SPROTT CONTINUES TO
SUPPORT COMBINATION TRANSACTION
TORONTO,
July 30, 2012 /CNW/ - U.S. Silver
Corporation (TSX: USA) ("U.S.
Silver" or the "Company") announced that its Board of Directors
unanimously recommends that U.S. Silver shareholders REJECT
the unsolicited cash offer from Hecla Mining Company ("Hecla") to
acquire all of the outstanding common shares of U.S. Silver (the
"Hecla Offer").
Commenting on the offer, Gordon Pridham, Chairman & Interim CEO of
U.S. Silver said, "the Board continues to believe that the
proposed strategic combination transaction with RX Gold is in the
best interest of shareholders and continues to recommend that U.S.
Silver shareholders vote in favour of the combination transaction
at the August 7th
shareholders' meeting. Valuation multiples in the precious metals
sector are at or near all-time lows - the Hecla Offer is simply not
compelling enough for us to abandon our strategic plan going
forward."
The Board of Directors, with the assistance of
its legal and financial advisors, carefully considered and reviewed
the terms and conditions of the Hecla Offer and recommends that
U.S. Silver shareholders REJECT the Hecla Offer and instead
vote their U.S. Silver shares IN FAVOUR of the proposed
combination transaction with RX Gold & Silver Inc. ("RX Gold")
for a number of reasons, including the following:
- The Hecla Offer is inadequate from a financial point of
view to U.S. Silver shareholders. Cormark Securities Inc.
has delivered an opinion to the Board of Directors that the
consideration offered pursuant to the Hecla Offer is inadequate,
from a financial point of view, to U.S. Silver shareholders.
- The Hecla Offer is not supported by Sprott nor by U.S. Silver's directors and
officers. Sprott, U.S.
Silver's largest shareholder, and U.S. Silver's directors and
officers have confirmed that they continue to support the
combination transaction with RX Gold.
- The Hecla Offer is highly opportunistic and does not
provide U.S Silver shareholders with an adequate change of control
premium. The Board of Directors believes that the Hecla
Offer is opportunistically timed to take advantage of a recent
period during which silver prices, and the share price of companies
in the silver industry, have been at a low point. If successful,
the Hecla Offer would deny U.S. Silver shareholders the opportunity
to participate in future value accretion as the silver price
recovers. The Hecla Offer is for C$1.80 per U.S. Silver common share in cash,
which represents a 13%premium to the 90-day volume weighted average
share price, and a 10% discount to the 180-day volume weighted
average share price, of the U.S. Silver common shares ending
July 24, 2012. These premiums are
well below premiums paid in other unsolicited metals and mining
transactions, which have been on average substantially higher on
completed transactions over $100
million since 2005.
- The Hecla Offer does not fully reflect value for U.S.
Silver's current assets and organic growth opportunities.
The Board of Directors believes that there are significant organic
growth opportunities available to the Company within its current
property portfolio. A plan to fill the Company's mills, which are
currently operating at approximately 60% capacity, is currently
underway. Achievement of this plan would increase production and
reduce cash operating costs. Further, the Company has a large
(state area covered) and dominant land position in the Silver Valley that has not seen exploration in
the Company's past due to working capital being directed to mine
production efficiencies. With the Company's improved cash position,
exploration programs are underway and showing encouraging progress.
The Board of Directors also does not believe that the Hecla Offer
adequately recognizes potential value from the Coeur, Calladay and
the Company's other highly prospective exploration properties.
- The Board of Directors continues to believe that the
proposed combination transaction with RX Gold will provide long
term value to U.S. Silver in excess of the consideration being
offered under the Hecla Offer. In the first half of 2012,
RX Gold's Drumlummon property, operating with a small miners
permit, produced approximately 860,000 silver equivalent ounces.
Together with U.S. Silver's steady commercial production (1.2
million silver equivalent ounces in the first half of 2012), the
combined company's current growth plan is expected to be funded
without diluting existing U.S. Silver shareholders. In
addition, under the proposed combination transaction, U.S. Silver
shareholders will have a 70% share of the $10 million per year of expected combined
synergies that have been currently identified.
- The Hecla Offer does not fairly compensate U.S. Silver
shareholders for the synergies and strategic benefits available to
Hecla upon acquiring U.S.
Silver. The Board of Directors believes that significant
synergies and strategic benefits would accrue to Hecla upon the acquisition of U.S. Silver
because of the proximity of the companies' respective assets and
the Company's large and dominant land position in the Silver Valley. Such synergies and benefits
include, among others, better mill sequencing, economies of scale,
and greater access to labour. The Board of Directors believes that
the Hecla Offer fails to fairly compensate U.S. Shareholders for a
portion of such synergies and benefits.
- The Hecla Offer takes advantage of U.S. Silver's existing
cash balances to finance its offer. U.S. Silver has
approximately C$29 million in working capital on its balance sheet
as of June 30, 2012, which represents
approximately 26% of the funding requirements of the Hecla Offer,
and as such, the Hecla Offer effectively values U.S. Silver's
operating assets at C$1.39 per
share.
- Combination transaction with RX Gold preserves benefits
of expected rise in price of silver and precious metals
companies. The proposed combination transaction with RX
Gold is a strategic plan recommended by the Board of
Directors. The combination with RX Gold is expected to
preserve the ability of current shareholders of U.S. Silver to
maximize the value of the cash-flowing assets of both companies,
and future shareholders in the combined company to capture the
benefits of an anticipated near to medium term increase in the
price of precious metal companies. Consummation of the combination
transaction with RX Gold does not preclude the ability of the
combined company from engaging in a change of control transaction
in the future.
- Pursuant to the terms of the combination agreement with
RX Gold, the Company has not solicited proposals from third parties
to compete with the Hecla Offer.
The Board of Directors' recommendation to U.S.
Silver shareholders that they REJECT the Hecla Offer and
instead vote their U.S. Silver shares IN FAVOUR of the
proposed combination transaction, as well as a more detailed
discussion of the reasons for rejecting the Hecla Offer and the
inadequacy opinion provided by U.S. Silver's financial advisor,
shall be set out in the Directors' Circular that will be mailed in
due course to each of U.S. Silver's shareholders in compliance with
applicable securities laws and filed with Canadian securities
regulatory authorities. The Directors' Circular will be available
on SEDAR at www.sedar.com and on U.S. Silver's website at
www.us-silver.com. Shareholders are advised to read the Directors'
Circular carefully and in its entirety, as it will contain
important information regarding U.S. Silver and the Hecla Offer. If
Shareholders have any questions or require more information they
are encouraged to contact the Company's proxy solicitation agent,
Phoenix Advisory Partners, toll-free at 1-800-240-2133 or outside
North America at 201-806-2222 or
via email at inquiries@phoenixadvisorypartners.com.
This press release is specifically deemed to be
incorporated by reference in U.S. Silver's management information
circulated dated July 9, 2012, which
has been mailed to shareholders and available on SEDAR at
www.sedar.com and on U.S. Silver's website at
www.us-silver.com.
How to Vote IN FAVOUR of the Combination
Transaction with RX Gold
Any U.S. Silver shareholder that has already
voted IN FAVOUR of the proposed combination transaction with RX
Gold need not take any action, as their votes will be counted. Any
U.S. Silver shareholder who has voted AGAINST the proposed
combination transaction is encouraged to change its vote and vote
IN FAVOUR of the proposed combination transaction.
Registered shareholders of U.S. Silver are
requested to complete, date, sign and return the form of proxy that
accompanied the Company's management information circular. To be
valid, the form of proxy must be signed and received by the proxy
department of U.S. Silver's transfer agent, Valiant Trust Company,
by mail at 310-606 4 Street SW, Calgary,
Alberta, T2P 9Z9, or by facsimile at 1-855-375-6916 or
toll-free in North America at
1-866-313-1872, not later than 5:00
p.m. (Toronto time) on
August 2, 2012.
Non-registered shareholders who receive voting
instructions from their intermediary should carefully follow the
instructions provided by their intermediary to ensure their vote is
counted. Non-registered shareholders are encouraged and can vote
via internet at www.proxyvote.com.
If you have any questions that are not
answered by U.S. Silver's management information circular, or would
like additional information, you should contact your professional
advisors. You can also contact Phoenix Advisory Partners, the proxy
solicitation firm engaged by U.S. Silver, toll-free at
1-800-240-2133 or outside North
America at 201-806-2222 or by email at
inquiries@phoenixadvisorypartners.com should you have any questions
regarding voting of your shares.
How to REJECT the Hecla Offer and Withdraw
Tendered Shares
To reject the Hecla Offer, you should do
nothing. The Hecla Offer is open for acceptance until August 31, 2012. Shareholders who have already
tendered their shares to the Hecla Offer can withdraw them at any
time before they have been taken up and accepted for payment by
Hecla. Shareholders holding shares
through a dealer, broker or other nominee should contact such
dealer, broker or nominee to withdraw their U.S. Silver shares.
Shareholders may also contact the information agent retained by
U.S. Silver, Phoenix Advisory Partners, toll-free at 1-800-240-2133
or outside North America at
201-806-2222 or via email at
inquiries@phoenixadvisorypartners.com.
About U.S. Silver
U.S. Silver, through its wholly owned
subsidiaries, owns and/or operates the Galena, Coeur, Caladay and
Dayrock silver-lead-copper mines in Shoshone County, Idaho, with the Galena mine
being the second most prolific silver mine in U.S. history. Total
silver production from U.S. Silver's mining complex has exceeded
217 million ounces of silver production since 1953. U.S. Silver
controls a land package now totalling approximately 14,000 acres in
the heart of the Coeur d'Alene Mining District. U.S. Silver is
focused on expanding the production from existing operations as
well as exploring and developing its extensive Silver Valley holdings in the Coeur d'Alene
Mining District.
Forward Looking Statements
Certain statements in this release may be
considered forward-looking statements, which reflect the board and
management's current beliefs and expectations and which involve
assumptions about expected future events or results that are
subject to inherent risks and uncertainties. There is significant
risk that assumptions and other forward-looking statements will not
prove to be accurate. Many factors could cause actual future
results, conditions or events to differ materially from the results
or outcomes expressed, including risks and uncertainties related
to: receipt of the requisite shareholder and court approvals for
the combination transaction with RX Gold, foreign currency
fluctuations; risks inherent in mining including environmental
hazards, industrial accidents, unusual or unexpected geological
formations, ground control problems and flooding; risks associated
with the estimation of mineral resources and reserves and the
geology, grade and continuity of mineral deposits; the possibility
that future exploration, development or mining results will not be
consistent with the Company's expectations; the potential for and
effects of labour disputes or other unanticipated difficulties with
or shortages of labour or interruptions in production; actual ore
mined varying from estimates of grade, tonnage, dilution and
metallurgical and other characteristics; the inherent uncertainty
of production and cost estimates and the potential for unexpected
costs and expenses, commodity price fluctuations; uncertain
political and economic environments; changes in laws or policies,
foreign taxation, delays or the inability to obtain necessary
governmental permits; and other risks and uncertainties, including
those described in the Company's public disclosure record. The
foregoing list of factors is not exhaustive. Accordingly, investors
should not place undue reliance on forward-looking information.
U.S. Silver includes in publicly available documents filed from
time to time with securities commissions and the Toronto Stock
Exchange, a thorough discussion of the risk factors that can cause
anticipated outcomes to differ from actual outcomes.
Forward-looking information is provided as of the date of this news
release only, it should not be relied upon as of any other date,
and U.S. Silver assumes no obligation to update or revise this
information to reflect new events or circumstances, except as
expressly required by law. There can be no assurance that the
proposed combination transaction with RX Gold will receive the
required shareholder and court approvals or that any other
alternative transaction, including the Hecla Offer, will be
completed.
SOURCE U.S. Silver Corporation