TIDMS32
RNS Number : 6726R
South32 Limited
18 June 2018
18(th) June 2018
South32 Limited
(Incorporated in Australia under the Corporations Act 2001)
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32
ISIN: AU000000S320
south32.net
South32 Limited
south32 to acquire arizona mining in AGREED all cash offer
South32 Limited (ASX, JSE, LSE: S32; ADR: SOUHY) (South32) and
Arizona Mining Inc. (TSX:AZ) (Arizona Mining) announced today that
they have entered into an agreement for South32 to acquire the
remaining 83 per cent of issued and outstanding shares of Arizona
Mining via a plan of arrangement, representing a fully funded, all
cash offer of US$1.3 billion(1) (C$1.8 billion). The offer price of
C$6.20 per share represents a 50 per cent premium to the closing
price on 15 June and implies a total equity value for Arizona
Mining of US$1.6 billion(1) (C$2.1 billion). Directors and officers
of Arizona Mining, who own 34 per cent of the common shares on
issue, have entered into voting support agreements and the
directors of Arizona Mining entitled to vote, have unanimously
recommended to their shareholders that they vote in favour of the
transaction.
Arizona Mining is the owner of the Hermosa Project, containing
the high grade base metals Taylor deposit, the Central zinc,
manganese and silver oxide resource and an extensive, highly
prospective land package with potential for discovery of
polymetallic and copper mineralisation. The Taylor deposit is a
greenfield development project that has a reported resource of 101
million short tons(2,3) (Measured and Indicated Mineral Resources)
at 10.4% zinc equivalent grade and is open at depth and laterally.
The project is located close to key infrastructure in an attractive
mining jurisdiction. A Preliminary Economic Assessment completed by
Arizona Mining in January 2018 indicated that this low cost, long
life project has the potential to deliver a very high Internal Rate
of Return on investment(2) .
South32 Chief Executive Officer, Graham Kerr said: "Our all cash
offer for Arizona Mining will allow us to optimise the design and
development of one of the most exciting base metal projects in the
industry. We have been a major shareholder in Arizona Mining since
May 2017 and an active participant in the Hermosa Project with
representation on the operations committee and a nominee on the
board of directors. Our deep understanding of this high grade
resource and surrounding tenement package, and extensive experience
at Cannington, makes us the natural owner of this project and
ensures we are well positioned to bring it to development,
delivering significant value to our shareholders."
Arizona Mining founder and Executive Chairman, Richard Warke
said: "South32's all cash offer of C$6.20 per share represents a
premium reflective of the truly world class nature of the Hermosa
Project and allows shareholders to realise immediate value. In
addition, the transaction is not contingent on financing, which
significantly reduces transaction risk.
Our board of directors and a special committee of three
independent members from the board of directors evaluated this
offer and determined that it represented the best outcome for all
shareholders. Importantly, South32 knows the asset well and
understands the significance of the strong relationships that we
have built in Arizona with all of our stakeholders. I wish South32
all the best in developing Hermosa and the Taylor deposit."
Terms of the Transaction(4)
The Transaction will be effected by way of a statutory plan of
arrangement pursuant to the Business Corporations Act (British
Columbia) (BCBCA) and will require the approval of:
-- at least 66.67 per cent of votes cast by Arizona Mining
shareholders at a shareholder meeting expected to take place in the
September 2018 quarter. South32 is eligible to vote its existing
53.2 million common shares in Arizona Mining, equivalent to 17 per
cent of the common shares outstanding, in favour of the
Transaction; and
-- a simple majority of the votes cast by Arizona Mining
shareholders, excluding South32 and any other persons required to
be excluded in accordance with Multilateral Instrument 61-101 of
the Canadian securities regulatory authorities.
No vote will be required by South32 shareholders in connection
with the Transaction.
As part of the Transaction, South32 will either acquire or
cancel the outstanding options and warrants in Arizona Mining. The
holders of options and warrants that are in-the-money will receive
cash consideration equal to the purchase price less the exercise
price of each Arizona Mining option or warrant. South32 has also
entered into an arrangement designed to manage foreign exchange
rate exposure associated with the Transaction.
The Arrangement Agreement includes customary deal protection
provisions including a
non-solicitation clause, notification rights and a right to
match in the event of a superior proposal, as well as a C$67
million termination fee payable by Arizona Mining to South32 under
certain circumstances.
In addition to a positive shareholder vote, the Transaction
remains subject to a limited number of conditions, a full list of
which is set out in the Arrangement Agreement, including:
-- receipt of interim and final court orders pursuant to the
statutory arrangement provisions of the BCBCA;
-- no material adverse effect concerning Arizona Mining; and
-- other customary conditions for a transaction of this nature.
The Transaction is not subject to any regulatory approvals.
Subject to the conditions precedent being met, the Transaction
is expected to close in the September 2018 quarter.
South32 has retained Goldman Sachs as lead financial adviser,
Canaccord Genuity as financial adviser, Osler, Hoskin &
Harcourt LLP as Canadian legal adviser and Perkins Coie as US legal
adviser, in relation to the Transaction.
Arizona Mining has retained Scotiabank as lead financial
adviser, Maxit Capital as financial adviser to the special
committee and Davies Ward Phillips & Vineberg as legal adviser,
in relation to the Transaction.
Board Recommendation and Voting Support Agreements
The Arrangement Agreement has been unanimously approved by the
directors of Arizona Mining entitled to vote who have recommended
that Arizona Mining shareholders vote in favour of the
Transaction.
Scotiabank has provided an opinion to the Arizona Mining board
of directors and Maxit Capital has provided an opinion to the
Arizona Mining special committee stating that, and based upon and
subject to the assumptions, limitations, and qualifications set
forth therein, the consideration offered pursuant to the
Transaction is fair, from a financial point of view, to the Arizona
Mining shareholders, excluding South32.
South32 has entered into voting support agreements with all
directors and senior officers of Arizona Mining who hold common
shares, including the founder and Executive Chairman, pursuant to
which these shareholders agree to vote in favour of the Transaction
subject to the terms and conditions of such agreements. This group
of shareholders collectively represents 34 per cent of Arizona
Mining's outstanding common shares.
Arizona Mining interim financing
In connection with the Transaction, South32 will provide Arizona
Mining with a C$70 million working capital facility at commercial
rates (the Facility). The Facility comprises an initial tranche of
C$40 million available following signing and subsequent tranches up
to a total of C$30 million, subject to South32's consent. The
Facility is being provided for agreed upon working capital and
capital expenditure purposes based on the most recent operational
budget for the Hermosa Project. In certain circumstances the
Facility can be repaid in Arizona Mining shares at South32's
election, but only to the extent South32's ownership of Arizona
Mining does not
exceed 19.9 per cent.
About South32
South32 is a globally diversified mining and metals company with
high quality operations in Australia, Southern Africa and South
America. Our purpose is to make a difference by developing natural
resources, improving people's lives now and for generations to
come. We are trusted by our owners and partners to realise the
potential of their resources. We have a simple strategy to maximise
the potential of our assets and shareholder returns by optimising
our existing operations, unlocking their potential and identifying
new opportunities to compete for capital.
About Arizona Mining
Arizona Mining is a mineral exploration and development company
focused on the exploration and development of its 100 per cent
owned zinc-lead-silver Hermosa Project located in Santa Cruz
County, Arizona. Hermosa has 554 acres of private, patented mining
claims and district exploration potential within 20,500 acres of
unpatented mining claims. It comprises two deposits, the flagship
Taylor deposit, a zinc-lead-silver sulphide and the Central
deposit, a zinc-manganese-silver manto oxide.
Footnotes
1. Based on a CAD/USD exchange rate of 0.7574 as of 15 June 2018.
2. The information in this announcement that relates to the
Mineral Resource estimates and the Preliminary Economic Assessment
(PEA) of Hermosa Project (Taylor and Central Deposit) is based on
the "National instrument 43-101 Technical Report" dated 16 January
2018 and filed by Arizona Mining on SEDAR (www.sedar.com) in
accordance with National Instrument 43-101 as required by Canadian
securities regulatory authorities. Quantities are stated in short
tons. Commodity weights of measure are in ounces per short ton
(oz/ton) or percent (%) unless stated otherwise. See also Mineral
Resources - clarifying statements in this market announcement.
3. The estimates of the Taylor sulphide Mineral Resources
contain 15.2 million tons of Measured Mineral Resource (4.0% Zn,
4.0% Pb & 1.6 g/t Ag) and 85.8 million tons of Indicated
Mineral Resource (4.2% Zn, 4.0% Pb & 2.2 g/t Ag). The % Zinc
equivalent calculation including assumptions are available in the
PEA of Hermosa Project (Taylor and Central Deposit) dated 16
January 2018, filed by Arizona Mining on SEDAR (www.sedar.com).
4. Capitalised terms have meanings defined in the Arrangement Agreement.
Further information
JSE Sponsor: UBS South Africa (Pty) Ltd
18 June 2018
SOUTH32 INVESTOR RELATIONS
Alex Volante Tom Gallop
T +61 403 328 408 T +61 8 9324 9030
M +44 7468 353 005 M +61 439 353 948
E Alex.Volante@south32.net E Tom.Gallop@south32.net
SOUTH32 MEDIA RELATIONS
James Clothier Jenny White
T +61 8 9324 9697 T +44 20 7798 1773
M +61 413 391 031 M +44 798 388 7467
E James.Clothier@south32.net E Jenny.White@south32.net
ARIZONA MINING INVESTOR RELATIONS & CORPORATE COMMUNICATIONS
Susan Muir Jerrold Annett
T +1 416 366 5678 T +1 416 366 5678 x
x 202 207
E smuir@arizonamining.com E jannett@arizonamining.com
This announcement contains inside information.
Further information regarding the Transaction can be found in
the Arrangement Agreement and will also be included in an
information circular, which is expected to be filed and mailed to
Arizona Mining shareholders in July 2018. These key documents will
also be available online at www.arizonamining.com and
www.sedar.com.
Further information on South32 can be found at
www.south32.net.
Forward-looking statements
This release may contain forward-looking statements, including
statements about currency exchange rates, commodity prices,
production forecasts, plans, development decisions, exploration and
capital expenditure. These forward-looking statements reflect
expectations at the date of this release; however, they are not
guarantees or predictions of future performance. They involve known
and unknown risks, uncertainties and other factors, many of which
are beyond our control, and which may cause actual results to
differ materially from those expressed in the statements contained
in this release. Readers are cautioned not to put undue reliance
on
forward-looking statements. Except as required by applicable
laws or regulations, neither South32 Limited nor Arizona Mining
Inc. undertakes to publicly update or review any forward-looking
statements, whether as a result of new information or future
events.
Mineral Resources - clarifying statements
The estimates of Mineral Resources for the Hermosa Project
(Arizona Mining) are foreign estimates under the ASX Listing Rules
reported in accordance with the National Instrument 43-101 (NI
43-101) and filed on SEDAR (www.sedar.com) on 16 January 2018.
In accordance with National Instrument 43-101, Resources are not
Mineral Reserves and do not have demonstrated economic viability.
There is no certainty that all or any part of mineral resources
will be converted to Mineral Reserves. Inferred Mineral Resources
are based on limited drilling which suggests the greatest
uncertainty for a resource estimate and that geological continuity
is only implied. Additional drilling will be required to verify
geological and mineralisation continuity and there is no certainty
that all of the Inferred Resources will be converted to Measured
and Indicated Resources. Quantity and grades are estimates and are
rounded to reflect the fact that the resource estimate is an
approximation.
The categories of Mineral Resource classification used are in
accordance with NI 43-101. NI 43-101 is a 'qualifying foreign
estimate' (Chapter 19, ASX Listing Rules) and has similar
categories of resource classification as the JORC Code (Appendix
5A, ASX Listing Rules).
South32 considers these estimates to be both relevant and
material to South32 given that this project has the potential to be
a material project to South32.
Reliability of estimate: South32 has experience of managing
similar operations to the Hermosa Project. South32's key technical
and operational personnel conducted site visits as part of the due
diligence process. Arizona Mining provided information used to
estimate Mineral Resources to South32 for review. The estimates of
Mineral Resources were reported in compliance with NI 43-101 using
independent consultants, AMC Mining Consultants (Canada) Ltd (AMC).
The Qualified Person (as required by Canadian securities regulatory
authorities) for the Mineral Resource estimate was Dinara
Nussipakynova, P.Geo, an employee of AMC.
The basis for the estimate as provided to South32 consists of a
geological database incorporating geology, analytical results and
surface topography. Mining and processing recoveries are based on
the PEA completed by Arizona Mining for the Hermosa Project (Taylor
and Central Deposit). The PEA dated 16 January 2018 is available on
SEDAR (www.sedar.com).
South32 believes that the information provided is the most
recent publicly available. Following completion of the transaction
it is South32's intention to conduct a work program to increase
confidence in the resource to ensure that resources are reported in
accordance with the JORC Code. The work program will include
additional exploration by means of drilling and is anticipated to
be completed within three years and will be funded using internal
cash reserves.
Cautionary statement:
-- The estimates of Mineral Resources for the Hermosa Project
(Arizona Mining) are foreign estimates under the ASX Listing Rules
and are not reported in accordance with the JORC Code.
-- Competent persons have not done sufficient work to classify
the foreign estimates as Mineral Resources in accordance with the
JORC Code.
-- It is uncertain, that following evaluation and further
exploration, the foreign estimates will be able to be reported as
Mineral Resources in accordance with the JORC code.
Competent persons' statement
In accordance with ASX listing rule 5.12, Matthew Readford, a
Competent Person, employee of South32 and Member of the
Australasian Institute of Mining and Metallurgy, confirms the
information in this market announcement that relates to the Hermosa
Project NI 43-101 foreign estimate filed on SEDAR (www.sedar.com)
on 16 January 2018 is an accurate representation of the available
data and studies for Hermosa Project provided to South32 by Arizona
Mining. Matthew Readford has sufficient relevant experience for the
type of deposit and method of extraction to qualify as a competent
person in accordance with the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (The JORC
Code). Mr Readford consents to the inclusion in the report of the
matters based on their information in the form and context in which
it appears.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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