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Wednesday, 13 February 2013
Orko Silver gains after superior bid by Coeur d'Alene Mines
Shares of Orko Silver Corp. (CVE:OK) rocketed higher this morning after the company said it received what it called a "superior" takeover proposal from Coeur d'Alene Mines (TSE:CDM) (NYSE:CDE), creating a potential bidding war with First Majestic (TSE:FR) (NYSE:AG).
Orko said that the $2.70 per share offer value from Coeur d'Alene is 25% higher than the implied value of First Majestic's bid announced back in December, based on the February 12 closing price of both First Majestic and Coeur d'Alene.
The new bid is also 71% higher than Orko's share price on December 14 - the last trading day prior to its agreement with First Majestic. Orko's shares rose almost 18% Wednesday morning, to $2.52.
Under the terms of the Coeur offer, Orko shareholders can choose between three alternatives, offering shares, cash and warrants, shares and warrants, or cash and warrants, respectively.
Orko said that except for the consideration, the agreement proposed by Coeur is "substantially similar" to the First Majestic friendly bid.
The Coeur deal includes a break fee of C$11.6 million, consistent with the fee payable to First Majestic under that agreement, Orko said.
First Majestic has a period of five business days, expiring just before midnight Pacific time on Tuesday February 19, to respond to the new offer.
Orko owns a 100% interest in the developing La Preciosa project that covers 80,000 acres of contiguous mining claims in Mexico, while First Majestic owns three producing silver mines and two development projects in Mexico: La Encantada, La Parrilla, Del Toro, San Martin and La Luz.
Coeur d'Alene Mines is the largest U.S.-based primary silver producer and a growing gold producer, generating from its Palmarejo silver-gold mine in Mexico, the San Bartolomé silver mine in Bolivia, the Rochester silver-gold mine in Nevada and the Kensington gold mine in Alaska.
Orko's La Preciosa is one of the largest undeveloped primary silver resources globally, and would add to either First Majestic's or Coeur d'Alene's land position in the Sierra Madre Belt, which is one of the world's most prolific silver and gold regions.
“We are pleased that Orko’s Board of Directors unanimously determined that our proposal is superior to the First Majestic offer,” said president and CEO of Coeur d'Alene, Mitchell J. Krebs.
“Based upon the substantial cash component of the proposal and the liquidity of Coeur’s common shares, we believe our proposal provides Orko shareholders with an attractive premium, superior value certainty, and the opportunity to share in the significant upside potential of the combined entity.
"We have a demonstrated track record of developing, commissioning and operating large-scale precious metals assets as well as the financial resources necessary to bring Orko’s La Preciosa project into production."
The deal would no doubt also diversify Coeur's asset mix and Orko shareholders would also benefit from Coeur's diverse spread, with mining properties in Mexico, Bolivia, Alaska, Nevada, Australia and Argentina.
The combination would also give Orko access to strong cash flow and a substantial production profile, Coeur said in its statement, with over US$500 million in available liquidity to support mine development and other growth initiatives.
Coeur's offer has already been approved by its board, with no shareholder approvals required to close the deal, which is not conditional on any financing.
Orko said that if First Majestic responds with a revised deal that its board deems "superior" to Coeur, then it will be required to enter into that agreement with First Majestic.
First Majestic said back in December that La Preciosa's planned development timeline blends well with its existing organic growth strategy, with anticipated start up timed after the ramp up of Del Toro and La Guitarra.
La Preciosa is also in close proximity to First Majestic's existing La Parrilla and Del Toro mines, allowing First Majestic to strengthen its position in the area.
If there is no superior bid, Orko's directors will enter into lock up agreements with Coeur, meaning they will vote in favour of the bid at a special meeting of shareholders to vote on the deal.