425: McEwen Mining Announces Friendly Acquisition of Timberline Resources for US$18.8 Million

McEwen Mining will acquire Timberline Resources in a merger transaction valued at US$18.8 million, augmenting McEwen's Nevada development and exploration projects.

Summary

• McEwen Mining has entered into an agreement to acquire Timberline Resources through a merger.
• Timberline shareholders will receive 0.01 of a McEwen Mining share for each Timberline share, valuing Timberline at US$0.102 per share.
• This represents a 132% premium to Timberline's 20-day volume-weighted average price on the OTCQB.
• Excluding McEwen's existing ownership, McEwen expects to issue approximately 1.84 million shares for a transaction value of US$18.8 million.
• The transaction is subject to customary conditions, including regulatory and stock exchange approvals, and Timberline shareholder approval.
• Timberline's board of directors has unanimously recommended shareholders vote in favor of the transaction.
• Directors, officers, and two principal shareholders of Timberline, holding approximately 40% of Timberline's outstanding shares, have entered into voting and support agreements with McEwen.
• Timberline has agreed not to solicit other acquisition proposals and would be required to pay McEwen a US$400,000 termination fee if it accepts a superior offer.
• Outstanding Timberline warrants will be converted into warrants to acquire McEwen shares based on the exchange ratio.
• In-the-money Timberline stock options will vest and be converted into the right to receive McEwen shares at the Exchange Ratio less the exercise price per stock option; all other outstanding Timberline stock options will be cancelled.

Sentiment

Score: 8

Explanation: The announcement is positive due to the significant premium offered to Timberline shareholders and the unanimous recommendation from Timberline's board. The deal expands McEwen's portfolio and has strong support from key Timberline stakeholders.

Positives

• McEwen Mining expands its portfolio of development and exploration projects in Nevada.
• Timberline shareholders receive a significant premium of 132% over the recent trading price.
• The transaction has the unanimous support of Timberline's board of directors.
• Key Timberline shareholders, representing 40% of outstanding shares, have committed to voting in favor of the transaction.

Negatives

• Timberline is subject to deal-protection provisions, limiting its ability to solicit other offers.
• Timberline will be required to pay McEwen a termination fee of US$400,000 if it terminates the agreement to accept a superior offer.
• Outstanding Timberline stock options that are not in-the-money immediately prior to the closing of the Transaction will be cancelled.

Risks

• The transaction is subject to customary conditions, including regulatory and stock exchange approvals, and Timberline shareholder approval, which may not be obtained.
• Forward-looking statements are subject to risks and uncertainties, including fluctuations in metal prices, mining industry risks, and political and economic risks associated with foreign operations.
• The ability of the Company to receive or receive in a timely manner permits or other approvals required in connection with operations, risks associated with the construction of mining operations and commencement of production and the projected costs thereof, risks related to litigation, the state of the capital markets, environmental risks and hazards, uncertainty as to calculation of mineral resources and reserves, foreign exchange volatility, foreign exchange controls, foreign currency risk, and other risks.

Future Outlook

The transaction is expected to augment McEwen's existing portfolio of development and exploration projects in Nevada. The closing of the Transaction is subject to customary conditions, including receipt of necessary regulatory and stock exchange approvals and approval from Timberlines shareholders holding a majority of its outstanding shares.

Industry Context

This acquisition reflects a trend of consolidation in the mining industry, where larger companies acquire smaller entities to expand their project portfolios and resource base, particularly in established mining jurisdictions like Nevada.

Comparison to Industry Standards

• The 132% premium offered to Timberline shareholders is significantly higher than the average premium paid in recent mining acquisitions, which typically range from 20% to 50%.
• Comparable transactions include Kinross Gold's acquisition of Great Bear Resources, which also involved a significant premium to market price.
• The termination fee of US$400,000 is relatively small compared to the overall transaction value, suggesting a high level of confidence in the deal's completion.

Stakeholder Impact

• Timberline shareholders will receive a significant premium for their shares.
• McEwen Mining shareholders may benefit from the expanded project portfolio and potential synergies.
• Employees of both companies may experience changes as a result of the integration.

Next Steps

• Timberline will seek shareholder approval for the transaction.
• McEwen Mining will file for regulatory and stock exchange approvals.
• The companies will work to satisfy all customary closing conditions.
• McEwen Mining will integrate Timberline's assets into its existing portfolio.

Key Dates