South32 Limited (ASX:S32) (JSE:S32) (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 billion1 (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 billion1 (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 tons2,[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 investment2.
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 Transaction4
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.
Conference callSouth32 will hold a
conference call at 7:30am Australian Western Standard Time on 18
June 2018 to discuss the Transaction, the details of which are as
follows:Conference ID: 538881 |
Australia: 1 800 558 698 South Africa: 0800 999 976United
States: (855) 881 1339 |
Singapore: 800 101 2785United Kingdom: 0800 051 8245International:
+612 9007 3187 |
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.
Further information
JSE Sponsor: UBS South Africa (Pty) Ltd 18
June 2018
SOUTH32 INVESTOR RELATIONS |
|
Alex VolanteT +61 403 328
408 M +44 7468 353
005E Alex.Volante@south32.net |
Tom
GallopT +61 8 9324
9030M +61 439 353
948E Tom.Gallop@south32.net |
|
|
SOUTH32 MEDIA RELATIONS |
|
James Clothier T +61 8 9324 9697M
+61 413 391 031E
James.Clothier@south32.net |
Jenny WhiteT +44 20 7798
1773M +44 798 388
7467E Jenny.White@south32.net |
|
|
ARIZONA MINING INVESTOR RELATIONS & CORPORATE
COMMUNICATIONS |
|
Susan Muir T +1 416 366 5678 x
202E smuir@arizonamining.com |
Jerrold AnnettT +1 416 366
5678 x 207E 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.
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.