PERTH (miningweekly.com) – Diversified miner South32 has struck a $1.3-billion takeover deal with TSX-listed Arizona Mining, offering to acquire the remaining 83% interest in the company through an all-cash offer.
South32 is offering Arizona shareholders C$6.20 a share for their interest in the TSX-listed miner, which represents a 50% premium to the company’s closing price on June 15, and implies a total value of C$1.6-billion for the company.
Arizona holds the Hermosa project, in the US, which contains the high-grade base metals Taylor deposit, the Central zinc, manganese and silver oxide resource, and an extensive, highly prospective land package with potential polymetallic and copper mineralisation.
The Taylor deposit, in Arizona, is a greenfield development project and has a reported resource of 101-million tonnes, at 10.4% zinc equivalent grade, and a previously completed preliminary economic assessment has shown that the project could be a low-cost, long-life operation, with the potential to deliver a high internal rate of return on investment.
South32 CEO Graham Kerr said on Monday that the all-cash offer for Arizona would allow the company to optimise the design and development of the most exciting base metals project 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,” Kerr said.
Arizona founder and executive chairperson Richard Warke said on Monday that the all-cash offer represented a premium reflective of the world-class nature of the Hermosa project, and allowed shareholders to realise immediate value.
“In addition, the transaction is not contingent on financing, which significantly reduces transaction risk,” he added.
“Our board of directors and a special committee of three independent members from the board of directors evaluated this offer and determined that it represents the best outcome for all shareholders. Importantly, South 32 knows the asset well and understands the significance of the strong relationship that we have built in Arizona with all our stakeholders.”
Directors and officers of Arizona, who own a collective 34% of the common shares on issue, have entered into voting support agreements, with the directors of Arizona unanimously recommending that shareholders vote in favour of the transaction.
The transaction would require at least 66.67% of votes cast by Arizona Mining shareholders to vote in favour of the transaction at the upcoming shareholders meeting in September, or a simple majority vote.
As part of the transaction, South32 will either acquire or cancel the outstanding options and warrants in Arizona, with the holders of these to receive cash consideration equal to the purchase price, less the exercise price of each option or warrant.
In addition, South32 will also provide Arizona with a C$70-million working capital facility, comprising an initial tranche of C$40-million following the signing, and subsequent tranches of up to A$30-million, subject to South32 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 instances, the facility can be repaid in Arizona shares at South32’s election, but only to the extent that South32’s ownership of Arizona does not exceed 19.9%.