Lake Shore Gold Corp. Announces Revised Agreement With Hochschild Mining; Second Private Placement Priced at 44% Premium to Market
Wed Apr 16, 2:15 AM
TORONTO, ONTARIO--(Marketwire - April 16, 2008) - Lake Shore Gold Corp. (TSX: LSG.TO) ("Lake Shore Gold," "the Company" or "LSG") is pleased to announce that it has reached a revised agreement with Hochschild Mining Holdings Ltd. ("Hochschild"), a wholly owned subsidiary of Hochschild Mining plc (LSE: HOC.L), to raise $79.0 million through a private placement transaction. The transaction will allow Hochschild to increase its interest in the Company to 35.0% of issued and outstanding common shares from its current ownership of 19.9%. Subject to shareholder approval of the transaction and the termination of the Company's Shareholders' Rights Plan, Hochschild has the right to acquire approximately 32.9 million common shares at a price of $2.40 per share, a 44% premium to the closing price on Tuesday, April 15, 2008. Hochschild will also have a right to increase its ownership to 40%, on a fully diluted basis, through market and private agreement transactions. Hochschild has agreed to a standstill with Lake Shore Gold, limiting its shareholdings to no more than 40%, on a fully diluted basis, until November 22, 2010.
Anthony (Tony) Makuch, President and CEO of Lake Shore Gold, commented: "Hochschild's desire to increase its interest in Lake Shore Gold by an additional 15.1% at a 44% premium to market illustrates its strong support for, and belief in, our vision to become Canada's next intermediate gold producer. The $79.0 million from the second private placement would benefit all of our shareholders as it gives us the capital required to develop and commence production at our Timmins West mine, to re-commission our 100%-owned Bell Creek mill, and to significantly advance our other projects in the Timmins area, including the Bell Creek mine and the Vogel and Schumacher properties. While considerable work remains, we fully expect Lake Shore Gold to be a very different company by the end of 2010, a gold producer with quality assets that is growing internally and through the pursuit of attractive acquisition and joint venture opportunities."
The private placement transaction announced today follows an initial private placement with Hochschild, which was completed in February 2008, through which Lake Shore Gold raised $64.7 million by issuing to Hochschild 28,172,301 common shares at a price of $2.30 per share, a 30% premium to the then market price. At the time of the initial financing, the Company and Hochschild entered into a strategic alliance agreement. Among the key terms of this agreement, Lake Shore Gold agreed to seek shareholder approval to terminate the Company's Shareholders' Rights Plan and to complete an additional financing that would allow Hochschild to increase its holdings to 35% of issued and outstanding shares, to be priced on a five-day volume weighted average price of LSG shares prior to the closing of the transaction. As well, Hochschild agreed to a standstill with Lake Shore Gold, with shareholdings limited to no more than 40%, on a fully diluted basis, for five years, subject to certain exceptions. As part of the revised agreement announced today, and subject to shareholder approval and termination of the Shareholders' Rights Plan, the price of the second financing is set at $2.40 per share and the duration of the standstill is being reduced to a period ending on November 22, 2010.
Eduardo Hochschild, Executive Chairman of Hochschild Mining plc, commented: "We are pleased to be taking this next step in enhancing our relationship with Lake Shore Gold. Our two companies have a number of complementary strengths and we have high regard for the Company and its asset base. Lake Shore Gold provides attractive growth potential to Hochschild in Canada and we view it as an important strategic investment moving forward."
The $2.40 per share private placement transaction is subject to both TSX and shareholder approval. Lake Shore Gold's shareholders will vote on the transaction, as well as a motion to terminate the Company's Shareholders' Rights Plan, at its Annual General and Special Meeting in Toronto on May 15, 2008. In advance of the Meeting, an information circular and proxy form will be mailed to shareholders. |
