U.S. Silver Board Recommends Rejection of Hecla Offer and Reaffirms Recommendation for Combination Transaction with RX Gold
30 July 2012 - 1:32AM
PR Newswire (Canada)
SPROTT CONTINUES TO SUPPORT COMBINATION TRANSACTION TORONTO, July
30, 2012 /CNW/ - U.S. Silver Corporation ("U.S. Silver" or the
"Company") announced that its Board of Directors unanimously
recommends that U.S. Silver shareholders REJECT the unsolicited
cash offer from Hecla Mining Company ("Hecla") to acquire all of
the outstanding common shares of U.S. Silver (the "Hecla Offer").
Commenting on the offer, Gordon Pridham, Chairman & Interim CEO
of U.S. Silver said, "the Board continues to believe that the
proposed strategic combination transaction with RX Gold is in the
best interest of shareholders and continues to recommend that U.S.
Silver shareholders vote in favour of the combination transaction
at the August 7(th) shareholders' meeting. Valuation multiples in
the precious metals sector are at or near all-time lows - the Hecla
Offer is simply not compelling enough for us to abandon our
strategic plan going forward." The Board of Directors, with the
assistance of its legal and financial advisors, carefully
considered and reviewed the terms and conditions of the Hecla Offer
and recommends that U.S. Silver shareholders REJECT the Hecla Offer
and instead vote their U.S. Silver shares IN FAVOUR of the proposed
combination transaction with RX Gold & Silver Inc. ("RX Gold")
for a number of reasons, including the following: -- The Hecla
Offer is inadequate from a financial point of view to U.S. Silver
shareholders. Cormark Securities Inc. has delivered an opinion to
the Board of Directors that the consideration offered pursuant to
the Hecla Offer is inadequate, from a financial point of view, to
U.S. Silver shareholders. -- The Hecla Offer is not supported by
Sprott nor by U.S. Silver's directors and officers.Sprott, U.S.
Silver's largest shareholder, and U.S. Silver's directors and
officers have confirmed that they continue to support the
combination transaction with RX Gold. -- The Hecla Offer is highly
opportunistic and does not provide U.S Silver shareholders with an
adequate change of control premium. The Board of Directors believes
that the Hecla Offer is opportunistically timed to take advantage
of a recent period during which silver prices, and the share price
of companies in the silver industry, have been at a low point. If
successful, the Hecla Offer would deny U.S. Silver shareholders the
opportunity to participate in future value accretion as the silver
price recovers. The Hecla Offer is for C$1.80 per U.S. Silver
common share in cash, which represents a 13%premium to the 90-day
volume weighted average share price, and a 10% discount to the
180-day volume weighted average share price, of the U.S. Silver
common shares ending July 24, 2012. These premiums are well below
premiums paid in other unsolicited metals and mining transactions,
which have been on average substantially higher on completed
transactions over $100 million since 2005. -- The Hecla Offer does
not fully reflect value for U.S. Silver's current assets and
organic growth opportunities.The Board of Directors believes that
there are significant organic growth opportunities available to the
Company within its current property portfolio. A plan to fill the
Company's mills, which are currently operating at approximately 60%
capacity, is currently underway. Achievement of this plan would
increase production and reduce cash operating costs. Further, the
Company has a large (state area covered) and dominant land position
in the Silver Valley that has not seen exploration in the Company's
past due to working capital being directed to mine production
efficiencies. With the Company's improved cash position,
exploration programs are underway and showing encouraging progress.
The Board of Directors also does not believe that the Hecla Offer
adequately recognizes potential value from the Coeur, Calladay and
the Company's other highly prospective exploration properties. --
The Board of Directors continues to believe that the proposed
combination transaction with RX Gold will provide long term value
to U.S. Silver in excess of the consideration being offered under
the Hecla Offer. In the first half of 2012, RX Gold's Drumlummon
property, operating with a small miners permit, produced
approximately 860,000 silver equivalent ounces. Together with U.S.
Silver's steady commercial production (1.2 million silver
equivalent ounces in the first half of 2012), the combined
company's current growth plan is expected to be funded without
diluting existing U.S. Silver shareholders. In addition, under the
proposed combination transaction, U.S. Silver shareholders will
have a 70% share of the $10 million per year of expected combined
synergies that have been currently identified. -- The Hecla Offer
does not fairly compensate U.S. Silver shareholders for the
synergies and strategic benefits available to Hecla upon acquiring
U.S. Silver.The Board of Directors believes that significant
synergies and strategic benefits would accrue to Hecla upon the
acquisition of U.S. Silver because of the proximity of the
companies' respective assets and the Company's large and dominant
land position in the Silver Valley. Such synergies and benefits
include, among others, better mill sequencing, economies of scale,
and greater access to labour. The Board of Directors believes that
the Hecla Offer fails to fairly compensate U.S. Shareholders for a
portion of such synergies and benefits. -- The Hecla Offer takes
advantage of U.S. Silver's existing cash balances to finance its
offer.U.S. Silver has approximately C$29million in working capital
on its balance sheet as of June 30, 2012, which represents
approximately 26% of the funding requirements of the Hecla Offer,
and as such, the Hecla Offer effectively values U.S. Silver's
operating assets at C$1.39 per share. -- Combination transaction
with RX Gold preserves benefits of expected rise in price of silver
and precious metals companies.The proposed combination transaction
with RX Gold is a strategic plan recommended by the Board of
Directors. The combination with RX Gold is expected to preserve the
ability of current shareholders of U.S. Silver to maximize the
value of the cash-flowing assets of both companies, and future
shareholders in the combined company to capture the benefits of an
anticipated near to medium term increase in the price of precious
metal companies. Consummation of the combination transaction with
RX Gold does not preclude the ability of the combined company from
engaging in a change of control transaction in the future. --
Pursuant to the terms of the combination agreement with RX Gold,
the Company has not solicited proposals from third parties to
compete with the Hecla Offer. The Board of Directors'
recommendation to U.S. Silver shareholders that they REJECT the
Hecla Offer and instead vote their U.S. Silver shares IN FAVOUR of
the proposed combination transaction, as well as a more detailed
discussion of the reasons for rejecting the Hecla Offer and the
inadequacy opinion provided by U.S. Silver's financial advisor,
shall be set out in the Directors' Circular that will be mailed in
due course to each of U.S. Silver's shareholders in compliance with
applicable securities laws and filed with Canadian securities
regulatory authorities. The Directors' Circular will be available
on SEDAR at www.sedar.com and on U.S. Silver's website at
www.us-silver.com. Shareholders are advised to read the Directors'
Circular carefully and in its entirety, as it will contain
important information regarding U.S. Silver and the Hecla Offer. If
Shareholders have any questions or require more information they
are encouraged to contact the Company's proxy solicitation agent,
Phoenix Advisory Partners, toll-free at 1-800-240-2133 or outside
North America at 201-806-2222 or via email at
inquiries@phoenixadvisorypartners.com. This press release is
specifically deemed to be incorporated by reference in U.S.
Silver's management information circulated dated July 9, 2012,
which has been mailed to shareholders and available on SEDAR at
www.sedar.com and on U.S. Silver's website at www.us-silver.com.
How to Vote IN FAVOUR of the Combination Transaction with RX Gold
Any U.S. Silver shareholder that has already voted IN FAVOUR of the
proposed combination transaction with RX Gold need not take any
action, as their votes will be counted. Any U.S. Silver shareholder
who has voted AGAINST the proposed combination transaction is
encouraged to change its vote and vote IN FAVOUR of the proposed
combination transaction. Registered shareholders of U.S. Silver are
requested to complete, date, sign and return the form of proxy that
accompanied the Company's management information circular. To be
valid, the form of proxy must be signed and received by the proxy
department of U.S. Silver's transfer agent, Valiant Trust Company,
by mail at 310-606 4 Street SW, Calgary, Alberta, T2P 9Z9, or by
facsimile at 1-855-375-6916 or toll-free in North America at
1-866-313-1872, not later than 5:00 p.m. (Toronto time) on August
2, 2012. Non-registered shareholders who receive voting
instructions from their intermediary should carefully follow the
instructions provided by their intermediary to ensure their vote is
counted. Non-registered shareholders are encouraged and can vote
via internet at www.proxyvote.com. If you have any questions that
are not answered by U.S. Silver's management information circular,
or would like additional information, you should contact your
professional advisors. You can also contact Phoenix Advisory
Partners, the proxy solicitation firm engaged by U.S. Silver,
toll-free at 1-800-240-2133 or outside North America at
201-806-2222 or by email at inquiries@phoenixadvisorypartners.com
should you have any questions regarding voting of your shares. How
to REJECT the Hecla Offer and Withdraw Tendered Shares To reject
the Hecla Offer, you should do nothing. The Hecla Offer is open for
acceptance until August 31, 2012. Shareholders who have already
tendered their shares to the Hecla Offer can withdraw them at any
time before they have been taken up and accepted for payment by
Hecla. Shareholders holding shares through a dealer, broker or
other nominee should contact such dealer, broker or nominee to
withdraw their U.S. Silver shares. Shareholders may also contact
the information agent retained by U.S. Silver, Phoenix Advisory
Partners, toll-free at 1-800-240-2133 or outside North America at
201-806-2222 or via email at inquiries@phoenixadvisorypartners.com.
About U.S. Silver U.S. Silver, through its wholly owned
subsidiaries, owns and/or operates the Galena, Coeur, Caladay and
Dayrock silver-lead-copper mines in Shoshone County, Idaho, with
the Galena mine being the second most prolific silver mine in U.S.
history. Total silver production from U.S. Silver's mining complex
has exceeded 217 million ounces of silver production since 1953.
U.S. Silver controls a land package now totalling approximately
14,000 acres in the heart of the Coeur d'Alene Mining District.
U.S. Silver is focused on expanding the production from existing
operations as well as exploring and developing its extensive Silver
Valley holdings in the Coeur d'Alene Mining District. Forward
Looking Statements Certain statements in this release may be
considered forward-looking statements, which reflect the board and
management's current beliefs and expectations and which involve
assumptions about expected future events or results that are
subject to inherent risks and uncertainties. There is significant
risk that assumptions and other forward-looking statements will not
prove to be accurate. Many factors could cause actual future
results, conditions or events to differ materially from the results
or outcomes expressed, including risks and uncertainties related
to: receipt of the requisite shareholder and court approvals for
the combination transaction with RX Gold, foreign currency
fluctuations; risks inherent in mining including environmental
hazards, industrial accidents, unusual or unexpected geological
formations, ground control problems and flooding; risks associated
with the estimation of mineral resources and reserves and the
geology, grade and continuity of mineral deposits; the possibility
that future exploration, development or mining results will not be
consistent with the Company's expectations; the potential for and
effects of labour disputes or other unanticipated difficulties with
or shortages of labour or interruptions in production; actual ore
mined varying from estimates of grade, tonnage, dilution and
metallurgical and other characteristics; the inherent uncertainty
of production and cost estimates and the potential for unexpected
costs and expenses, commodity price fluctuations; uncertain
political and economic environments; changes in laws or policies,
foreign taxation, delays or the inability to obtain necessary
governmental permits; and other risks and uncertainties, including
those described in the Company's public disclosure record. The
foregoing list of factors is not exhaustive. Accordingly, investors
should not place undue reliance on forward-looking information.
U.S. Silver includes in publicly available documents filed from
time to time with securities commissions and the Toronto Stock
Exchange, a thorough discussion of the risk factors that can cause
anticipated outcomes to differ from actual outcomes.
Forward-looking information is provided as of the date of this news
release only, it should not be relied upon as of any other date,
and U.S. Silver assumes no obligation to update or revise this
information to reflect new events or circumstances, except as
expressly required by law. There can be no assurance that the
proposed combination transaction with RX Gold will receive the
required shareholder and court approvals or that any other
alternative transaction, including the Hecla Offer, will be
completed. U.S. Silver Corporation CONTACT: U.S. Silver Corporation
Gordon Pridham, Chairman & Interim CEO, or Chris Hopkins,
CFO416-907-5501info@us-silver.com (www.us-silver.com)
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