Pan American Silver and Corner Bay Silver to merge
Pan American will host a conference call on Tuesday, May 21st at 11:00
a.m. Pacific time (2:00 p.m. Eastern time) to discuss the planned merger
with Corner Bay Silver. To participate in the call, dial 1-416-695-5801
five minutes before the start time. To listen to a playback of the call
after it has ended, dial 1-416-695-5800 and enter the pass code 1172916.
This option will be available for 2 weeks after the call. The conference
call will also be broadcast live and archived for later playback on the
Internet at q1234.com.
VANCOUVER and TORONTO, May 21 /CNW/ - Pan American Silver Corp. (Nasdaq -
PAAS; Toronto - PAA) and Corner Bay Silver Inc. (Toronto - BAY) are pleased to
announce that they have entered into an agreement whereby Pan American will
acquire all of the issued and outstanding shares of Corner Bay pursuant to a
plan of arrangement. The transaction will combine Pan American's strong silver
production and operational experience with Corner Bay's proven exploration
success that has resulted in the discovery of the Alamo Dorado silver-gold
deposit, its principal asset.
Under the arrangement, each common share of Corner Bay will be exchanged
for 0.54 common shares of Pan American plus 0.25 shares of a newly formed
exploration company ("ExploreCo"). Peter Mordaunt, Corner Bay's Chairman and
President, would join the Board of Pan American. Pan American would own 9.99
percent of ExploreCo and would have the option to acquire, under certain
conditions, any future silver discoveries made by it. ExploreCo would be
capitalized with approximately US$3 million (C$5.0 million) of Corner Bay's
existing cash and would give Pan American's and Corner Bay's shareholders
continuing participation in future exploration under the leadership of Mr.
Mordaunt.
The Board of Directors of each company has unanimously approved the
transaction, which is subject to due diligence, receipt of fairness opinions,
and regulatory and shareholder approvals. Certain significant shareholders of
Corner Bay, holding approximately 16.4 percent of Corner Bay's shares, have
agreed to enter into support agreements with Pan American under which they
would vote their shares in favor of the transaction. If Corner Bay terminates
the transaction and enters into another acquisition transaction, Pan American
would receive a break fee of approximately US$3.4 million (C$5.3 million).
Corner Bay currently has 20.7 million shares outstanding on a fully
diluted basis, including approximately 2 million share purchase options
(approximately 1 million of which may be exchanged for options in Pan
American). Pan American currently has 41.5 million shares outstanding (45
million fully diluted) and would issue approximately 11 million shares to
complete the transaction. The merger ratio represents a 53 percent premium
over Corner Bay's May 17th closing share price.
The Alamo Dorado deposit is a grassroots exploration discovery made by
Corner Bay in 1997. Corner Bay holds a right to earn a 100 percent interest,
with no royalties, in the project located in Sonora State, Mexico. Corner Bay
previously disclosed reserves (calculated at per ounce prices of $5.28 silver
and $300 gold) of 50 million tonnes of ore grading 63.8 grams of silver per
tonne and 0.23 grams of gold per tonne for the Alamo Dorado deposit (qualified
person - MINTEC, Inc., Sept. 2000 Pre-feasibility Study) containing
approximately 103 million ounces of silver and 371,000 ounces of gold. Corner
Bay is currently awaiting completion of a feasibility study on the Alamo
Dorado deposit by AMEC Simons Mining and Metals, a well-known independent
engineering consulting firm. The ongoing feasibility study will be subject to
review by Pan American prior to completion. The Alamo Dorado project is
located in the western foothills of the Sierra Madres and occupies a ridge
top, making it ideal for low strip ratio, open pit mining. Additional mineral
resources in the deposit and ample exploration targets on the 5,370-hectare
(13,400 acre) project could significantly expand the project's resource base.
Peter Mordaunt, Corner Bay's Chairman and President stated, "Rarely does
the combination of two companies have such a natural synergy to instantly
create additional shareholder value. There is no question the merger will
create a leading primary silver producer and silver investment. Our
shareholders along with Pan American's shareholders should be as optimistic
about the future of the "new" Pan American as management and the Boards of
both of these companies are."
Pan American Silver now operates three wholly owned mines in Latin
America with expected production of 8.5 million ounces of silver this year,
growing to an annual rate of over 11 million ounces in 2003 with the planned
expansion of the La Colorada mine, also located in Mexico.
Pan American's Chairman and CEO, Ross Beaty said, "I congratulate Peter
on the excellent job Corner Bay has done in discovering Alamo Dorado and
enhancing its value. This deposit fits Pan American like a glove and creates
exceptional value for Pan American's shareholders. This transaction increases
our Latin American reserves by almost 70 percent and is expected to increase
our near-term silver production by more than 50 percent. In addition, over 75
percent of Alamo Dorado's value comes from silver, so it will also accentuate
our existing silver purity. This acquisition will boost our silver reserves
and resources to over 739 million ounces, and with Alamo Dorado in our
development pipeline, Pan American's near-term annual silver production should
reach 20 million ounces."
CAUTIONARY NOTE
Some of the statements in this news release are forward-looking
statements, such as estimates of future production levels, expectations
regarding mine production costs, expected trends in mineral prices and
statements that describe Pan American/Corner Bay's future plans, objectives or
goals. Actual results and developments may differ materially from those
contemplated by these statements depending on such factors as changes in
general economic conditions and financial markets, changes in prices for
silver and other metals, technological and operational hazards in Pan
American/Corner Bay's mining and mine development activities, uncertainties
inherent in the calculation of mineral reserves, mineral resources and metal
recoveries, the timing and availability of financing, governmental and other
approvals, political unrest or instability in countries where Pan American is
active, labor relations and other risk factors listed from time to time in Pan
American's Form 40-F and Corner Bay's Form 20-F. |
