Silvermex Resources Ltd. and Genco Resources Ltd. Enter into Business Combination Agreement
September 20 2010 - 12:55PM
Marketwired Canada
Silvermex Resources Ltd. (TSX VENTURE:SMR) ("Silvermex") and Genco Resources
Ltd. (TSX:GGC) ("Genco") are pleased to announce that they have entered into a
definitive agreement (the "Agreement") to combine their respective businesses in
an all-share transaction. The transaction will create a well managed,
growth-oriented silver and gold producer focused on aggressively increasing its
production profile.
The combined company will possess a fully operational mine and a substantial
silver reserve and resource base. The transaction will provide shareholders with
an experienced, production-focused, management team with a successful record of
enhancing shareholder value. The combined company will be well capitalized with
$6.2 million in cash.
Transaction Highlights
-- Combines a highly experienced management team with a quality operation
situated on a very large and prospective land position with numerous
opportunities for future production expansion.
-- Creates a company that contains one operation in production, with
substantial expansion potential, and one advanced stage project with
extensive infrastructure in place.
-- Builds a large, diversified, quality reserve and resource base with a
Mexican focus and tremendous potential to expand resources in multiple
highly prospective jurisdictions.
-- Offers shareholders significant growth potential through production
expansion, resource growth and future acquisitions.
-- The resulting combined company will have approximately $6.2 million in
cash to fund facility upgrades, property assessments and studies and
finance reserve growth.
-- This transaction will accelerate production and exploration efforts on
multiple projects concurrently, ultimately increasing shareholder value.
The management team and board of directors of the combined company will include
key personnel from some of the silver sector's most acclaimed and successful
companies. Management and directors include:
-- Arthur Brown, P.Eng, Executive Chairman and Director - Mr. Brown is the
past Chairman and CEO of Hecla Mining Company (NYSE: HL) ("Hecla"),
headquartered in Coeur d'Alene, Idaho. During Mr. Brown's 40 year tenure
at Hecla he held many executive positions with the company. He became
President in 1986 and was named Chairman and Chief Executive Officer in
1987. Mr. Brown played a vital role in the evolution of Hecla and built
it into one of the world's largest and most successful silver mining
companies. Mr. Brown retired from Hecla in 2006 and joined Silvermex as
Executive Chairman in 2009.
-- Michael H. Callahan, President and Director - Mr. Callahan was with
Hecla from 1989 to 2009. During this 20 year period he held a variety of
positions including: Director, President of Minera Hecla Venezolana, a
subsidiary of Hecla Mining Co. and Vice President of Corporate
Development. Mr. Callahan played a key role in the acquisition,
development and production growth of some of Hecla's most successful
mines.
-- Duane A. Nelson, CEO and Director - Mr. Nelson has been a director and
officer of Silvermex since February 2006. He has over 25 years of
private and public sector experience with a focus on early-stage
projects.
-- Joseph J. Ovsenek, P.Eng, L.L.B, Director - Mr. Ovsenek is the Senior
Vice President of Silver Standard Resources Inc. (NASDAQ:SSRI) ("Silver
Standard") Mr. Ovsenek holds a Bachelor of Law degree from the
University of Toronto. He is a registered professional engineer, and
holds a Bachelor of Applied Science degree from the University of
British Columbia. Mr. Ovsenek played a key role in building Silver
Standard into one of the largest primary silver companies in the world.
-- Kenneth C. McNaughton, M.A.Sc., P.Eng, Director - Mr. McNaughton is the
Senior Vice President, Exploration for Silver Standard since 1991. Mr.
McNaughton holds a Bachelor of Applied Science degree and a Master of
Applied Science degree in geological engineering from the University of
Windsor. He has been with Silver Standard since 1991 and played a vital
role in the development of Silver Standard's extensive resource base,
creating the largest in-ground silver resource of any publicly-traded
primary silver company.
-- Robert J. Fraser, M.Sc., P.Geo, VP Exploration - Mr. Fraser is the past
Exploration Manager for Hecla in Canada and Venezuela. He graduated
with a Hon's B.Sc. in Geology and a M.Sc. in Mineral Exploration from
Queen's University at Kingston and has over 35 years experience. Prior
to his senior position with Hecla Mr. Fraser was with Noranda for over
25 years.
-- Hallein Darby, CA, CFO and Corporate Secretary - Ms. Darby has been
Silvermex's Senior VP Finance since November 2008 initially as Senior VP
Finance and is currently CFO. She was previously the Senior VP Finance
for Timmins Gold Corp. Ms. Darby served as a Senior Securities Analyst
with the British Columbia Securities Commission from 1996 to 2006.
-- James R. Anderson, BSB, LLC, Director - Mr. Anderson is the current CEO
and largest shareholder of Genco. He is a successful businessman with
wide-ranging interests in oil & gas production, as well as real estate
development and rentals. He is the founder, sole shareholder and
President of Tennessee Eastern Gas & Oil Co. Mr. Anderson holds a
Bachelor of Science in Business degree and a Juris Doctor degree in Law
from the University of Minnesota.
-- Bruce Bried, B.Sc., P.Eng. - Mr. Bried is currently a consultant to
Silvermex and acting Vice President of Mining. He is the past Vice
President of Mining for Endeavour Silver. Mr. Bried is a professional
engineer with over 25 years experience in engineering and operating
mines, his specialty is underground vein gold and silver mines and
mills.
-- Wayne R. Moorhouse, CFA, - Mr. Moorhouse is the current CFO of Genco and
has been with the company since 2005. Mr. Moorhouse has considerable
experience in project planning, budgeting, administration and corporate
finance. He has held senior management positions with a variety of
public & private companies, and has conducted business in Mexico for
over a decade.
Transaction Terms
The transaction will be carried out by way of a plan of arrangement, and is
subject to court approval and approval by Silvermex and Genco shareholders,
applicable regulatory approvals and the satisfaction of certain other
conditions. Prior to the completion of the transaction, Genco will subdivide all
of the outstanding Genco common shares ("Genco Common Shares") on a 1.1-for-one
basis. Under the terms of the Agreement, all of the Silvermex common shares (the
"Silvermex Common Shares") issued and outstanding immediately prior to the
completion of the transaction will be exchanged into Genco Common Shares on the
basis of one Genco Common Share for each Silvermex Common Share. Additionally:
-- Genco shareholders will retain an approximately 53.0% interest in the
combined company, or approximately 55.8% on a fully-diluted basis.
-- Silvermex shareholders will retain an approximately 47.0% interest in
the combined company, or approximately 44.2% on a fully-diluted basis.
-- The transaction terms represent a premium of approximately 49.0% to
Genco's 20-day volume weighted average price on the Toronto Stock
Exchange ("TSX") based on Silvermex 20-day volume weighted average price
on the TSX Venture Exchange, in each case based on the 20-trading day
period ending September 17, 2010, and a premium of 38.2% to Genco's
closing price on the TSX on September 17, 2010.
-- Silvermex and Genco each intend to call a special meeting of their
respective shareholders to seek approval of the transaction and related
matters which are expected to be held in early November 2010.
-- The Board of Directors of Silvermex has determined that the transaction
is in the best interests of Silvermex and its shareholders, and has
unanimously approved the transaction. The Board of Directors recommends
that Silvermex shareholders vote in favour of the matters to be
considered at the Silvermex meeting, including the transaction.
-- In reaching its determination, the Board of Directors of Silvermex
considered, among other things, a fairness opinion and advice provided
by GMP Securities L.P. in relation to the transaction.
-- Silvermex shareholders collectively holding approximately 3.4% of the
outstanding Silvermex Common Shares have entered into support agreements
with Genco in which they have agreed, among other things, to vote such
shares in favour of the transaction.
-- The Board of Directors of Genco has determined that the transaction and
related matters are in the best interests of Genco and its shareholders
and has unanimously approved the transaction. The Board of Directors
recommends that Genco shareholders vote in favour of the matters to be
considered at the Genco meeting, including the transaction.
-- Genco shareholders collectively holding approximately 20.1% of the
outstanding Genco Common Shares have entered into support agreements
with Silvermex in which they have agreed, among other things, to vote
such shares in favour of the transaction.
-- In reaching its determination, the Board of Directors of Genco
considered, among other things, a fairness opinion and advice provided
by Haywood Securities Inc. in relation to the transaction.
-- The Agreement provides that Genco and Silvermex may, under certain
circumstances, terminate the Agreement in favour of an unsolicited
proposal, subject to the payment of a termination fee of $2,000,000 and
subject to a right by each party to match the superior proposal in
question.
-- Further information regarding the transaction will be contained in an
information circular that each of Silvermex and Genco will prepare, file
and mail in due course to their respective shareholders in connection
with the special meetings of their respective shareholders to be held to
consider the transaction.
-- The transaction is expected to close in early November 2010 shortly
after the Genco and Silvermex shareholder meetings. Following the
completion of the transaction, the combined company's name will be
"Silvermex Resources Inc."
Both Genco's Board of Directors and Silvermex's Board of Directors unanimously
recommend that shareholders vote in favour of the transaction. The companies'
respective management teams agree that this business combination is
significantly accretive to Silvermex and Genco shareholders on both a NAV and
resources per share basis.
"We are very pleased to offer both Silvermex and Genco shareholders such a
value-enhancing transaction. We are confident that the proposed business
combination will significantly strengthen and add shareholder value to both
companies. The new company will own a fully operational mine with substantial
production growth potential and additional advanced mining projects which will
provide an aggressive production growth profile. The combined company will
possess a significant silver reserve and resource base. After extensive
consideration of all aspects of the transaction, we strongly believe this
business combination offers a great opportunity for the shareholders of both
Silvermex and Genco," stated Duane Nelson, CEO of Silvermex.
James Anderson, CEO of Genco stated, "We believe the combination with Silvermex
creates both near-term and long-term value for our shareholders. The solid
management team of Silvermex offers the experience, leadership and industry
contacts we require to advance our company and realize our production goals and
objectives. The advanced projects in Silvermex provide significant resources and
a solid production growth profile. Together, we have a very strong opportunity
to rapidly grow towards becoming a premier silver producer."
Pursuant to National Instrument 43-101, Robert Fraser, P.Geo, Vice-President
Exploration of Silvermex Resources Ltd. is the Qualified Person (QP) responsible
for the disclosure in this news release.
Lang Michener LLP acted as legal counsel to Silvermex in connection with the
transaction; McCarthy Tetrault LLP acted as legal counsel to Genco in connection
with the transaction.
About Silvermex
Silvermex Resources is a well funded exploration and development company focused
on advancing the recently consolidated Rosario/San Marcial Mining Camp in south
eastern Sinaloa, Mexico. This mining concession consists of 2 past producing
mines and numerous known high-grade deposits. The project has significant
resources and historic reserves with extensive production related infrastructure
in place. Silvermex is led by a highly experienced and successful team,
comprised of top executives from leading corporations in the silver mining
sector.
About Genco
Genco Resources Ltd. is a publicly traded mining company focused on developing
its core asset, the producing La Guitarra silver-gold property located in the
Temascaltepec Mining District of Mexico. La Guitarra Mine presently consists of
two underground operation centres and a flotation mill with a proven capacity of
320 tonnes per day. Genco is evaluating options for the expansion of existing
mining operations at La Guitarra Mine.
This News Release contains forward-looking statements. Forward looking
statements are statements which relate to future events. In some cases, you can
identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", believes", "estimates", "predicts",
"potential", or "continue" or the negative of these terms or other comparable
terminology. These statements include assumptions regarding the proposed
transaction between Silvermex and Genco, including that it will be completed in
accordance with the terms and conditions of the Agreement. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors that may cause actual results, level of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by these
forward-looking-statements. These risks include that the transaction is not
completed or that the combined company is not able to achieve expected results,
as well as other risks and uncertainties described in Silvermex's and Genco's
public filings.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect management's judgment regarding future
events, actual results will almost always vary, sometimes materially, from any
estimates, predictions, projections, assumptions or other future performance
suggests herein. Except as required by applicable law the company does not
intend to update any forward-looking statements to conform these statements to
actual results.
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