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Precious metal miner Hochschild to buyout partner in Peru assets

The Sydney News.Net Wednesday 2nd October, 2013

TORONTO UK-based precious metals miner Hochschild Mining on Wednesday said it planned to buy the remaining 40% interest in its Peruvian assets - the Pallancata silver mine and the Inmaculada gold-silver development project, from its partner Arizona-based Canadian miner International Minerals Corp (IMC) for about $280-million.


Under the agreement, Hochschild will acquire all of International Minerals, while each IMZ shareholder will receive roughly $2.46 per common share as well as one share of a new Canadian public company for each common share of IMZ, representing total consideration of approximately $3.04 to $3.31 per share.

This corresponds to a premium of 15 per cent to 25 per cent to IMZ's spot price of $2.65, the company said in a release Wednesday.

The LSE-listed company said it plans to raise up to $96-million in an equity placing to partially fund the acquisition.

As part of a broader corporate refinancing initiative, Hochschild said it had raised commitments for a $340-million acquisition bridge financing facility subject to cancellation of the $140-million Suyamarca loan facility; and was undertaking an equity placing to institutional investors, including Eduardo Hochschild, of between 4.99% and 9.99% of Hochschild's outstanding share capital, representing about $48-million to $96-million.

In the event, a total of 29-million new ordinary shares of 0.25 pound each in Hochschild were placed by Goldman Sachs International and Merrill Lynch International at a price of 1.55 pound apiece, raising gross proceeds of about $72.8-million.

Hochschild CEO Ignacio Bustamante saidHe added that while Hochschild and IMZ's joint venture had benefited greatly from each other's respective skill sets, taking full ownership had become necessary for the group.

The transaction represented an important opportunity to increase the company's exposure to the southern Peru cluster, reduce its overall operating cost position and to potentially enhance its cash flow generating potential at no additional ongoing administrative cost.

"We are excited to be announcing today a strategic milestone for Hochschild by consolidating ownership in Pallancata, currently our biggest cash flow generator and Inmaculada, our most exciting growth project," Bustamante added.

The company said its other growth project, Crespo, would be deferred as it focused its capital expenditure on the Inmaculada project.

Hochschild, which also has projects in Argentina and Chile, stated that it remained on track to produce 20-million attributable silver equivalent ounces in 2013.

Shares in International Minerals Corp. closed at $2.61 in Toronto the trading session prior to the announcement, and rose almost 10 per cent to $2.87 in early deals Wednesday.

Hochschild Mining Plc was trading down in London the day of the announcement, losing 1700 pence to reach 15750 pence as of 2.49 pm EST, a loss of more than 9 per cent.

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