Editor’s note: Updating earlier story with more details.
Under the merger, each Lake Shore Gold share would be exchanged for 0.1467 of a Tahoe common share. Upon completion, existing Tahoe and Lake Shore Gold shareholders will own approximately 74% and 26% of the company, respectively.
The exchange ratio implies a price of C$1.71 per Lake Shore Gold share, the companies said. This represents a 14.8% premium to the closing price of Lake Shore Gold on Friday. Based on each company’s 20-day volume weighted average price on the Toronto Stock Exchange, this implies a premium of 25.7% to Lake Shore Gold shares for the period ending Friday.
The transaction will require approval by two-thirds of Lake Shore shareholders at a special meeting. The companies added that they expect a shareholder meeting and closing of the transaction to take place in early April.
The companies said the implied equity value, assuming the conversion of in-the-money convertible debentures, is equal to C$945 million.
Shares of Lake Shore Gold
Lake Shore Gold operates the Timmins West and Bell Creek mines in Ontario. Tahoe has the Escobal mine in Guatemala and La Arena and Shahuindo mines in Peru.
The companies listed 2016 production guidance of 18 million to 21 million ounces of silver at total cash costs of $7.50 to $$8.50 an ounce and all-in sustaining costs of $10 to $11. They also listed 370,000 to 430,000 ounces of gold at total cash costs of $675 to $725 and AISC of $950-$1,000 an ounce.
“The combination with Lake Shore Gold enhances Tahoe’s position as the new leader in precious metals by adding another low-cost operation in Timmins, one of the most prolific gold camps in the world,” said Kevin McArthur, executive chair of Tahoe. “We are impressed by the long-term presence and see tremendous regional opportunities going forward.”
He added that Alan Moon, the current chair of Lake Shore Gold, will join the Tahoe board of directors upon completion of the transaction. Also, Tony Makuch, the current CEO of Lake Shore Gold, will join Tahoe’s management team as president of Canadian operations.
Shares of Tahoe Resources
By Allen Sykora of Kitco News; firstname.lastname@example.org