McEwen Mining to buy Lexam VG

VANCOUVER (miningweekly.com) – Precious metals miner McEwen Mining will acquire Lexam VG Gold under a plan of arrangement in an all-scrip deal valued at about $54-million.

McEwen Mining will pay a 30% premium to Lexam shareholders based on the TSX-listed stock’s 30-day volume weighted average price on Friday. The acquisition will add several advanced exploration projects in the prolific gold camp of Timmins, Ontario, to McEwen Mining's assets.

The deal will add compliant measured and indicated gold resources of 1.47-million ounces and inferred gold resources of 954 000 oz to McEwen’s resource base, in a geopolitically stable mining jurisdiction. Upon closing, McEwen Mining will own 100% of the Buffalo Ankerite, Fuller and Davidson Tisdale properties, and a 61% interest in the Paymaster property, with the remaining 39% held by Goldcorp.

“Lexam’s primary projects are past producers with defined resources and excellent infrastructure. The proposed transaction will give the Lexam shareholders access to McEwen Mining’s technical and financial resources, enabling the projects to be advanced towards production. Lexam shareholders will also gain exposure to a growing gold and silver producer, with a diversified portfolio of projects throughout the Americas,” commented chief owner of both McEwen Mining and Lexam Rob McEwen.

Prior to the transaction, McEwen held a 27% stake in Lexam VG Gold, and 25% in McEwen Mining.

McEwen believes the acquisition enhances McEwen Mining’s development and production pipeline with the potential to start production of the Timmins properties within 24 months, while also providing substantial exploration potential.

The boards of both companies have approved the proposed merger and the deal will be put to a vote by shareholders during forthcoming shareholder meetings. The arrangement agreement includes customary deal protection and non-solicitation provisions, including a break fee of $2.1-million payable to McEwen Mining in certain circumstances, and fiduciary out provisions for the benefit of Lexam. Lexam is entitled to a reverse break fee of the same amount payable in certain other circumstances.

The arrangement is also subject to certain other conditions including approval by the TSX, the NYSE and the Ontario Superior Court of Justice.

Lexam VG’s TSX-listed stock rose as much as 24% on Monday to change hands at C$0.31 apiece, while McEwen Mining’s stock dipped 1.3% to C$4.18 apiece on the NYSE.