Attention Business Editors:
Northgate Minerals Corporation Announces Friendly Proposal to Acquire Perseverance Corporation Limited to Create Leading Mid-tier Gold Producer
US$257 Million Transaction Adds Approximately 200,000 Ounces of
Annual Production through Two Australian Mines with Significant
Exploration Upside
Notice:
Conference Call and Webcast on Monday, October 29 at 10:00 am ET
Dial in: +1 416-644-3416 or 1-800-733-7571
VANCOUVER, Oct. 28 /CNW/ - Northgate Minerals Corporation (TSX: NGX,
AMEX: NXG) ("Northgate") and Perseverance Corporation Limited (ASX: PSV)
("Perseverance") are pleased to announce that they have signed a Merger
Implementation Agreement ("MIA") pursuant to which Northgate would acquire all
outstanding securities and debt of Perseverance for cash consideration (the
"Transaction").
The Transaction will create a multi-mine gold producer with over 430,000
ounces of estimated production in 2008 and significant free cash flow.
Northgate's offer capitalises Perseverance at an Enterprise Value of
approximately US$257 million (A$282 million).
TRANSACTION HIGHLIGHTS
Northgate and Perseverance have today entered into a definitive MIA that
provides for the acquisition by Northgate of Perseverance. The Transaction
will be implemented via schemes of arrangement between Perseverance and its
shareholders and warrant holders (referred to in Australia as optionholders),
respectively (the "Schemes"), and a resolution of holders of convertible
subordinated notes to approve the early redemption of the notes. Under the
Schemes, a wholly owned subsidiary of Northgate will acquire all of the
outstanding fully paid ordinary shares in Perseverance and the company's
warrants (referred to in Australia as options) will be cancelled. In addition,
under the resolution of holders of convertible subordinated notes, the
convertible subordinated notes will be cancelled. The Transaction is subject
to certain conditions, including the approval of securityholders.
Under Northgate's offer, Perseverance securityholders will receive:
- A$0.20 cash per ordinary share;
- A$0.08 cash for each of the Perseverance warrants issued as
part of the recent A$26.5 million placement; and,
- A$100,000 (face value) plus any accrued interest per
convertible subordinated note.
The Northgate offer of A$0.20 per share provides substantial value to
Perseverance shareholders and represents:
- a 37.9% premium to the Perseverance closing share price on
October 26, 2007 of A$0.145; and,
- a 37.1% premium to the one month volume weighted average price
of A$0.146.
Northgate has also agreed to acquire all of Perseverance's existing debt
from a major financial institution in Australia (the "Bank") amounting to
US$30.6 million (A$33.5million) and is extending an additional bridging
facility of up to US$22.8 million (A$25.0 million). Northgate has also agreed
to acquire the Bank's exposure of approximately US$43.8 million (A$48.0
million) to Perseverance's gold hedges and subsequent to the close of the
Transaction, Northgate will close out this hedge position.
Under the terms of the debt assumption and loan agreements, all debt held
by Northgate will be in a first secured position and interest on the bridge
financing will be deferred up to the date of successful conclusion of the
Transaction or termination of the MIA.
The additional bridging facility eliminates any short-term requirement
for Perseverance to raise further equity capital.
In the event that the Transaction does not close as a result of another
person acquiring an interest in Perseverance of more than 20%, the Bank debt
and bridging facility will become immediately repayable in full and
Perseverance will be required to immediately close out the gold hedges.
In the event that the Transaction does not close for any other reason,
Perseverance is required to repay the principal amount of all bridge financing
plus accrued interest and fees within three months of the relevant termination
date. The remaining Bank debt and the gold hedges will remain in place and
subject to their current terms (although the Bank debt will be owned by
Northgate, and Northgate will become the counterparty to the gold hedges).
Perseverance Directors have unanimously determined that the Transaction
is in the best interests of securityholders and unanimously recommend that all
Perseverance shareholders and warrant holders vote in favour of the Schemes
and that convertible subordinated noteholders approve the early redemption of
the notes in the absence of a superior proposal.
All Perseverance Directors intend to vote all Perseverance securities
held or controlled by them at the time of the Scheme meetings in favour of the
Schemes, in the absence of a superior proposal.
"We believe Northgate's offer takes into account the current status and
value of the existing operations and strong exploration potential at
Perseverance," John Quinn, Chairman of Perseverance, said.
"In addition to providing our shareholders with an attractive premium, I
expect that the operational expertise and financial resources of Northgate
should allow the assets to prosper going forward.
"Northgate has a plan to contribute the capital to fund the required
development of Fosterville's underground infrastructure and to reinvigorate
exploration on the Company's extensive tenements.
"The Northgate management team has a proven track record as strong
operators and their team will provide the guidance necessary following the
previously announced departure of Mark Mitchell, Perseverance's Executive
General Manager," he said.
Transaction Rationale - Perseverance
Mr Quinn said that in order to extract full value from the assets and to
re-structure the Company's existing financing facilities and hedge
commitments, substantial additional capital would have been required by the
Company.
He said that Perseverance Directors were mindful that such additional
capital would, most probably, have necessitated a further large and dilutive
equity raising.
"Having reviewed a comprehensive range of alternative options available
to the Company, our Directors have formed the view that the Transaction is the
most attractive alternative available, because it provides Perseverance
shareholders with certainty of return at a substantial premium to the recent
trading range for its shares."
Mr Quinn said the Transaction, underwritten by the strength of
Northgate's balance sheet, should allow the full realisation of the potential
of the mining assets and provide stability and assuredness to employees and
other stakeholders including the communities around the operations of the
Company.
Transaction Rationale - Northgate
The Transaction will create a leading, mid-tier gold producer with three
producing gold mines in politically favourable mining jurisdictions. Northgate
has the management expertise and financial capability to efficiently fund
current development projects, accelerate mine improvements at Perseverance and
capitalize on other growth opportunities.
- Estimated production for 2008 of approximately 434,000 ounces
of gold and 71 million pounds of copper.
- 2.3 million ounces of proven and probable gold reserves,
2.0 million ounces of measured and indicated resources and
2.8 million ounces of inferred resources based on the latest
publicly available figures of both Northgate and Perseverance.
- Proven and probable copper reserves of 250 million pounds.
- Average net cash cost of production of approximately US$184
per ounce during 2008 based on a copper price of US$2.95 per
pound. Post Transaction, this would place Northgate in the
lower quartile of world gold producers.
- Net cash after this Transaction of US$105 million and
continued strong cash flow of the combined entity will provide
maximum financial flexibility.
The Transaction provides the following anticipated benefits to Northgate
shareholders:
- The proposed business combination will create a leading multi-
mine, mid-tier gold producer with strong cash flow, proven
operating expertise, large resource base and exciting growth
prospects.
- Northgate's solid balance sheet, substantial free cash flow
and management strength will support the accelerated mine
development at Fosterville and enhanced exploration programs
at both Stawell and Fosterville.
- The Transaction will create a combined entity with three
operating mines, over 430,000 ounces of gold production in
2008, a variety of near term organic growth opportunities and
the financial capability to bring these opportunities into
production.
- The establishment of a new, core mining district in Australia
with roughly 7,700 km(2) of exploration area located in the
prolific Victorian gold belt, with further potential
acquisition opportunities.
- The diversification of Northgate's operating mines in multi-
jurisdiction, mining-friendly countries.
"Our stated corporate development goal has been the acquisition of a
50,000 - 200,000 ounce producer in a politically stable jurisdiction with
exploration potential and the opportunity for Northgate management to secure
additional value through our track record as strong operators," Ken Stowe,
President and CEO of Northgate, said.
"With this acquisition of Perseverance, we will add two attractive assets
in Australia, which allow us to meet that goal.
"This acquisition will add over 200,000 ounces of production in 2008 in
the prolific Victorian gold belt in Australia with over 7,700km(2) of
exploration area."
The assets are both fully permitted and are currently operating with
excellent infrastructure near developed towns.
"The addition of Northgate's management team to supplement the existing
operating team at Perseverance's two mine sites and the support of our balance
sheet will allow us to accelerate the mines' development plans to increase
production and reduce costs. We also intend to expand the existing exploration
programs to identify additional reserves and extend the life at both camps."
Implementation of the Transaction
The Transaction will be effected through separate schemes of arrangement
between Perseverance and holders of shares and warrants, respectively, and a
resolution by holders of convertible subordinated notes to amend the terms and
conditions of the notes to provide for early redemption.
An Explanatory Memorandum setting out the terms and rationale for the
Transaction, Independent Expert's Reports, and the reasons for the Directors'
recommendations are expected to be circulated to Perseverance shareholders and
warrant holders in mid-December 2007.
Meetings of Perseverance shareholders and warrant holders to approve the
Schemes are expected to be held in mid-January 2008 with Transaction
completion anticipated in early February 2008. The meeting of noteholders to
consider the noteholders' resolution is expected to occur in December 2007.
The above timetable is indicative only, and Northgate and Perseverance
reserve the right to vary any or all of the relevant dates.
The Transaction is subject to regulatory, Court and Perseverance
securityholder approvals, together with other conditions.
The relevant approval thresholds are as follows:
- In relation to the Schemes of Arrangement: at least 75% by
number of the securities voted and at least 50% by number of
the securityholders who voted, in each case in person or by
proxy;
- In relation to the convertible subordinated notes: at least
75% by number of the notes.
The MIA between Perseverance and Northgate contains exclusivity
obligations on the part of Perseverance, subject to customary "fiduciary out"
provisions. Perseverance has agreed to pay Northgate a break fee of A$2.5
million, if the Transaction does not proceed in certain circumstances.
Annexure A contains further details regarding the terms of the MIA.
Advisors
Northgate's financial advisor is UBS and its legal advisors are Allens
Arthur Robinson in Australia and Fasken Martineau in Canada.
Perseverance's financial adviser is ANZ Mergers & Acquisitions and its
legal adviser is Clayton Utz.
CONFERENCE CALL AND WEBCAST
You are invited to participate in Northgate Minerals Corporation's live
conference call and webcast to discuss the acquisition of Perseverance
Corporation Limited. The call and webcast will take place on Monday, October
29, 2007 at 10:00 am ET.
Conference Call:
Please call +1 416-644-3416 or toll free in North America at
1-800-733-7571.
Webcast:
The webcast package, including the webcast link and presentation, will be
available on the morning of October 29 and posted on Northgate's website at
www.northgateminerals.com under the section entitled "Offer for Perseverance",
located on the homepage. You may also access the webcast at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID 68660
Replay:
A replay of this event will be available beginning on October 29 at 1:00
pm ET until November 12 at 11:59 pm ET.
Replay Access No. +1 416-640-1917 or 1-877-289-8525
Passcode: 212 519 20 followed by the number sign
ABOUT NORTHGATE
Northgate Minerals Corporation is a Canadian gold and copper mining
company with its principal assets being the Kemess South mine in north-central
British Columbia and the Young-Davidson property in northern Ontario.
Northgate is listed on the Toronto Stock Exchange under the symbol NGX and on
the American Stock Exchange under the symbol NXG.
Northgate is widely recognized as one of the finest operators in the
global mining business, having transformed Kemess into one of the most
efficient open pit mines in the world over the past seven years. In 2006,
exceptional operating performance at Kemess, combined with a strong metal
price environment, produced record earnings of US$107 million and record cash
flow of almost US$147 million. As Northgate moves forward into 2008 and
beyond, the culture of operational excellence that exists within Northgate
will provide a solid foundation for growth in pursuit of the Corporation's
vision of becoming an even larger, multi-mine gold producer.
ABOUT PERSEVERANCE
Perseverance Corporation Limited is an Australian based gold producer and
explorer. The company owns and operates gold mines at Fosterville and Stawell
in Victoria, Australia and has extensive exploration tenements covering over
7,700km(2) along major trends within the world-class Victorian goldfields.
Gold production at the Company's two mines in the year ended June 30, 2007
aggregated 189,000 ounces.
NOTE TO SECURITY HOLDERS:
This news release does not constitute an offer to buy or an invitation to
sell, or the solicitation of an offer to buy or invitation to sell, any of the
securities of Northgate or Perseverance. Information about Perseverance is
provided by Perseverance and Northgate has not verified its accuracy or
completeness.
Subject to the terms and conditions set forth in the Merger
Implementation Agreement relating to the proposed transaction, Perseverance
intends to mail a scheme booklet (which will include an explanatory statement
and independent expert's report) to its shareholders . Perseverance
shareholders and other interested parties are strongly advised to read these
documents, as well as any amendments and supplements to these documents, when
they become available because they will contain important information.
FORWARD-LOOKING STATEMENTS:
This news release contains certain "forward-looking statements" and
"forward-looking information" under applicable Canadian and U.S. securities
laws. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Forward-looking statements are
necessarily based on a number of estimates and assumptions that are inherently
subject to significant business, economic and competitive uncertainties and
contingencies. Certain of the statements made herein, including any
information as to the timing and completion of the proposed transaction, the
potential benefits thereof, the future activities of and developments related
to Perseverance and Northgate prior to the proposed transaction and the
combined company after the proposed transaction, market position, and future
financial or operating performance of Northgate or Perseverance, are
forward-looking and subject to important risk factors and uncertainties, many
of which are beyond the corporations' ability to control or predict. Known and
unknown factors could cause actual results to differ materially from those
projected in the forward-looking statements. Such factors include, among
others: gold price volatility; impact of any hedging activities, including
margin limits and margin calls; discrepancies between actual and estimated
production, between actual and estimated reserves and resources and between
actual and estimated metallurgical recoveries; costs of production, capital
expenditures, costs and timing of construction and the development of new
deposits, success of exploration activities and permitting time lines; changes
in national and local government legislation, taxation, controls, regulations
and political or economic developments in any of the countries in which either
corporation does or may carry out business in the future; risks of sovereign
investment; the speculative nature of gold exploration, development and
mining, including the risks of obtaining necessary licenses and permits;
dilution; competition; loss of key employees; additional funding requirements;
and defective title to mineral claims or property. In addition, there are
risks and hazards associated with the business of gold exploration,
development and mining, including environmental hazards, industrial accidents,
unusual or unexpected formations, pressures, cave-ins, flooding and gold
bullion losses (and the risk of inadequate insurance or inability to obtain
insurance, to cover these risks), as well as the factors described or referred
to in the section entitled "Risk Factors" in Northgate's Annual Information
Form for the year ended December 31, 2006 or under the heading "Risks and
Uncertainties" in Northgate's 2006 annual report, both of which are available
on SEDAR at www.sedar.com, and which should be reviewed in conjunction with
this document. Accordingly, readers should not place undue reliance on
forward-looking statements. Neither corporation undertakes any obligation to
update publicly or release any revisions to forward-looking statements to
reflect events or circumstances after the date of this document or to reflect
the occurrence of unanticipated events.
Readers are advised to refer to independent technical reports containing
detailed information with respect to the material properties of Northgate.
technical reports are available under the profile of Northgate at
www.sedar.com. These technical reports provide the date of each resource or
reserve estimate, details of the key assumptions, methods and parameters used
in the estimates, details of quality and grade or quality of each resource or
reserve and a general discussion of the extent to which the estimate may be
materially affected by any known environmental, permitting, legal, taxation,
socio-political, marketing, or other relevant issues. The technical reports
also provide information with respect to data verification in the estimation.
This news release uses the terms "measured", "indicated" and "inferred"
resources as defined in accordance with National Instrument 43-101 and Joint
Ore Reserves Committee (JORC) Code - Standards of Disclosure for Mineral
Projects. United States readers are advised that while these terms are
recognized and required by Canadian and Australasian securities laws,
respectively, the SEC does not recognize them. There are no significant
differences between reserves and resources as defined in accordance with
National Instrument 43-101 and the JORC Code. Readers are cautioned not to
assume that all or any part of the mineral deposits in these categories will
ever be converted into reserves. In addition, "inferred resources" have a
great amount of uncertainty as to their existence and economic and legal
feasibility and it cannot be assumed that all or any part of an inferred
mineral resource will ever be upgraded to a higher category. Readers are
cautioned not to assume that all or any part of an inferred resource exists or
is economically or legally mineable. Mineral resources are not mineral
reserves and do not have demonstrated economic viability.
Scientific and technical information contained herein in respect of
Northgate's mineral projects is under the control of Northgate's geological
staff that includes a number of individuals, who are qualified persons as
defined under National Instrument 43-101. Reference to scientific and
technical information contained herein in respect of Northgate's mineral
projects does not include the Kemess North project. Overall supervision of the
program is by Carl Edmunds, PGeo, Northgate's Exploration Manager.
Northgate has included certain non-GAAP Measures including cost per ounce
data, adjusted net earnings and adjusted net earnings per share to supplement
its financial statements, which are presented in accordance with Canadian
GAAP. Non-GAAP measures do not have any standardized meaning prescribed under
Canadian GAAP, and therefore they may not be comparable to similar measures
employed by other companies. The data is intended to provide additional
information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with Canadian GAAP.
Northgate has included cost per ounce information data because it
understands that certain investors use this information to determine
Northgate's ability to generate earnings and cash flow for use in investing
and other activities. Northgate believes that conventional measures of
performance prepared in accordance with Canadian GAAP do not fully illustrate
the ability of its operating mines to generate cash flow. The measures are not
necessarily indicative of operating profit or cash flow from operations as
determined under Canadian GAAP. Where cost per ounce data is computed by
dividing GAAP operating cost components by ounces sold, Northgate has not
provided formal reconciliations of these statistics. Cash costs are determined
in accordance with the Gold Institute's Production Cost Standard. For the
purposes of co-product cash cost calculation purposes, Northgate assumes that
operating costs are attributable to gold and copper on a 70/30 split. The
attributable costs will vary from time to time and would be influenced by a
number of factors including current market terms for treatment and refining
costs and customer mix. Cost of sales under Canadian GAAP and cash costs are
reconciled by the following: non-cash movements in net working capital items
and provisions for losses on inventory.
Northgate uses the financial measures "adjusted net earnings" and
"adjusted net earnings per share" to supplement its consolidated financial
statements. The presentation of adjusted measures are not meant to be a
substitute for net earnings or net earnings per share presented in accordance
with GAAP, but rather should be evaluated in conjunction with such GAAP
measures. Adjusted net earnings and adjusted net earnings per share are
calculated as net earnings excluding (a) stock based compensation, (b) foreign
exchange loss (gain), (c) future income tax expense on the translation of
foreign currency inter corporate debt, (d) unrealized losses on derivatives,
(e) impairment losses, (f) non-production costs during business interruption
and (g) debt repayment expense. The terms "adjusted net earnings" and
"adjusted net earnings per share" do not have a standardized meaning
prescribed by Canadian GAAP, and therefore Northgate's definitions are
unlikely to be comparable to similar measures presented by other companies.
Northgate's management believes that the presentation of adjusted net earnings
and adjusted net earnings per share provide useful information to investors
because they exclude non-cash charges and are a better indication of
Northgate's profitability from operations. The items excluded from the
computation of adjusted net earnings and adjusted net earnings per share,
which are otherwise included in the determination of net earnings (loss) and
net earnings (loss) per share prepared in accordance with Canadian GAAP, are
items that Northgate does not consider to be meaningful in evaluating
Northgate's past financial performance or the future prospects and may hinder
a comparison of its period to period profitability.
For further information about Northgate, please visit
www.northgateminerals.com. For further information about Perseverance, please
visit www.perseverance.com.au.
ANNEXURE A
Summary of Key Terms of the Merger Implementation Agreement
Northgate and Perseverance have entered into an MIA dated 28 October 2007
setting out the terms and conditions of each party's obligations in connection
with the implementation of the Transaction. The parties, and their relevant
subsidiaries, have also entered into related agreements with Australia and New
Zealand Banking Group Limited ("ANZ") ("the Financing Agreements") in relation
to the assignment to Northgate of Perseverance's debt and the provision of a
further bridging facility to Perseverance.
A summary of the structure of the Transaction, and an outline of the key
terms and conditions of the MIA and the Financing Agreements, are set out
below. Relevant defined terms are set out at the end of the summary of the
MIA.
Structure of Transaction
------------------------
The Transaction will involve:
- a scheme of arrangement between Perseverance and holders of
ordinary shares, under which a wholly owned subsidiary of
Northgate will acquire all the ordinary shares for
consideration of A$0.20 per share ("the Share Scheme");
- a scheme of arrangement between Perseverance and holders of
the 176,716,000 options (referred to in Canada as warrants),
each to subscribe for one ordinary share, with an expiry date
of 31 August 2009 ("the Options"), under which the Options
will be cancelled for consideration of A$0.08 per Option ("the
Option Scheme");
- a resolution by holders of convertible subordinated notes
("the Notes") to amend the conditions applying to the Notes to
provide for the early redemption of the Notes on the
implementation date of the Share Scheme ("the Noteholders'
Resolution"); and
- the assignment to Northgate of Perseverance's debt and the
provision of a further bridging facility to Perseverance.
Merger Implementation Agreement
-------------------------------
Conditions Precedent
The Share Scheme will not become effective unless each of the following
conditions precedent has been satisfied or waived in accordance with the terms
of the MIA.
- Regulatory Approvals: before 8.00am on the Second Court Date:
- (Commonwealth Treasurer) the Treasurer of the Commonwealth
of Australia advises Northgate that there is no objection
under the Australian Federal Government's foreign
investment policy or under the Foreign Acquisition and
Takeovers Act 1975 of Australia to the acquisition by
Northgate of Shares and other securities of Perseverance,
as contemplated by the MIA; and
- (other approvals) all other approvals, consents,
modifications or waivers of a governmental agency which are
necessary to implement the Schemes are obtained;
- Shareholder Approval: before 8.00am on the Second Court Date,
the Share Scheme is approved by the requisite majorities of
Shareholders;
- Restraints: no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition
preventing any aspect of the Share Scheme is in effect as at
8.00am on the Second Court Date;
- Independent Expert: before the date on which the Scheme
Booklet is lodged with ASIC, the Independent Expert gives a
report to Perseverance that in its opinion the Share Scheme is
in the best interests of Shareholders;
- Perseverance Regulated Events: no Perseverance Regulated Event
occurs between the date of this Agreement and 8.00am on the
Second Court Date;
- Perseverance Material Adverse Change: no Perseverance Material
Adverse Change occurs, or is discovered, announced, disclosed
or otherwise becomes known to Northgate between the date of
this Agreement and 8.00am on the Second Court Date;
- Perseverance Representations and Warranties: the
representations and warranties of Perseverance contained in
the MIA are true and correct in all material respects as at
the date of the MIA and as at 8.00am on the Second Court Date;
- Northgate Representations and Warranties: the representations
and warranties of Northgate contained in the MIA are true and
correct in all material respects as at the date of the MIA and
as at 8.00am on the Second Court Date;
- Approval of Noteholders' Resolution: before 8.00am on the
Second Court Date, the Noteholders' Resolution has been
approved by Noteholders and that approval has not been revoked
or affected by any subsequent resolution of Noteholders; and
- Executive Option Cancellation Deeds: no later than 5:00pm on
the day which is 2 Business Days before the date of the Scheme
Meetings, all Perseverance executives and other persons
holding options (ie rights to acquire or subscribe for
Perseverance shares that do not constitute Options) have
executed legally binding cancellation deeds in relation to
those options.
The Option Scheme will not become effective unless each of the following
conditions precedent has been satisfied or waived in accordance with the terms
of the MIA.
- Optionholder Approval: before 8.00am on the Second Court Date,
the Option Scheme is approved by the requisite majorities of
Optionholders;
- Restraints: no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition
preventing any aspect of the Option Scheme is in effect as at
8.00am on the Second Court Date;
- Independent Expert: before the date on which the Scheme
Booklet is lodged with ASIC, the Independent Expert gives a
report to Perseverance that in its opinion the Option Scheme
is in the best interests of Optionholders; and
- Satisfaction of Share Scheme Conditions Precedent: before
8.00am on the Second Court Date, each of the conditions
precedent to the Share Scheme has been satisfied.
The Noteholders' Resolution will not become effective unless:
- Noteholder Approval: it is approved by the requisite
majorities of Noteholders; and
- Share Scheme is effective: the Share Scheme becomes effective.
Each party must use their best endeavours to satisfy the conditions
precedent.
Termination
Either party may terminate at any time prior to the commencement of the
Court hearing on the Second Court Date for any one of the following reasons:
- the other party is in material breach of any clause of the
MIA, taken in the context of the Transaction as a whole, the
non-defaulting party has given notice to the other party and
the material breach has continued to exist for five business
days (or any shorter period ending immediately prior to the
commencement of the court hearing on the Second Court Date)
from the time such notice is given;
- any Perseverance Director makes a public statement changing or
withdrawing their recommendation of the Schemes or
Noteholders' Resolution;
- the Independent Expert, having given a report to Perseverance
that in its opinion the Share Scheme is in the best interests
of Shareholders, changes that opinion for any reason;
- if the Court refuses to make any order convening the Share
Scheme meeting and a party obtains an opinion from Queen's
Counsel or Senior Counsel that an appeal against that decision
would have no reasonable prospect of success;
- if a court or other governmental agency has issued a final and
non appealable order, decree or ruling or taken other action
which permanently restrains or prohibits any Scheme or the
Noteholders' Resolution;
- if the conditions precedent are not met; or
- if the Schemes have not become effective on or before the End
Date.
- In addition, the MIA will terminate automatically, without the
action of any party, in the event that:
- the Share Scheme is not approved by the requisite majorities
of Shareholders; or
- the Noteholders' Resolution is not approved by the requisite
majorities of Noteholders, and Northgate has not waived the
condition precedent requiring approval of the Noteholders'
Resolution within five Business Days.
Exclusivity
The MIA contains the following no-shop, no-talk and no due diligence
restrictions.
Under the no-shop restrictions in the MIA, during the Exclusivity Period,
Perseverance must ensure that neither it, nor any of its related bodies
corporate or its representatives, directly or indirectly solicits, invites,
facilitates or encourages, or communicates any intention to do any of these
things, with a view to obtaining any offer or proposal from any person in
relation to a Competing Proposal.
Under the no-talk restrictions in the MIA, during the Exclusivity Period,
Perseverance must ensure that neither it, nor any of its related bodies
corporate or its representatives, negotiates or enters into, continues or
participates in negotiations or discussions with any other person regarding a
Competing Proposal, even if:
- that person's Competing Proposal was not directly or
indirectly solicited, initiated, facilitated or encouraged by
Perseverance or any of its representatives; or
- that person has publicly announced their Competing Proposal.
The parties have also agreed to a no due diligence restriction, whereby
during the Exclusivity Period, Perseverance must not, without Northgate's
prior written consent:
- solicit, invite, facilitate or encourage any party to
undertake due diligence investigations on it or any of its
related bodies corporate; or
- make available to any person or permit any such person to
receive any non-public information relating to it or any of
its related bodies corporate in connection with such person
formulating, developing or finalizing, or assisting in the
formulation, development or finalization of, a Competing
Proposal.
In addition, during the Exclusivity Period, Perseverance must immediately
notify Northgate if it is approached by any person to engage in activity that
would breach the no-talk or no due diligence restrictions. Under the MIA,
Northgate has a period of five Business Days in which to amend the Transaction
to match or better any Superior Proposal received by Perseverance.
The no-talk and no due diligence restrictions and the requirement to
notify Northgate above do not apply to the extent that they restrict
Perseverance or its Board from taking any action in respect of a bona fide
Competing Proposal which was not encouraged, solicited or initiated by
Perseverance, or to the extent that they require Perseverance to provide
notification to Northgate, provided that Perseverance's Board has determined,
in good faith and acting reasonably, that:
- the Competing Proposal is a Superior Proposal; or
- failing to respond in the manner contemplated to that
Competing Proposal or providing notification to Northgate
would likely cause Perseverance's directors to breach their
fiduciary duty or other legal duties, after receiving written
advice to that effect from their external lawyers.
Perseverance must immediately notify Northgate if it relies on this
exception.
Break Fees
Perseverance has agreed to pay Northgate A$2.5 million (exclusive of GST)
in any of the following circumstances:
- there is a material breach by Perseverance of its obligations
under the MIA;
- a Perseverance Regulated Event occurs between the date of the
MIA and 8.00am on the Second Court Date;
- a Perseverance Material Adverse Change occurs or otherwise
becomes known to Northgate between the date of the MIA and
8.00am on the Second Court Date);
- the Independent Expert:
- gives a report to Perseverance that in its opinion the
Shares Scheme is not in the best interests of Shareholders;
or
- having given a report to Perseverance that in its opinion
the Share Scheme is in the best interests of Shareholders,
changes that opinion for any reason; or
- at any time before the end of the Scheme Meeting, the
Perseverance Board makes a public statement changing or
withdrawing their support or recommendation of the Schemes or
the Noteholders' Resolution or recommends a Competing
Proposal.
In addition, no amount is payable by Perseverance to Northgate if
Shareholders fail to pass, by the requisite majorities, the resolution to
approve the Share Scheme, or the condition precedent relating to approval of
the Noteholders' Resolution is not satisfied, in circumstances where the
Perseverance Board has not made a public statement changing or withdrawing
their support or recommendation of the Schemes and Noteholders' Resolution,
and has not recommended a Competing Proposal.
Key Definitions
Competing Proposal means any proposed or possible transaction or
arrangement pursuant to which, if ultimately completed, a person (other than
Northgate or a related body corporate of Northgate) would:
(a) directly or indirectly, acquire an interest, a relevant
interest in or become the holder of:
(i) more than 50% of the Shares; or
(ii) the whole or a substantial part or a material part of
the business or property of Perseverance or the
Perseverance Group;
(b) acquire control of Perseverance, within the meaning of
section 50AA of the Corporations Act; or
(c) otherwise acquire or merge with Perseverance (including by a
reverse takeover bid, reverse scheme of arrangement or dual
listed companies structure).
End Date means 31 March 2008, or such later date as Northgate and
Perseverance may agree in writing.
Exclusivity Period means the period commencing on the date of this
Agreement and ending on the earlier of:
(a) the termination of the MIA in accordance with its terms;
(b) the Implementation Date; and
(c) the End Date.
Perseverance Material Adverse Change means an event, occurrence or matter
other than:
(a) that required to be done or procured by Perseverance
pursuant to the MIA, the Schemes or an executive option
cancellation deed;
(b) as fairly disclosed in an announcement to the ASX prior to
the date of the MIA or as fairly disclosed by Perseverance
to Northgate in writing prior to the date of the MIA
(provided that disclosure of the risk or possibility of an
event, occurrence or matter happening shall not be a
disclosure of an actual event, occurrence or matter
happening);
(c) an actual event, occurrence or matter which is known to
Northgate prior to the date of the Agreement (which does not
include knowledge of the risk or possibility of an event,
occurrence or matter happening);
(d) those arising from changes in general economic or business
conditions in Australia including changes in rates of
corporate taxation and interest rates; or
(e) any other event, occurrence or matter which the parties
agree in writing shall be excluded from this definition,
which individually will, or is reasonably likely to, or when
aggregated with all such events, occurrences or matters
will, or is reasonably likely to:
(f) diminish the value of the consolidated net assets of the
Perseverance Group by A$5 million or more;
(g) diminish the consolidated net profit after tax of the
Perseverance Group in any financial year by A$2 million or
more, excluding any costs and expenses incurred in
connection with the Schemes; or
(h) have a material adverse effect on the ability of
Perseverance to perform its obligations under the MIA.
Perseverance Regulated Event means the occurrence of any of the
following:
(a) Perseverance converts all or any of its shares into a larger
or smaller number of shares;
(b) Perseverance resolves to reduce its share capital in any way
or reclassifies, redeems or repurchases directly or
indirectly any of its shares;
(c) Perseverance or any related body corporate of Perseverance:
(i) enters into a buy-back agreement; or
(ii) resolves to approve the terms of a buy-back agreement
under the Corporations Act;
(d) Perseverance or any related body corporate of Perseverance
pays any amount to an employee or officer of the
Perseverance Group in connection with the termination of
their employment, or their ceasing to act as an officer of
Perseverance or a related body corporate, other than
pursuant to an agreement in force prior to 5 October 2007;
(e) Perseverance declares, pays or distributes any dividend,
bonus or other share of its profits or assets, or returns or
announces an intention to return or agree to return any
capital to its members;
(f) Perseverance or any related body corporate of Perseverance:
(i) issues or agrees to issue shares or instruments
convertible into shares (each a Perseverance Security)
to a person outside of the Perseverance Group; or
(ii) grants or agrees to grant an option (including any
performance right or right to have shares transferred)
over or in respect of Perseverance Securities to a
person outside of the Perseverance Group, other than
an issue of Shares pursuant to the exercise of an
Option or an executive option or the conversion of a
Note.
(g) Perseverance makes a material change or amendment to its
constitution;
(h) Perseverance or any related body corporate of Perseverance
creates, or agrees to create, any mortgage, charge, lien or
other encumbrance over the whole, or a substantial part, of
its business or property;
(i) Perseverance resolves that it be wound up;
(j) a court makes an order for the winding up of Perseverance or
of any related body corporate of Perseverance;
(k) a liquidator, provisional liquidator or administrator of
Perseverance or of any related body corporate of
Perseverance is appointed;
(l) a receiver or a receiver and manager is appointed in
relation to the whole, or a substantial part, of the
property of Perseverance or of any related body corporate of
Perseverance;
(m) after the date of announcement of the MIA:
(i) Perseverance or any related body corporate of
Perseverance acquires, offers to acquire or agrees to
acquire one or more companies, businesses or assets
(or any interest in one or more companies, businesses
or assets) for an amount in aggregate greater than
A$500,000, or makes an announcement in relation to
such an acquisition, offer or agreement;
(ii) Perseverance or any related body corporate of
Perseverance leases or disposes of, offers to lease or
dispose of or agrees to lease or dispose of one or
more companies, businesses or assets (or any interest
in one or more companies, businesses or assets) for an
amount, or in respect of which the book value (as
recorded in Perseverance's statement of financial
position as at 30 June 2007) is, in aggregate greater
than A$500,000, or making an announcement in relation
to such a lease, disposition, offer or agreement;
(iii) Perseverance or any related body corporate of
Perseverance enters into, or offers to enter into or
agrees to enter into, any agreement, joint venture or
partnership involving a commitment of greater than 12
months other than in the ordinary course of business
or which would require expenditure, or the foregoing
of revenue, by the Perseverance Group of an amount
which is, in aggregate, more than A$500,000 or which
would bring the aggregate new capital expenditure
commitments of the Perseverance Group since the
announcement date to more than A$500,000, or makes an
announcement in relation to such an entry, offer or
agreement;
(iv) Perseverance or any related body corporate of
Perseverance makes any loans, advances or capital
contributions to, or investments in, any other person,
other than to or in Perseverance or any wholly owned
related body corporate of Perseverance, or in the
ordinary course of business; or
(v) Perseverance or any related body corporate of
Perseverance incurs any indebtedness (other than under
the Financing Agreements) or issuing any indebtedness
or debt securities other than in the ordinary course
of business, or the business of the Perseverance Group
not otherwise being carried on in the ordinary course;
(n) Perseverance or any related body corporate of Perseverance
executes a deed of company arrangement;
(o) Perseverance or any related body corporate of Perseverance
(as applicable) authorizes, commits or agrees to take any of
the actions referred to in any of the foregoing paragraphs,
provided that a Perseverance Regulated Event will not
include a matter:
(p) required to be done or procured by Perseverance pursuant to
the MIA, the Schemes or an option cancellation deed;
(q) which Perseverance is permitted to do, or not to do, under
the carve-out to its exclusivity obligations or which
Perseverance is permitted to do, or not to do, in connection
with any Competing Proposal once the exclusivity period
ends;
(r) in relation to which Northgate has expressly consented in
writing; or
(s) previously announced to ASX or fairly disclosed by
Perseverance to Northgate in writing prior to the date of
the MIA.
Scheme Booklet means the explanatory memorandum prepared, or to be
prepared, by Perseverance in respect of the Schemes and despatched to
Shareholders and Optionholders.
Second Court Date means the first day on which the application made to
the Court for orders pursuant to section 411(4)(b) of the Corporations Act
approving the Schemes is heard or, if the application is adjourned for any
reason, the first day on which the adjourned application is heard.
Superior Proposal means a bona fide Competing Proposal which the
Perseverance Board reasonably believes, acting in good faith, and after having
taken advice from its financial and legal advisers:
(a) is capable of being valued and completed, taking into
account all aspects of the Competing Proposal; and
(b) would, if consummated in accordance with its terms and
taking into account, among other things, all legal,
financial, regulatory, timing and other aspects of such
proposal and the person making such proposal, result in a
transaction more favourable to the Shareholders from a
financial point of view than the terms of the Share Scheme.
Financing Agreements
--------------------
Under the Financing Agreements:
- Northgate will acquire all of Perseverance's existing bank
debt from ANZ (amounting to US$30.6 million (A$33.5 million);
- Northgate will extend an additional bridging facility to
Perseverance of up to US$22.8 million (A$25.0 million);
- Northgate and ANZ have entered into a put and call arrangement
pursuant to which Northgate expects to acquire ANZ's exposure
of approximately US$43.8 million (A$48.0 million) to
Perseverance's gold hedges following completion of the
Schemes;
- Northgate will obtain a first ranking security (subject to one
immaterial exception) over all the assets and undertakings of
Perseverance and certain of its subsidiaries, by way of the
assignment of existing securities held by ANZ and the granting
of new securities by Perseverance and certain of its
subsidiaries over certain of their assets and undertakings;
The bridging financing will attract interest at a rate of BBSY + 4.5% on
drawn amounts, and a commitment fee of 4.5% on the facility amount. These
amounts will only be payable following the successful completion of the
Transaction or termination of the MIA.
In the event that the Transaction does not close as a result of another
person acquiring an interest in Perseverance of more than 20%, the bank debt
and bridging facility will become immediately repayable in full, and
Perseverance will be required to immediately close out the gold hedges.
In the event that the Transaction does not close for any other reason,
Perseverance is required to repay the principal amount of all bridge financing
plus accrued interest and fees within three months of the relevant termination
date. The remaining bank debt and the gold hedges will remain on foot and
subject to their current terms (although the bank debt will be owned by
Northgate, and Northgate or its nominee will become the counterparty to the
gold hedges).
%CIK: 0000072931
For further information: Northgate Minerals Corporation, Ken Stowe, President
& CEO, (416) 216-2772; Keren Yun, Manager, Investor Relations, (416) 216-2781;
Perseverance Corporation Limited, John Quinn, +61 (0) 412 381 081; Brian
Phillips, +61 (0) 402 298 022; Cannings Corporate Communications, Peter
Brookes, +61 2 8284 9966; Nigel Kassulke, + 61 2 8284 9905
