Americas Silver and Pershing Gold have entered into an agreement to complete a business combination (merger) and create a low-cost, precious metal growth company in the Americas.
Under the transaction, two polymetallic mines in Mexico and Idaho will be combined, which are expected to produce approximately 7.0 million silver equivalent ounces with a shovel-ready, precious metal development project in Nevada with the potential to add 91,000 gold ounces annually.
The transaction will be executed through exchange of shares under Nevada law, where Americas Silver will acquire the issued and outstanding common shares of Pershing for common shares of Americas Silver.
Under the terms of the agreement, holders of Pershing common shares will receive 0.715 common shares of Americas Silver for each common share of Pershing by way of a share exchange.
Holders of Pershing preferred shares may exchange those shares for new non-voting preferred shares of Americas Silver or common shares of Americas Silver.
Each Pershing common share will be worth $1.69, based on the closing price of Americas Silver on the NYSE American on September 28, 2018, a 39% premium to Pershing’s closing price on the NASDAQ and a 39% premium based on the volume weighted average prices of Americas Silver and Pershing for the 10-day period ending on September 28, 2018.
After the transaction, existing shareholders of Americas Silver and Pershing will own approximately 64% and 36%, respectively, on an undiluted basis.
If Pershing wishes to terminate the agreement in favor of a superior proposal, it will be required to pay Americas Silver an amount equal to $4m as a termination payment. Each party will have to pay expense reimbursement of up to $600,000 in the event that approval from shareholders is not obtained.
The boards of both companies have unanimously recommended support for the transaction, which is expected to conclude in the first quarter of 2019.
The executive team of Americas Silver, led by Darren Blasutti as president and CEO, will manage the combined entity. Alex Davidson will be the chairman of the combined company.
Pierre Lassonde and Trinity Capital Partners have provided Americas Silver with a C$5.5m short-term secured convertible loan with interest payable at 1.25% per month for the transaction.
Trinity Advisors is acting as financial advisor to Americas Silver, Blake, Cassels & Graydon is acting as Canadian legal counsel, Troutman Sanders is acting as US legal counsel, and Parsons Behle & Latimer is acting as Nevada Counsel to Americas Silver.
Canaccord Genuity is acting as financial advisor to Pershing, Davis Graham & Stubbs is acting as US legal counsel and Stikeman Elliott is acting as Canadian legal counsel to Pershing.