Northgate Diversifies with Mexican Mine

Canadian mining company Northgate Minerals has acquired Primero Mining for approximately $409m. Primero owns the San Dimas gold and silver mine in Mexico. The deal will give Northgate a total of three mines, with two in Australia. “It makes a lot of sense,” says analyst Chris Ecclestone of Hallgarten & Company, citing the increased diversification the San Dimas mine will provide Northgate. Northgate will acquire all of the issued and outstanding common shares of Primero for 1.50 in new Northgate common shares per Primero share, for total consideration of $4.215 per share. The offer represents 13.9% premium to Primero’s July 12 closing price of $3.70. Northgate shareholders will own 69% of the pro-forma entity. The offer includes a $25m breakup fee payable to Primero and a $12m fee payable to Northgate. Primero had originally acquired the San Dimas from Goldcorp in August last year for $216m in cash, $60m in convertible notes paying 3% interest, $50m in promissory notes paying 6% and 31m shares of Primero, leaving Goldcorp a 35.5% shareholder in Primero. Yesterday’s deal will make it an 11% shareholder in Northgate. The deal is expected to close in mid-September. Northgate has retained GMP Securities to act as financial advisor and Torys as legal advisor. Canaccord Genuity is acting as financial advisor for Primero, while McMillan is acting as legal advisor. Macquarie Capital Markets Canada and GMP Securities provided fairness opinions to the board of directors of Northgate. BMO Capital Markets did the same for Primero. Northgate’s shares rose 0 .35% to close at $2.90 on the Amex Wednesday.