DRDGOLD announces merger between Emperor Mines and Intrepid Mines
Published: Tuesday, 18 September 2007 02:00
Emperor Mines Limited, the 78.7% subsidiary of DRDGOLD, has today announced that its board and the board of Intrepid Mines Limited have signed an agreement to merge the two companies.
The merged company
- Emperor Mines Limited (“Emperor”), the 78.7% subsidiary of DRDGOLD, has today announced that its board and the board of Intrepid Mines Limited (“Intrepid”) have signed an agreement to merge the two companies.
- The new company, to be named Intrepid Mines Limited, will be a dynamic and well funded international gold producer, developer and explorer listed on both the Toronto Stock Exchange and ASX Limited.
- The combination of Emperor’s balance sheet strength, Intrepid’s producing Paulsens Gold Mine and its Casposo development project, and both companies’ exploration assets, together with the combined skills of the two management teams, will create a well balanced company capable of adding significant value for its shareholders.
In particular, the merged Intrepid’s strengthened balance sheet and the ability to secure project finance, will allow it to immediately move forward with corporate objectives, including:
- accelerated underground exploration at the Paulsens Gold Mine;
- imminent development of the Casposo gold/silver Project in Argentina on an unhedged basis and continued examination of early expansion options;
- immediate exploration at Taviche (Mexico) and Tujuh Bukit Project (Indonesia) and an expanded exploration budget of up to approximately A$8.0 million per annum; and
- improved capacity to target project and corporate acquisition opportunities.
The proposed merger, if it proceeds, will take place by way of a scheme of arrangement.
- DRDGOLD has informed Emperor that it intends to re–focus its attention on opportunities in South Africa and so intends to seek to realise its investment in an orderly manner prior to the scheme meeting convened by the Court to approve the proposed scheme. Emperor has agreed to work with DRDGOLD to seek to facilitate such an exit. The proposed merger with Intrepid is therefore subject to DRDGOLD being able to successfully realise its investment in Emperor prior to this time.
- The boards of directors of Emperor and Intrepid have resolved to support the proposed merger.
Board and Management Structure
- The merger will take place by way of a scheme of arrangement, with Emperor shareholders receiving 1 Intrepid share for every 4.25 Emperor shares held. Existing unlisted Emperor employee options are to be either cancelled for cash or new Intrepid options issued on equivalent terms and conditions.
Synergy and benefits of the merged company
- The merged company will benefit from the skills and international experience of the combined management teams, with personnel who have held senior positions with major resource companies such as Placer Dome, BHP Billiton, and Western Mining Corporation.
- Management of the merged company will be led by Mr Brad Gordon as Chief Executive Officer and Mr Laurence Curtis as President. The merged company’s head office will be located in Brisbane, Australia and the capital markets and the Americas exploration office will be located in Toronto, Canada.
- The Board of the merged company will comprise at least three representatives from each of Intrepid and Emperor. Mr Colin G Jackson will continue as Chairman of the merged company.
The principal assets of the merged company will be:
- Paulsens’ operating gold mine in Western Australia (100% interest);
- Casposo gold/silver development project in Argentina (100% interest); and
- advanced exploration projects with multi–million ounce potential at Taviche (Mexico – earning a 35% interest, gold/silver) and Tujuh Bukit Project (Java, Indonesia – earning up to 70% interest,gold/silver/copper).
The merger is expected to deliver an expanded production profile and near term increased gold inventory potential, leveraging exposure to the gold price.
Emperor and Intrepid have entered into a Merger Implementation Deed under which they have agreed to certain undertakings and arrangements to facilitate the merger. The complete document may be found on the companies’ websites or on www.sedar.com, the official site that provides access to most public securities’ documents and information filed by public companies and investment funds with the Canadian Securities Administrators in the SEDAR filing system. Key terms of the Merger Implementation Deed are summarised in Appendix A.
The proposed merger is conditional on, amongst other things:
- Emperor shareholder approval;
- If required, Intrepid shareholder approval;
- DRDGOLD selling its shareholding in Emperor;
- The acquisition or cancellation of all Emperor options;
- Each of Emperor and Intrepid being satisfied with the results of their respective due diligence enquiries;
- Emperor having surplus net cash of at least $54 million immediately prior to the second Court hearing to approve the scheme (taking into account any amounts provided by Emperor to Intrepid, any sum expended in respect of the Tujuh Bukit Joint Venture and any other expenditure approved by Intrepid);
- Any other regulatory approvals, no regulatory action, no material adverse change, no prescribed occurrences and TSX consent; and
- Court approval.
Both companies have entered into no solicitation–no talk provisions customary for this type of transaction. In addition Emperor has provided financial accommodation to Intrepid Minerals Corporation, a wholly owned subsidiary of Intrepid, amounting to A$5.0 million and holds an option to convert this loan into Intrepid shares.
The proposed timetable to complete the merger involves:
- Despatch Emperor shareholder documentation early–November
- Emperor scheme meeting early–December
- Implementation date early–January
Market Briefing / Conference Calls
- Emperor’s financial advisor in relation to this transaction is Gryphon Partners and legal advice is being provided by Blake Dawson Waldron. Intrepid’s legal advisors are Q Legal and Gardiner–Roberts.
- Emperor and Intrepid will host two conference calls to discuss the benefits of the proposed merger. For further details on the conference calls, please refer to Appendix B.
James Duncan, Russell & Associates
+27 11 880 3924 (office)
+27 82 892 8052 (mobile)
Investor and Media Relations
Barbara Cano, Breakstone Group International
+1 646 452 2334 (office)
Investor and Media Relations
Phil Dexter, St James’s Corporate Services
+44 20 7499 3916 (office)
+44 779 863 4398 (mobile)
For more information, please visit www.drdgold.com
Many factors could cause the actual results, performance or achievements to be materially different from any future results,performance or achievements that may be expressed or implied by such forward–looking statements, including, among others, adverse changes or uncertainties in general economic conditions in the markets we serve, a drop in the gold price, a continuing strengthening of the rand against the dollar, regulatory developments adverse to DRDGOLD or difficulties in maintaining necessary licences or other governmental approvals, changes in DRDGOLD’s competitive position, changes in business strategy, any major disruption in production at key facilities or adverse changes in foreign exchange rates and various other factors.
These risks include, without limitation, those described in the section entitled “Risk Factors“ included in our annual report for the fiscal year ended 30 June 2006, which we filed with the United States Securities and Exchange Commission on 22 December 2006 on Form 20–F. You should not place undue reliance on these forward–looking statements, which speak only as of the date thereof. We do not undertake any obligation to publicly update or revise these forward–looking statements to reflect events or circumstances after the date of this report or to the occurrence of unanticipated events.
|Summary of Key Terms of the Merger Implementation Deed|
|Conditions Precedent to the Scheme||The principal conditions precedent to the implementation of the Scheme include:
- continued recommendation of the Scheme by the Emperor and Intrepid Boards;
- Emperor shareholder approval of the Scheme at the Scheme Meeting by the requisite majorities under the Corporations Act;
- if required by TSX, ASX or applicable laws of Australia and Canada, Intrepid shareholder approval of the Scheme;
- DRDGOLD selling their Emperor shares prior to the Scheme Meeting;
- approval of the Scheme by Intrepid's third party providers of finance;
- Court approval of the Scheme in accordance with s411(4)(b) of the Corporations Act;
- no Emperor or Intrepid Material Adverse Change occurs;
- Intrepid executing the Deed Poll;
- no Emperor or Intrepid Prescribed Occurrence occurs;
- confirmation that the actual Net Cash Position of Emperor (plus any sum advanced under the Emperor Working Capital Funding or any other expenditure approved by Intrepid) is no more than $6 million below the forecast $62 million Net Cash Position of Emperor as at 30 September 2007;
- confirmation that as at the Business Day prior to the Second Court Date, the actual Net Cash Position of Emperor (plus any sum advanced under the Emperor Working Capital Funding, any sum expended in respect of the Tujuh Bukit Joint Venture or any other expenditure approved by Intrepid) is no more than $8 million below the forecast $62 million Net Cash Position of Emperor as at 30 September 2007;
- no changes in any material respect to the intention of Emperor to effect the Sale of Tolukuma (as announced on 10 September 2007), other than as approved by Intrepid in writing, before 8.00am on the Second Court Date;
- all Emperor options to subscribe for shares having been exercised, cancelled or acquired by Intrepid; and
- Emperor and Intrepid being satisfied with their respective due diligence investigations.
|Scheme Consideration||The Scheme will be concluded on terms which will provide for the issue of 1 Intrepid Share for every 4.25 Emperor Shares held by Scheme Participants.|
|Subscription Option||Intrepid has granted to Emperor an option to subscribe for up to 20 million shares in Intrepid at Intrepid’s 20 day volume exercising the option. Should the option be exercised, the funds due to Intrepid under the option exercise shall be applied to extinguishing the existing A$5.0 million loan with Intrepid Minerals Corporation.|
|Independent Expert's report||Emperor has discretion whether or not to commission an Independent Expert to provide an opinion as to whether the Scheme is in the best interests of Emperor Shareholders ("Expert Report"). Emperor is not obliged to commission an Expert Report. |
If Emperor does decide to commission an Expert Report, then a further condition precedent to the implementation of the Scheme will be that the Expert Report concludes that the Scheme is in the best interests of the Scheme Participants.
|No talk and no shop obligations||Each party must ensure that during the Exclusivity Period:|
- (No Shop) It, nor any of its Representatives, directly or indirectly solicits, invites, facilitates any discussions or negotiations (or encourages, or communicates any intention to do any of these things), with a view to obtaining any expression of interest, offer or proposal from any Person for or in respect of a Competing Transaction in relation to that party; and
- (No Talk) It, nor any of its Representatives, in connection with or for the purposes of a Competing Transaction in relation to that party, without the other party's prior written consent, directly or indirectly participate or engage in any negotiations or discussions with any Person or provide or make available any information to any Person (including any information or access for the purposes of undertaking due diligence investigations of the party or any of its Related Bodies Corporate).
|Limitations to no talk obligation||The no talk provision summarised above does not restrict a party from responding to a bona fide offer or proposal which was not solicited or initiated by it, and to the extent necessary to discharge their fiduciary duties as a director of Emperor or Intrepid in accordance with the written opinion of senior counsel ("Fiduciary Carve-out").|
|Competing Transactions and the parties' right to respond||If a party ("Recipient") is approached by another person during the Exclusivity Period with a Competing Transaction to which the No Talk or No Shop provisions apply, they must promptly notify the other party of such approach.|
The Recipient must not enter into any agreement in relation to that Competing Transaction unless, after notifying the other party, the other party has not within 3 Business Days of notification submitted a written proposal which is on terms no less favourable than the Competing Transaction ("Counterproposal"). If the Counterproposal is on terms no less favourable than the Competing Transaction, then in the absence of a more favourable offer, the parties must proceed exclusively with the Counterproposal, otherwise the Recipient may proceed exclusively with the Competing Transaction.
Conference Call Details
Conference Call One
The call is scheduled for 18 September 2007 and will be hosted by Intrepid Mines Chairman Mr. Colin
Jackson and Emperor Mines CEO Mr. Brad Gordon. An invitation is extended to all interested investors,
analysts or media representatives to attend.
Timing and dial in details appear below, with AEST meaning Australian Eastern Standard Time.
Schedule of events:
|1:50pm || AEST To participate in the conference call, dial 1800 148 258 and reference
Conference ID 17374994 (if calling from outside Australia, dial +61 2 8524
|2:00pm ||AEST Conference call commences An audio recording of the teleconference will be available approximately 4 hours after the call. To listen to the audio recording of the call, visit Emperor’s website at www.emperor.com.au.|
Conference Call Two
The call is scheduled for 18 September 2007 and will be hosted by Intrepid Mines Chairman Mr. Colin Jackson and Emperor Mines CEO Mr. Brad Gordon. An invitation is extended to all interested investors, analysts or media representatives to attend.
Timing and dial in details appear below;
Schedule of events:
|10:00am ||(Toronto eastern time) To participate in the conference call, dial (toll free) 1-888-300-0053 or (international/local) 1-647-427-3420|
An audio replay of the call will be available for one week by dialing 1-800-365-8354 (passcode 17401204), and will also be available on Intrepid’s website at