Paramount Gold and Silver Corp. and Klondex Mines Ltd. Announce
Business Combination>
Paramount Gold and Silver Corp. and Klondex Mines Ltd. Announce Business Combination
(Thomson Reuters ONE) - OTTAWA, ONTARIO AND VANCOUVER, BRITISH COLUMBIA -- (MARKET WIRE) --07/20/09 -- Paramount Gold and Silver Corp. (NYSE: PZG)(TSX:PZG)(FRANKFURT: P6G)(WKN: A0HGKQ) ("Paramount") and Klondex MinesLtd. (TSX: KDX)(OTCBB: KLNDF) are pleased to announce that they haveentered into a binding letter agreement (the "Letter Agreement") tocombine the two companies under a plan of arrangement, in atransaction valued at approximately C$80 million (the "Transaction"or the "Paramount Transaction"). The Letter Agreement has beenunanimously approved by the Board of Directors of each of Paramountand Klondex, as well as by the Special Committee of the Board ofDirectors of Klondex.Pursuant to the Letter Agreement, each Klondex share will beexchanged for 1.45 Paramount shares, implying a purchase price ofC$2.32 per Klondex share using closing share prices on the TSX onJuly 17, 2009. The Transaction represents a premium of 33.3% to theclosing price of Klondex shares and a 30.3% premium to the impliedvalue of the unsolicited proposal by Silvercorp Metals Inc.("Silvercorp.") as of July 17, 2009. The Silvercorp proposal wasannounced on June 8, 2009, and was rejected by the Klondex Board ofDirectors as providing inadequate consideration for Klondexshareholders.Klondex recommends that shareholders SUPPORT the ParamountTransaction and REJECT the Silvercorp offer by NOT TENDERING theirshares to the Silvercorp offer. Any Klondex Shareholder who hastendered their Klondex Shares to the Silvercorp offer should WITHDRAWthose Klondex Shares.A shareholder meeting will be scheduled for Klondex shareholders toapprove the Transaction. Klondex shareholders with questions on howto support the Paramount Transaction may contact David Collins,Ratula Velez Roy or Jim Leahy at Jaffoni & Collins toll free at877-882-2587 or 212/835-8500 or via e-mail at kdx(at)jcir.com.William Solloway, President and director of Klondex stated, "TheTransaction with Paramount is the result of our strategic reviewprocess and delivers significant value to Klondex shareholders whilecreating a powerful North American Gold & Silver Exploration platformwith substantial growth potential. We are very excited to beassociated with the Paramount team and are confident that theTransaction will provide substantially greater value for Klondexshareholders than was contemplated in Silvercorp's hostile bid. Weurge all shareholders to join us in supporting the Transaction, whichcombines two high-quality gold ore bodies in the Americas, provenexploration professionals and avoids many of the risks inherent inthe Silvercorp bid."Highlights of CombinationChristopher Crupi, CEO of Paramount stated, "The combination ofParamount and Klondex will create an exciting new company focused ondeveloping high-grade gold projects in North America. Our two majorprojects will be located in excellent mining jurisdictions, nearmajor producers and close to infrastructure. Both projects haveunusual potential for growing resources with compelling economics.Our largest stockholder, Albert Friedberg, provides a strong andproven track record with the financial leadership to bring thecombined company to a significantly higher valuation over time."The combination of Paramount and Klondex will move Paramount closerto its goal of increasing value for its stockholders through propertyacquisition and aggressive development. The Transaction addsKlondex's Fire Creek and other projects in Nevada to Paramount'sexisting San Miguel property in Chihuahua, Mexico, whichsignificantly increases the combined entity's resource base. Inaddition to the 2.65 million ounce gold-equivalent inferred resourceParamount has established at San Miguel, Klondex has established ahigh-grade resource at Fire Creek of 1.64 million gold-equivalentounces in the indicated category, grading 10.11 g/t Au(eq.) at a cutoff of 5 g/t, plus an additional 0.51 million ounces in the inferredcategory, grading 8.63 g/t Au(eq.) at a cut off of 5 g/t. Summariesof the mineral resources contained on Paramount's properties areavailable in Paramount's public filings with the United StatesSecurities and Exchange Commission ("SEC") at www.sec.gov and withthe applicable Canadian securities regulators at www.sedar.com, andsummaries of the mineral resources contained on Klondex's propertiesare available in Klondex's public filings with the applicableCanadian securities regulators at www.sedar.com. Other highlights ofthe combined entity are:- Expanded and diversified operations with significantreserve/resource upside on two flagship projects, San Miguel and FireCreek;- Expanded resource base of 1.69 million ounces indicated and 3.15million ounces inferred- Paramount's experienced personnel is poised to aggressively exploreand develop its flagship projects;- Enhanced market presence with pro forma market capitalization ofapproximately C$210 million; and- Strategic position and management experience to enhance marketvaluation of the combined entity under Paramount.Upon completion of the Transaction, Paramount will have approximately132.4 million shares of its common stock issued and outstanding.Existing Paramount stockholders will retain approximately 62.4%ownership while Klondex shareholders will have approximately 37.6%ownership in the combined company.Both Paramount and Klondex have agreed to obtain support agreementsfrom each of their respective directors and certain of theirshareholders to vote any shares which they control in favor of theTransaction. Shares to be voted with respect to support agreementswould represent approximately 29% and 18% of the shares outstandingfor Paramount and Klondex, respectively, on a fully diluted basis.Transaction DetailsThe Transaction is expected to be structured as a statutory plan ofarrangement. Under the terms of the Transaction, Klondex shareholderswill receive 1.45 shares of common stock of Paramount for each commonshare of Klondex. All options and warrants of Klondex outstanding atthe time of the Transaction will also be exchanged for options andwarrants of Paramount on the same basis. On closing of theTransaction Klondex will become a wholly-owned subsidiary ofParamount. Following closing of the Transaction, one Klondexdirector, Robert Sibthorpe, will join the Paramount Board ofDirectors.The letter agreement setting out the Transaction includes acommitment by Klondex not to solicit alternative transactions to theproposed Transaction. Paramount has also been provided with certainother rights customary for a transaction of this nature, includingthe right to match competing offers made to Klondex. The letteragreement also provides a reciprocal break fee of US$2.85 million tobe payable by each of the parties under certain circumstances.The letter agreement will provide a basis for the preparation of adefinitive agreement which will also include representations andwarranties and covenants customary for a transaction of this nature.Klondex & Paramount have agreed to hold meetings of theirshareholders to secure their approval by not later than October 31,2009, and the Transaction is expected to be completed in the fourthquarter of 2009. Completion of the Transaction is subject to a numberof conditions, including: the approval of the Supreme Court ofBritish Columbia, the approval of not less than 66 2/3% of theoutstanding shares of Klondex being voted in favor of the Transactionat a meeting of Klondex shareholders, the approval of not less than50% plus one of the outstanding shares of Paramount being voted infavor of the Transaction at a meeting of Paramount shareholders andcertain customary conditions, including receipt of all necessaryregulatory approvals and third party consents.Dahlman Rose & Company, LLC ("Dahlman Rose") is acting as financialadvisor to Paramount, and the Board of Directors of Paramount hasreceived an opinion from Dahlman Rose that the exchange ratiocontemplated in the Letter Agreement is fair, from a financial pointof view, to Paramount. Gowling Lafleur Henderson LLP and TroutmanSanders LLP are acting as legal counsel to Paramount.Scotia Capital is acting as financial advisor to Klondex, and theBoard of Directors of Klondex has received an opinion from ScotiaCapital that the consideration to be received by Klondex shareholderspursuant to the Letter Agreement is fair, from a financial point ofview, to Klondex. Lang Michener LLP is acting as legal counsel toKlondex and Lawson Lundell LLP is acting as legal counsel to theSpecial Committee of the Board of Directors of Klondex.Full details of the Transaction will be included in a managementinformation circular to be filed with the regulatory authorities andmailed to Klondex shareholders in accordance with applicablesecurities laws. Investors are cautioned that, except as disclosed inthat management information circular, any information released orreceived with respect to the Transaction may not be accurate orcomplete and should not be relied upon.Klondex shareholders are cautioned that an arrangement where Klondexshareholders will receive Paramount shares directly may result in ataxable event for Canadian shareholders. The parties have committedto establish a structure for the merger before the execution of thedefinitive agreement, having regard to relevant securities, corporateand regulatory laws, stock exchange requirements and the tax planningconsiderations of each of the parties and their shareholders,including in particular, consideration of a share exchange structureto allow Klondex shareholders to receive Paramount securities on atax-deferred basis. There is no guarantee the parties will be able toestablish such a structure. Shareholders should consult with theirown advisors.About Paramount Gold and Silver Corp.Paramount Gold and Silver Corp. is a precious metals explorationcompany listed on the Toronto Stock Exchange (TSX) and the NYSE Amexunder the symbol "PZG", and listed on the Deutsche Borse under thesymbol "P6G" (WKN: A0HGKQ).Paramount holds a 100% interest in the San Miguel Project and hascompleted 47,560 meters of diamond drilling on 213 holes and 3,743meters of exploration trenching at San Miguel since the summer of2006. Paramount has recently expanded its land holdings by acquiringa 100% interest in the Temoris Project from Garibaldi Resources; aland package of over 54,000 hectares. Paramount's land package nowincludes most of the ground surrounding Coeur d'Alene Mines (NYSE:CDE) Palmarejo Mine project and is in excess of 140,000 hectares.About Klondex Mines Ltd.Klondex Mines Ltd. (TSX: KDX)(OTCBB: KLNDF) is engaged in acquiring,exploring and developing high-grade gold and silver properties inNorth Central Nevada and has to date identified an Indicated MineralResource in excess of 1.6 million ounces of gold and an InferredMineral Resource of over 0.5 million ounces of gold via its deepdrilling program at its 100% owned Fire Creek Property.Klondex is focused on the exploration and development of Fire Creekon the Northern Nevada Rift in North Central Nevada, an area ofsubstantial mining activity which has produced in excess of 100million ounces of gold. Klondex's property portfolio covers over12,615 acres or 19.7 square miles and includes three other goldexploration located in areas with strong gold exploration prospects.For more information, visit www.klondexmines.com.Additional Information About the Transaction and Where to Find ItIn connection with the Transaction, Paramount expects to file withthe SEC a proxy statement which will be sent to the shareholders ofParamount seeking their approval of the merger. In addition,Paramount may file other relevant documents concerning theTransaction with the SEC. Security holders are urged to read theproxy statement and other relevant documents when they becomeavailable because they will contain important information about theTransaction.Security holders of Paramount may obtain free copies of thesedocuments through the website maintained by the SEC athttp://www.sec.gov. Security holders of Paramount may also obtainfree copies of these documents by directing a request by telephone ormail to Paramount Gold and Silver Corp., 346 Waverley Street, Suite100, Ottawa, Ontario Canada K2P OW5 (telephone: (613) 226-9881) or byaccessing these documents at Paramount's website:www.paramountgold.com under "Investors". The information onParamount's website is not, and shall not be deemed to be, a part ofthis release or incorporated into other filings made with the SEC.Paramount and its directors, executive officers and members ofmanagement may be deemed to be participants in the solicitation ofproxies from the shareholders of Paramount in connection with theTransaction. Information about the directors and executive officersof Paramount is set forth in the proxy statement for its 2009 annualmeeting of shareholders filed with the SEC on January 8, 2009.Information regarding the interests of these participants and otherpersons who may be deemed participants in the Transaction may beobtained by reading the proxy statement regarding the Transactionwhen it becomes available.Cautionary Note to U.S. Investors Concerning Estimates of Indicatedand Inferred Resources: This press release uses the terms "indicatedresources" and "inferred resources". We advise U.S. investors thatwhile these terms are defined in and permitted by Canadianregulations, these terms are not defined terms under SEC IndustryGuide 7 and are normally not permitted to be used in reports andregistration statements filed with the SEC. "Inferred resources" havea great amount of uncertainty as to their existence, and greatuncertainty as to their economic and legal feasibility. It cannot beassumed that all or any part of an inferred mineral resource willever be upgraded to a higher category. Under Canadian rules,estimates of inferred mineral resources may not form the basis of afeasibility study or prefeasibility studies, except in rare cases.The SEC normally only permits issuers to report mineralization thatdoes not constitute SEC Industry Guide 7 compliant "reserves" asin-place tonnage and grade without reference to unit measures. U.S.investors are cautioned not to assume that any part or all of mineraldeposits in this category will ever be converted into reserves. U.S.investors are cautioned not to assume that any part or all of aninferred resource exists or is economically or legally minable.SAFE HARBOR FOR FORWARD-LOOKING STATEMENTSStatements in this document regarding the Transaction, the expectedtimetable for completing the Transaction, benefits and synergies ofthe Transaction, future opportunities for the combined company,expectations regarding the value and benefits of the Transaction andany other statements about Paramount or Klondex managements' futureexpectations, beliefs, goals, plans or prospects constituteforward-looking statements within the meaning of the United StatesPrivate Securities Litigation Reform Act of 1995 and other applicablesecurities laws. Any statements that are not statements of historicalfact (including statements containing the words "believes," "plans,""anticipates," "expects," estimates and similar expressions) shouldalso be considered to be forward-looking statements. There are anumber of important factors that could cause actual results or eventsto differ materially from those indicated by such forward-lookingstatements, including, but not limited to: the ability of the partiesto consummate the Transaction and satisfy the conditions thereunder;the ability to obtain, and the timing of, the necessary exchange,regulatory and shareholder or stockholder approvals for theTransaction; the impact of any actions taken by Silvercorp. or anyother party to complicate, delay or prevent the Transaction; theability to realize the anticipated synergies and benefits from theTransaction and the combined company; and the other factors describedin Paramount's Annual Report and Annual Information Form on Form 10-Kfor the year ended June 30, 2008 and its most recent quarterlyreports filed with the SEC available on www.sec.gov and applicableCanadian securities regulators available on www.sedar.com andKlondex's filings with the applicable Canadian securities regulatorsavailable on www.sedar.com. Except as required by applicable law,each of Paramount and Klondex disclaims any intention or obligationto update any forward-looking statements as a result of developmentsoccurring after the date of this document.Contacts:Paramount Gold and Silver Corp.Christopher CrupiCEO866-481-2233/613-226-9881Klondex Mines Ltd.William SollowayPresident604-638-3273Jaffoni & Collins IncorporatedDavid Collins, Ratula Roy, James Leahy212-835-8500KDX(at)jcir.comThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
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Datum: 20.07.2009 - 20:47 Uhr
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