AuRico Gold to Acquire Northgate Minerals and Create
Superior Production Growth with Fully Un-Hedged Precious Metals Exposure
AuRico Gold Inc. (“AuRico”) (TSX:AUQ) (NYSE:AUQ) and Northgate Minerals Corporation (“Northgate”) (TSX:NGX) (NYSE-Amex:NXG) are pleased to announce that they have entered into a definitive acquisition agreement (the “Agreement”) to create a new leading intermediate gold producer. The new company will have 5 operating gold mines, a sixth mine targeting production in 2012 and 3 gold development projects in Mexico, Canada, and Australia, three of the top global mining jurisdictions. The combined company is completely unhedged and offers full exposure to record gold and silver prices and an exceptional growth profile from approximately 475,0001 gold equivalent (“Aue”) ounces2 this year to 730,000+3 Aue ounces in 2013 (growth of approximately 54%). All figures in Canadian dollars, unless otherwise indicated.
1) Adding together the midpoints of AuRico’s production guidance (265,000 – 295,000 gold equivalent ounces) and Northgate’s production guidance (190,000 – 200,000 gold ounces)
2) Gold equivalent ounces include silver ounces produced and sold converted to gold equivalent based on AuRico’s long-term gold equivalency ratio of 55:1
3) As per street consensus
Under the terms of the Agreement, AuRico will acquire all of the issued and outstanding common shares of Northgate on the basis of 0.365 AuRico common shares per Northgate common share. Based on both companies’ 20-day volume weighted average prices on the Toronto Stock Exchange (TSX) ending on August 26, 2011, the exchange ratio under the offer represents a 45% premium to Northgate’s shareholders.
“The combination of AuRico and Northgate will immediately position the combined company as a pre-eminent intermediate gold producer with peer leading growth”, said Rene Marion, President and CEO of AuRico. “The assets, projects and people in our two companies are highly complementary and we are excited about the many opportunities ahead for us to continue to deliver value to our shareholders.”
Richard Hall, President and CEO of Northgate, added "This transaction gives Northgate shareholders a significant premium to market and an exciting opportunity to participate in a leading intermediate gold company. The Northgate team has worked hard to develop a highly successful business in Canada and Australia and we look forward to further value creation through our combination with AuRico.”
AuRico Gold Pro Forma Highlights:
- Emergence of a new leading intermediate gold company with expected 2011 production of 475,000 Aue ounces1 and peer leading growth of approximately 54% to 730,000+3 Aue ounces by 2013
- Large resource base of approximately 19 million Aue ounces (excluding copper)
- 2 cornerstone assets in Ocampo and Young-Davidson that alone have the potential to produce over 500,000 Aue ounces at lowest quartile cash costs
- Fully un-hedged exposure to record gold and silver prices generating significant free cash flows
- Strong balance sheet
- Experienced management team with a proven track record of building and operating mines; supported by highly qualified Directors
- Excellent platform for further consolidation, with a focus on the Americas
- Geopolitically diversified asset portfolio across three of the most attractive mining jurisdictions (Mexico, Canada, and Australia)
- Enhanced market presence: AuRico and Northgate are covered by 15 analysts, and will have exceptional trading liquidity with listings on the TSX and NYSE
- Compelling revaluation opportunity driven by an attractive valuation, significant synergies, and a focused growth strategy
Current shareholders of AuRico and Northgate will own approximately 62% and 38% respectively4 of the pro forma company. The Board of Directors of the combined company will include three nominees from Northgate.
The acquisition of Northgate by AuRico will be completed by way of a court approved plan of arrangement. The Agreement has been unanimously approved by the Boards of Directors of AuRico and Northgate. UBS Securities Canada Inc. provided a fairness opinion to the Board of Directors of AuRico and GMP Securities L.P. and Macquarie Capital Markets Canada Ltd. provided fairness opinions to the Special Committee and Board of Directors of Northgate.
The transaction is subject to approval by 66 and 2/3% of the votes cast by holders of Northgate common shares at a special meeting of Northgate shareholders expected to be held in October. The transaction is also subject to obtaining approval by a majority of votes cast by the shareholders of AuRico at a special meeting of AuRico shareholders expected to take place on the same date as the Northgate meeting, as well as certain other customary conditions. Closing of the transaction is expected in October. The Agreement includes customary deal protection and non-solicitation provisions including reciprocal break fees, right to match and fiduciary-out provisions.
On August 28, 2011, the Board of Directors of Northgate determined that AuRico’s proposal to enter into the Agreement is a “superior proposal” for the purposes of the arrangement agreement between Northgate and Primero Mining Corp (“Primero”) previously announced on July 13, 2011 (the “Primero Agreement”). Northgate’s Board provided notice of that determination to Primero. On receiving this notice, Primero waived its “right to match” the proposal by AuRico. Accordingly, as per the terms of the Primero Agreement, Northgate has paid a termination fee of $25 million to Primero and the Primero Agreement has been terminated. The meeting of Northgate shareholders currently scheduled for September 21, 2011 has been delayed to a later date which is expected to be in October, 2011, at which Northgate shareholders will be asked to approve the transaction with AuRico.