Premier Gold Announces Royalty Purchase Agreement by its Subsidiary Premier Royalty Corporation

April 25th, 2012
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THUNDER BAY, ON, April 25, 2012 /CNW/ - PREMIER GOLD MINES LIMITED (PG:TSX) (“Premier Gold” or the “Company”) is pleased to announce that it has entered into a purchase agreement with Aberdeen International Inc. (“Aberdeen”) pursuant to which its wholly-owned subsidiary, Premier Royalty Corporation (“Premier Royalty”), will acquire from Aberdeen a 1% net smelter return royalty (the “Royalty”) on gold produced from Village Main Reef Limited’s Buffelsfontein Mine and First Uranium Corporation’s Mine Waste Solutions tailings recovery project in the Republic of South Africa. The closing of the acquisition of the Royalty is expected to occur on or about May 31, 2012 and is subject to closing conditions typical for a transaction of this nature, including the receipt of all necessary regulatory and third-party approvals.

Pursuant to the terms of the Agreement, Premier Royalty has agreed to purchase the Royalty in consideration for an aggregate purchase price of $20,900,000, which shall consist of a cash payment in the amount of $11,500,000 and the issuance by Premier Royalty of a convertible debenture payable to Aberdeen in the amount of $9,400,000 (the “Convertible Debenture”). The unpaid amounts owing under the Convertible Debenture shall accrue interest at a rate of 8% per annum and upon Premier Royalty completing a public offering, or any other comparable going public transaction (a “Going Public Transaction”), the Convertible Debenture shall automatically convert into that number of common shares of Premier Royalty equal to the principal amount and accrued interest divided by the amount equal to the offering price or deemed price in connection with the Going Public Transaction less a 10% discount. Further, in the event Premier Royalty completes a Going Public Transaction, Premier Royalty shall issue to Aberdeen that number of warrants of Premier Royalty equal to 0.5 multiplied by the number of common shares of Premier Royalty issued under the Convertible Debenture (each whole warrant, a “Warrant”). Each Warrant shall entitle Aberdeen to acquire one common share of Premier Royalty at a price which represents a 25% premium to the price per Premier Royalty common share issued in connection with a Going Public Transaction for a period of two years from the closing date of the Going Public Transaction.

In the event that a Going Public Transaction is not completed on or before the first anniversary of the closing date of the purchase and sale of the Royalty (the “Closing Date”), the principal amount and accrued interest under the Convertible Debenture shall be repaid by Premier Royalty in cash to Aberdeen in full, or if Premier Royalty elects, and subject to the approval of Premier Gold, Premier Gold shall satisfy the Convertible Debenture on Premier Royalty’s behalf by issuing that number of common shares of Premier Gold equal to the principal amount and accrued interest divided by the volume weighted average price of the common shares of Premier Gold for the five trading days immediately prior to the one year anniversary of the Closing Date.

The Closing Date is expected to occur on or before May 31, 2012 and remains subject to the receipt of all necessary regulatory approvals, including the approval of the TSX and applicable approval of the South African Reserve Bank. The Agreement includes customary representations and warranties of both parties and includes a commitment by Aberdeen to obtain all necessary third party consents and approvals with respect to the assignment of Aberdeen’s interest in the Royalty to Premier Gold and a commitment by Aberdeen not to sell or assign its interest in the Convertible Debenture, the Warrants or any common shares of Premier Royalty issued upon conversion or exercise of the Convertible Debenture or Warrants until 180 days following the closing of a Going Public Transaction.

Abraham Drost, Chairman of Premier Royalty Corporation stated that “we recognize that royalty companies have outperformed bullion and other mining sector companies for some time. The acquisition of two high quality, cash-flowing, royalty assets, Premier’s existing royalty portfolio, and the potential acquisition of additional cash flowing assets is consistent with Premier’s objective to establish a new public royalty company with the potential to add considerable value for its shareholders. The Aberdeen gold royalties at Buffelsfontein and Mine Waste Solutions generated more than $2.4 million in free cash flow in 2011 and are large, long life operations in the hands of capable operators. We are very pleased that subject to closing of the acquisition and a future going public transaction, Aberdeen International Inc. will become a significant shareholder of the company.”

About Premier Gold Mines Limited and Premier Royalty Corporation

Premier Royalty Corporation is a wholly-owned subsidiary of Premier Gold Mines Limited, one of North America’s leading exploration and development companies with a high-quality pipeline of projects focused in proven, safe and accessible mining jurisdictions in Canada and the United States. The Company’s portfolio includes significant assets in world class gold mining districts such as Red Lake, Musselwhite and Geraldton in Ontario and the Carlin Trend in Nevada. It is felt that packaging up existing royalties owned by Premier Gold combined with acquisition of other high quality cash flowing royalty assets into Premier Royalty Corporation will form the basis of a going public transaction that is value accretive to Premier shareholders.

FOR FURTHER INFORMATION PLEASE CONTACT:

Ewan Downie, President & CEO
Premier Gold Mines Limited

Abraham Drost, P.Geo., Chairman
Premier Royalty Corporation

Phone: 807-346-1390
Fax: 807-346-0100
e-mail: info@premiergoldmines.com
Web Site: www.premiergoldmines.com

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain information that may constitute “forward-looking information” under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements about strategic plans, including the closing of the acquisition of the Royalty, a going public transaction involving Premier Royalty, Premier Gold issuing the bridge loan to Premier Royalty and future acquisitions of high quality cash flowing royalty assets by Premier Royalty. Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information, including the risks identified in Premier Gold’s annual information form under the heading “Risk Factors”. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information contained in this press release is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.