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OceanaGold to buy Pacific Rim Mining for C$10.2M to gain control of El Dorado Gold Project

Wednesday 9th October 2013

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OceanaGold Corp, the worst performing stock on New Zealand's benchmark index this year, has agreed to acquire all the shares in Canadian gold miner Pacific Rim Mining Corp that it doesn't already own in a deal valued at C$10.2 million.

OceanaGold is offering 0.04006 of its shares for each Pacific Rim share, which would see it issue some 6.76 million new shares to Pacific Rim holders, the Melbourne-based miner said in a statement. The offer values Pacific Rim shares at C$0.060497 apiece, a 50 percent premium to the stock's 20-day volume weighted average trading price on the Toronto Stock Exchange and a 73 percent premium to the closing price on Oct. 7.

For OceanaGold, the proposed acquisition would give it control of Pacific Rim's El Dorado Gold Project in El Salvador, a high grade gold-silver resource yet to be developed. For Pacific Rim, alignment with OceanaGold offers greater diversity of assets, gaining exposure to OceanaGold's gold mines in New Zealand and the Philippines while allowing continued exposure to development of the El Dorado project with stronger financial stability.

"This transaction will provide OceanaGold shareholders with potential exposure to a high grade gold-silver resource located in a very prospective region," Mick Wilkes, managing director of OceanaGold, said in the statement.

OceanaGold currently owns just under 20 percent of Pacific Rim. As part of the agreement, OceanaGold will advance Pacific Rim as much as US$1 million for working capital at a 10 percent interest rate and a maturity date of Oct. 7, 2014.

The agreement has been unanimously approved by the directors of OceanaGold and Pacific Rim, excluding one common director who abstained from voting.

The proposal is fair to Pacific Rim shareholders from a financial point of view, according to advice provided to Pacific Rim from Evans & Evans Inc. The board recommends shareholders vote in favour of the arrangement, the company said.

Pacific Rim is currently in dispute with the government of El Salvador over what it says is a passive refusal to issue a decision on Pacific Rim's application for environmental and mining permits for the El Dorado project. The matter is now in the final phase of arbitration and OceanaGold said it would continue to seek a negotiated resolution to the El Dorado permitting impasse.

The triple-listed OceanaGold shares fell 1.2 percent to $1.69 at the open of the NZX and have declined 50 percent so far this year.

The proposed acquisition is expected to close next month pending shareholder and regulatory approvals.

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