Premier Gold Mines Limited (“Premier”), (TSX: PG) and Sedimentary Holdings Limited (“Sedimentary”), (AU: SED) an Australian based mining company, have entered into a merger implementation agreement dated August 17, 2006 to provide a framework for proposing and implementing a scheme of arrangement between Sedimentary and its shareholders (the “Scheme”) under which Premier will acquire for cash all of the outstanding shares (the “Shares”) of Sedimentary for A$0.31 per share. This offer values Sedimentary at approximately A$87.5 million. This offer is conditional upon approval by shareholders of both companies as well as both court and regulatory approvals.
Sedimentary holds several high-grade gold projects in Australia including a 30 percent interest in the Cracow Gold Mine. Cracow is a 100,000+ ounce per annum gold mine operated by Newcrest Mining Limited (70%) that in the last quarter produced at a cash cost of US$253 per ounce of gold, with 9,135 ounces to Sedimentary’s account. Cracow was put in production in July 2005 and Newcrest and Sedimentary have since discovered a new zone on the property, the Kilkenny Zone, which has returned numerous high grade intersections, including 23g/t Au across 6.4 meters, and 21 g/t Au across 9.3 meters.
Commenting on the merger proposal, Premier’s CEO, Ewan Downie, said “we believe that this offer represents a full and fair value for Sedimentary shares and provides all Sedimentary shareholders with the ability to sell with the certainty of cash at a level that Sedimentary has not traded at since November 2004”.
Sedimentary’s Managing Director, Rob Devereux was quoted as saying “The Sedimentary Directors welcome the Premier cash offer which they believe is superior to the existing offer from AuSelect”.
The Directors of Sedimentary unanimously endorsed the merger proposal and recommend that Sedimentary shareholders vote in favour of the Premier offer. In addition, Lion Selection Group Limited (which is a 23.7% shareholder in Sedimentary) has informed Sedimentary that it intends to vote in favour of the merger in the absence of a higher offer.
The implementation of the Scheme is subject to certain conditions precedent which must be satisfied or waived (as applicable) on or before the date on which the Federal Court of Australia Court (the “Court”) is convened for the purposes of considering an order pursuant to the Corporations Act 2001 (Cth) (Australia) (the “Corporations Act”) in relation to the Scheme (unless otherwise stated).
The conditions precedent include, but are not limited to the following:
- the Scheme is approved by the Court pursuant to section 411(4)(b) of the Corporations Act and becomes effective on such conditions as are imposed by the Court and are reasonably acceptable to Premier;
- there being no prohibitive orders or determinations that prevent the implementation of the Scheme;
- there being no Sedimentary prescribed occurrences that occur (these occurrences primarily relate to Sedimentary reorganizing its share capital, Sedimentary varying its constitution or material contracts, and Sedimentary encumbering its business or property and the ongoing solvency of Sedimentary);
- there being no Sedimentary regulated event that occurs (these events primarily relate to Sedimentary taking any action to distribute cash outside the company);
- receipt by Premier of a notice from the Treasurer of the Commonwealth of Australia (or its agent) that there is no objection to the proposed acquisition by Premier of the Shares under the Commonwealth Government’s foreign investment policy;
- receipt of the approval of the Australian Securities and Investments Commission (“ASIC”) and the Australian Stock Exchange (“ASX”) and other regulatory approvals required in Australia;
- there being no termination of the merger implementation agreement;
- there being no material adverse change that occurs in respect of Sedimentary;
- all change of control consents and approvals required under any material contracts of Sedimentary are obtained;
- within 10 business days of the date of the merger implementation agreement, Premier enters into financing agreements on terms satisfactory to it;
- within five business days of the date of the merger implementation agreement, Lion Selection Group Limited confirms their intention to vote in favour of the Scheme;
- the price of gold does not fall below US$575;
- no information filed by Sedimentary with ASX or ASIC contains statements that are incorrect or misleading or contain a material omission;
- within five business day of the merger implementation agreement, Premier is provided with information concerning the mineral properties and financial information required to enable it to comply with applicable Canadian securities regulations;
- all regulatory and third party approvals (including the approval of the shareholders of Premier) required in Canada are obtained.
In addition, pursuant to the merger implementation agreement, Sedimentary must not, subject to the exceptions set out below or without the consent of Premier:
- solicit, encourage or initiate any competing transaction;
- participate in any discussions or negotiations, provide any information or take any other action to induce or facilitate any other person pursuing a competing transaction;
- enter into any agreement in relating to a competing transaction;
- approve or recommend a competing transaction; or
- disclose any information about its businesses or affairs to a third party.
Sedimentary may undertake any action that would otherwise be prohibited by the above exclusivity arrangements in relation to a bona fide competing transaction which was not solicited by Sedimentary where the directors of Sedimentary are acting in good faith and in order for the directors of Sedimentary to satisfy their fiduciary and statutory duties. This includes the continuation of any existing discussions.
Sedimentary has agreed to pay Premier an amount equal to A$900,000 (the “Break Fee”) if:
- a condition precedent in the merger implementation agreement is not fulfilled as a consequence of a material act or omission of Sedimentary;
- the directors of Sedimentary fail to recommend or adversely modify their recommendation or otherwise do something that prevents the Scheme from proceeding;
- a competing transaction is completed or becomes unconditional; and
- the Scheme is not approved by the shareholders of Sedimentary.
The merger implementation agreement may be terminated by either party at any time before completion by giving the other party written notice if:
- the other party is in material breach of any clause of the merger implementation agreement or there has been a material breach of a representation or warranty; and
- the non-defaulting party has given the defaulting party a written notice:
- setting out the relevant circumstances; and
- stating its intention to terminate; and
- the relevant circumstances continue to exist seven business days (or any shorter period ending immediately before completion) from the time the notice is given.
Premier may terminate the merger implementation agreement immediately if a Sedimentary Director fails to recommend the Scheme or adversely changes or withdraws his recommendation.
Meeting materials in connection with the Scheme are expected to be sent to the shareholders of Sedimentary before the end of September 2006. A meeting of the shareholders of Sedimentary to vote on the Scheme is expected to be held during October 2006.
Mr. John Cook is the qualified person for the technical information contained in this press release and is a Qualified Person within the meaning of National Instrument 43-101.
Premier Gold Mines Limited is a new Canadian based mining and exploration company focussed on developing and acquiring high quality gold projects worldwide. Pursuant to an arrangement with Wolfden Resources Inc., which became effective on August 18, 2006, Premier acquired the interest of Wolfden in the Bonanza and East Bay Projects as well as certain other mineral property interests of Wolfden in Ontario together with $2,000,000 in cash and the shareholders of the Wolfden also became shareholders of Premier. It is expected that the common shares of Premier will commence trading on the Toronto Stock Exchange on Tuesday, August 22, 2006 under the symbol PG.