02:49:15 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



Queenston Mining Inc
Symbol QMI
Shares Issued 84,597,623
Close 2012-11-09 C$ 5.01
Market Cap C$ 423,834,091
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Osisko to buy Queenston for $6 per share

2012-11-12 08:32 ET - News Release

See News Release (C-OSK) Osisko Mining Corp

Mr. Sean Roosen of Osisko reports

OSISKO ANNOUNCES FRIENDLY ACQUISITION OF QUEENSTON

Osisko Mining Corp. and Queenston Mining Inc. have entered into a definitive agreement pursuant to which Osisko will acquire, by way of a court-approved plan of arrangement, all of the issued and outstanding common shares of Queenston. Queenston is a Canadian mineral exploration and development company with a primary focus on its holdings in the historic Kirkland Lake gold camp, comprising 230 square kilometres of prime exploration lands on trend with Osisko's flagship Canadian Malartic mine.

Pursuant to the terms of the agreement, Queenston shareholders will receive 0.611 of an Osisko share for each common share of Queenston held, implying an offer of $6 per share based on Osisko's closing price on the Toronto Stock Exchange on Nov. 9, 2012. The offer represents a 45-per-cent premium to Queenston's 30-day volume-weighted average price for the period ending Nov. 9, 2012.

The transaction values Queenston's equity at approximately $550-million on a fully diluted in-the-money basis and implies an enterprise value of approximately $400-million. Pro forma the transaction, Queenston shareholders will own approximately 12 per cent of Osisko (based on fully diluted in-the-money shares outstanding).

"Osisko is very pleased to announce this transaction with Queenston," commented Sean Roosen, president and chief executive officer of Osisko. "Queenston is an excellent strategic fit within our existing Canadian portfolio and, in our view, is one of the best undeveloped high-grade opportunities and significant open pit targets in Canada. Osisko has always sought to be a part of camps rather than isolated assets, and this transaction provides us with a highly strategic land package in another prolific Canadian gold camp."

Commenting on the transaction, Charles Page, president and chief executive officer of Queenston, said: "We are delighted to be combining forces with the world-class team from Osisko. We feel that we are offering the shareholders of Queenston the opportunity to maximize value through our combined efforts. I would like to take this opportunity to thank all Queenston employees for their dedication and hard work to bring the company to this point. We look forward to integrating our team with the Osisko team to create a new leading Canadian mid-tier mining company. I am very proud of our success and the exceptional value that it has created for our shareholders."

Benefits to Osisko shareholders:

  • Addition of a portfolio of deposits in a premier Canadian exploration district, in keeping with Osisko's strategic vision of having exposure to gold camps in geopolitically stable jurisdictions;
  • Flagship Upper Beaver project -- high grade and of significant scale with potential to grow;
  • Considerable exploration potential on all assets;
  • Ability to utilize Osisko's mine permitting and development teams, which include significant underground expertise;
  • Transaction accretive on all key metrics, including net asset value per share, resources per share, and longer-term production and cash flow per share;
  • Ability to finance Upper Beaver development through internal cash flow.

Benefits to Queenston shareholders:

  • Significant premium of 45 per cent to Queenston's 30-day VWAP ending Nov. 9, 2012;
  • Exposure to Osisko's gold production at Canadian Malartic and existing asset base;
  • Continuing exposure to the development of the Upper Beaver project through an all-share transaction;
  • Osisko's proven development team that can maximize Upper Beaver's potential;
  • Dramatically improved trading liquidity and a heightened capital markets profile through Osisko;
  • Fairness opinion received from Queenston's financial adviser indicating that the consideration payable pursuant to the transaction is fair, from a financial point of view, to Queenston shareholders.

Overview of the Kirkland Lake gold properties

Upon closing, Osisko will assume ownership of Queenston's 100-per-cent-owned gold properties in the historic Kirkland Lake gold camp as well as other various interests in Quebec, Manitoba and Ontario. The flagship Upper Beaver project is progressing with advanced exploration leading to new shaft development and a definitive feasibility study in 2013.

In February, 2012, Queenston completed a preliminary economic assessment on the Upper Beaver project outlining an initial 10-year mine life operating at 2,000 tonnes per day. Over the life of mine, Upper Beaver is expected to produce a total of 1.1 million ounces of gold at an average rate of 120,000 ounces per year and average cash costs of $386 (U.S.) per ounce (net of byproduct credits). Using a gold price of $1,275 (U.S.) per ounce, the PEA shows that Upper Beaver has an after-tax internal rate of return of 22.1 per cent.

In addition, exploration activities are continuing at the four other 100-per-cent-owned deposits in Kirkland Lake that will provide additional feed for a central milling facility. The Kirkland Lake gold properties in total currently host a National Instrument 43-101-compliant resource of 2.1 million ounces of gold in the indicated category (contained within 13 million tonnes of material grading 5.0 grams per tonne) and 1.9 million ounces of gold in the inferred category (contained within 13 million tonnes of material grading 4.5 grams per tonne).

Summary of the transaction

The acquisition of Queenston will be completed by way of a court-approved plan of arrangement, whereby Osisko will acquire each issued and outstanding share of Queenston in exchange for 0.611 of a common share of Osisko. The number of Osisko shares to be issued will be approximately 51.7 million based on the currently issued and outstanding shares as of the date of this announcement, but will be subject to change depending on the number of Queenston options and warrants exercised while the offer is outstanding.

The board of directors of Queenston has unanimously approved the transaction and will recommend that shareholders vote in favour of the transaction.

Each senior officer and each member of the board of directors of Queenston has entered into lock-up agreements with Osisko pursuant to which each has agreed to vote in favour of the transaction, together representing approximately 3 per cent of the shares outstanding. In addition, Osisko advises that certain shareholders of Queenston have also executed lock-up agreements with Osisko in which each has agreed to vote in favour of the transaction, together representing approximately 27 per cent of the shares outstanding. In total, therefore, Osisko has received lock-up agreements representing approximately 30 per cent of issued and outstanding common shares of Queenston.

The terms and conditions of the agreement will be disclosed in more detail in the management information circular that will be filed and mailed to Queenston shareholders in late November, 2012.

Completion of the transaction is subject to customary conditions, including court approvals, a favourable vote of at least 66-2/3 per cent of the holders of Queenston common shares voted at a special meeting of shareholders, and the receipt of all necessary regulatory and stock exchange approvals. The agreement includes a customary non-solicitation clause, right-to-match covenants and provides for the payment of a $22-million break fee to Osisko under certain circumstances.

Advisers and legal counsel

Dundee Capital Markets and Primary Capital are acting as financial advisers, and Fraser Milner Casgrain LLP is acting as legal counsel to Osisko and its board of directors.

BMO Capital Markets is acting as financial adviser to Queenston and its board of directors in connection with the transaction, and Stikeman Elliott LLP is acting as special legal counsel to Queenston and the special committee of its board of directors.

Conference call

A conference call is scheduled for Nov. 12, 2012, at 9 a.m. EST. The Toronto area call-in number is 416-981-9012 and the North American toll-free call-in number is 1-800-909-4792.

We seek Safe Harbor.

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