BHP spin-off South 32 has entered into an agreement to buy out the remaining 83% of Arizona Mining it doesn’t already own.
The deal is based on an all-cash offer of $US1.3 billion ($C1.8 billion) for the Toronto-listed company.
It values Arizona Mining at $C6.20 per share, which is a 50% premium to Friday’s closing price and gives Arizona a total equity value of around $US1.6 billion.
The purchase of Arizona will give South32 strategic ownership of a high-grade base metals deposit.
The company’s assets include 100% ownership of the Hermosa Project in Santa Cruz County, Arizona. It contains the Taylor deposit of zinc, manganese and silver oxide. The deal also include a large land package for exploration, with the potential for discover of polymetalic and copper minerals.
South 32 CEO Graham Kerr called the Arizona deposit “one of the most exciting base metal projects in the industry”.
The Board of Arizona Mining has unanimously recommended that their shareholders accept the South32 proposal.
Directors of Arizona Mining currently hold 34% of the shares in on issue. In order for the deal to proceed, it will require the vote of at least 66.67% of Arizona shareholders.
A shareholder meeting to vote on the proposal is expected to be held sometime in the September quarter.
Arizona founder Richard Warke said the deal “represents a premium reflective of the truly world class nature of the Hermosa Project and allows shareholders to realise immediate value.”
“In addition, the transaction is not conditional on financing, which significantly reduces transaction risk.”
To help facilitate the transaction, South32 will provide Arizona with a $C70 million working capital debt facility, at commercial rates.