Armitage acted as
the Qualified Person, as defined in National Instrument 43-101 and
is independent of Silver Quest.
David Pawliuk, P. Geo., Vice-President Exploration for Silver
Quest is the Qualified Person, as defined by National Instrument
43-101, for the Capoose Project and has reviewed the technical
information in this release.
About New Gold Inc.
New Gold is an intermediate gold mining company. The company has
a portfolio of three producing assets and three significant
development projects. The Mesquite Mine in the United States, the
Cerro San Pedro Mine in Mexico and Peak Gold Mines in Australia are
expected to produce between 380,000 and 400,000 ounces of gold in
2011. The fully-funded New Afton project in Canada is scheduled to
add further growth in 2012. In addition, New Gold owns 30% of the
world-class El Morro project located in Chile and, in June 2011,
New Gold acquired the exciting Blackwater project in Canada. For
further information on the company, please visit
www.newgold.com.
About Silver Quest Resources Ltd.
Silver Quest is a gold and silver exploration company, whose
main areas of interest are central British Columbia and the White
Gold District of the Yukon. Silver Quest maintains a portfolio of
highly prospective projects, ranging from grassroots exploration
through advanced stage resource expansion. The Company is poised to
add shareholder value through project advancement, while evaluating
early to advanced stage gold and silver projects for possible
acquisition. For further information on the company, please visit
www.silverquest.ca.
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this news release, including
any information relating to New Gold's and/or Silver Quest's future
financial or operating performance may be deemed "forward looking".
All statements in this news release, other than statements of
historical fact, that address events or developments that New
Gold/Silver Quest expects to occur, are "forward-looking
statements". Forward-looking statements are statements that are not
historical facts and are generally, but not always, identified by
the words "expects", "does not expect", "plans", "anticipates",
"does not anticipate", "believes", "intends", "estimates",
"projects", "potential", "scheduled", "forecast", "budget" and
similar expressions, or that events or conditions "will", "would",
"may", "could", "should" or "might" occur. All such forward-looking
statements are based on the opinions and estimates of the relevant
management as of the date such statements are made and are subject
to important risk factors and uncertainties, many of which are
beyond New Gold/Silver Quest's ability to control or predict.
Forward-looking statements are necessarily based on estimates and
assumptions (including that the Arrangement will be completed
successfully on the terms agreed upon by the parties and that the
business of Silver Quest will be integrated successfully in the New
Gold organization) that are inherently subject to known and unknown
risks, uncertainties and other factors that may cause actual
results, level of activity, performance or achievements to be
materially different from those expressed or implied by such
forward-looking statements.
In the case of New Gold, such factors include, without
limitation: significant capital requirements; fluctuations in the
international currency markets and in the rates of exchange of the
currencies of Canada, the United States, Australia, Mexico and
Chile; price volatility in the spot and forward markets for
commodities; impact of any hedging activities, including margin
limits and margin calls; discrepancies between actual and estimated
production, between actual and estimated reserves and resources and
between actual and estimated metallurgical recoveries; changes in
national and local government legislation in Canada, the United
States, Australia, Mexico and Chile or any other country in which
New Gold currently or may in the future carry on business;
taxation; controls, regulations and political or economic
developments in the countries in which New Gold does or may carry
on business; the speculative nature of mineral exploration and
development, including the risks of obtaining and maintaining the
validity and enforceability of the necessary licenses and permits
and complying with the permitting requirements of each jurisdiction
that New Gold operates, including, but not limited to, Mexico,
where New Gold is involved with ongoing challenges relating to its
environmental impact statement for the Cerro San Pedro Mine; the
lack of certainty with respect to the Mexican and other foreign
legal systems, which may not be immune from the influence of
political pressure, corruption or other factors that are
inconsistent with the rule of law; the uncertainties inherent to
current and future legal challenges the company is or may become a
party to, including the third party claim related to the El Morro
transaction with respect to New Gold's exercise of its right of
first refusal on the El Morro copper-gold project in Chile and its
partnership with Goldcorp Inc., which transaction and third party
claim were announced by New Gold in January 2010; diminishing
quantities or grades of reserves; competition; loss of key
employees; additional funding requirements; actual results of
current exploration or reclamation activities; changes in project
parameters as plans continue to be refined; accidents; labour
disputes; defective title to mineral claims or property or contests
over claims to mineral properties.
In the case of Silver Quest, such risks include, among other
risks, the approvals of regulators, availability of funds, the
results of financing and exploration activities, the interpretation
of drilling results and geological data, project cost overruns or
unanticipated costs and expenses. In addition, there are risks and
hazards associated with the business of mineral exploration,
development and mining, including environmental hazards, industrial
accidents, unusual or unexpected formations, pressures, cave-ins,
flooding and gold bullion losses (and the risk of inadequate
insurance or inability to obtain insurance to cover these risks) as
well as "Risk Factors" included in New Gold's and Silver Quest's
continuous disclosure documents filed on and available at
www.sedar.com. Forward-looking statements are not guarantees of
future performance, and actual results and future events could
materially differ from those anticipated in such statements. All of
the forward-looking statements contained in this news release are
qualified by these cautionary statements. New Gold/Silver Quest
expressly disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new
information, events or otherwise, except in accordance with
applicable securities laws.
Cautionary Note to U.S. Readers Concerning Estimates of
Measured, Indicated and Inferred Mineral Resources
Information concerning the properties and operations discussed
herein has been prepared in accordance with Canadian standards
under applicable Canadian securities laws, and may not be
comparable to similar information for United States companies. The
terms "Mineral Resource", "Measured Mineral Resource", "Indicated
Mineral Resource" and "Inferred Mineral Resource" used in this news
release are Canadian mining terms as defined in accordance with NI
43-101 under guidelines set out in the Canadian Institute of
Mining, Metallurgy and Petroleum ("CIM") Standards on Mineral
Resources and Mineral Reserves adopted by the CIM Council on
December 11, 2005. While the terms "Mineral Resource", "Measured
Mineral Resource", "Indicated Mineral Resource" and "Inferred
Mineral Resource" are recognized and required by Canadian
regulations, they are not defined terms under standards of the
United States Securities and Exchange Commission. Under United
States standards, mineralization may not be classified as a
"reserve" unless the determination has been made that the
mineralization could be economically and legally produced or
extracted at the time the reserve calculation is made. As such,
certain information contained in this news release concerning
descriptions of mineralization and resources under Canadian
standards is not comparable to similar information made public by
United States companies subject to the reporting and disclosure
requirements of the United States Securities and Exchange
Commission. An "Inferred Mineral Resource" has a great amount of
uncertainty as to its existence and as to its economic and legal
feasibility. It cannot be assumed that all or any part of an
"Inferred Mineral Resource" will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or other economic
studies. Readers are cautioned not to assume that all or any part
of Measured or Indicated Resources will ever be converted into
Mineral Reserves. Readers are also cautioned not to assume that all
or any part of an "Inferred Mineral Resource" exists, or is
economically or legally mineable. In addition, the definitions of
"Proven Mineral Reserves" and "Probable Mineral Reserves" under CIM
standards differ in certain respects from the standards of the
United States Securities and Exchange Commission.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Silver Quest Resources Ltd. Randy Turner President
& CEO +1 (604) 687-3959info@silverquest.cawww.silverquest.ca
Contacts: New Gold Inc. Hannes Portmann Vice President, Corporate
Development +1 (416) 324-6014info@newgold.comwww.newgold.com
Silver Quest Resources Ltd (TSXV:SQI)
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