The Combined Company will have:
- Initial Production of Approximately 45,000 Ounces of Gold per
Year Increasing to 130,000 Ounces of Gold per Year Following
Completion of the Orosi Mill Installation in 2009; and
- Approximately US$20.0 Million in Cash and Cash Equivalents
- 726,700 ounces of gold in Proven and Probable Reserves,
1,114,000 ounces of gold in Measured and Indicted, and 861,200
ounces of gold in Inferred Resources
Linear Gold Corp. (TSX: LRR) ("Linear Gold") and Central Sun
Mining Inc. (TSX: CSM)(NYSE ALTERNEXT US: SMC)("Central Sun" or
"CSM") are pleased to announce that they have signed a letter
agreement whereby Linear Gold will acquire all of the outstanding
common shares of Central Sun in exchange for common shares of
Linear Gold (the "Transaction"). Pursuant to the Transaction, CSM
shareholders will receive 0.4 Linear Gold common shares for each
CSM common share held.
Wade Dawe, President and Chief Executive Officer of Linear Gold,
stated, "We believe this transaction is an attractive opportunity
to acquire a portfolio of gold assets which includes the Limon
Mine, currently producing approximately 45,000 ounces of gold per
year, the Orosi Mine, with planned production of approximately
85,000 ounces of gold annually following a nine month construction
period, and the highly prospective Mestiza-La India Property, which
represents a potential high grade development opportunity for the
future. Together, Linear and Central Sun plan to pursue a growth
strategy focused on building an aggressive and very profitable gold
producer."
Stan Bharti, the Chairman of Central Sun, commented, "We believe
that the combination of Central Sun and Linear Gold will form the
basis for the next intermediate gold producer. The combined company
brings together gold production, potential near-term production
expansion, financial resources and an experienced management team.
The combined company will be well positioned to leverage continued
strength in the price of gold in 2009."
Conference Call
A conference call will be held on January 6th, 2009, 2:00 p.m.
(Toronto time) to discuss this Transaction. An investor
presentation outlining the Transaction will be made available on
the Linear Gold and Central Sun websites on or before January 6th,
2009. Please use the following information to access the call:
Dial in: 416-695-9753
Toll Free: 1-877-461-2814
There will be a question and answer session following management
presentations during the call.
Highlights of the Transaction
Upon completion of the Transaction, Linear Gold, continuing as
the combined company will feature:
- Annual production of approximately 45,000 ounces of gold
increasing to 130,000 ounces of gold following completion of the
Orosi mill installation.
- Proven and probable gold mineral reserves estimated to be
approximately 730,000 ounces, and measured and indicated gold
mineral resources estimated to be approximately 1,114,000 ounces.
See chart at end of release for details; Approximately CDN$24
million (US$20 million) in cash and cash equivalents;
- Significant potential for growth through exploration at
Central Sun's properties in Nicaragua and Linear Gold's promising
Ixhautan Gold Project in Mexico and Ampliacion Pueblo Viejo, Loma
El Mate and Loma Hueca Gold Properties in the Dominican
Republic;
- Management and board of directors with experience operating,
developing, and financing mining companies;
- Strategic position to leverage expected consolidation in the
gold industry.
Upon completion of the Transaction, Linear Gold will have
approximately 53.2 million common shares issued and outstanding,
with former Central Sun shareholders holding approximately 48% of
the issued and outstanding common shares of the combined
company.
Compelling Combination
The combination will bring significant benefits to each of the
companies and their shareholders. The boards of directors of both
Central Sun and Linear Gold unanimously support the proposed
combination.
For Central Sun,
- The exchange ratio of 0.4 Linear Gold common shares for each
Central Sun common share values Central Sun at approximately
$CDN18.4 million, or approximately $CDN0.292 per CSM common share,
which represents a premium of 75% based on the 20-day volume
weighted average TSX price of Central Sun and Linear Gold shares
from December 23, 2008, the trading day prior to the announcement,
and 42% based on the respective closing prices on December 23,
2008;
- Helps to facilitate development of the Orosi gold project
resulting in increased gold production in the combined company;
- Provides cash resources of approximately CDN$24 million (US$20
million), which addresses Central Sun's immediate working capital
needs and will partly fund development activities to re-commence
production at Orosi;
- Provides exposure to Linear Gold's promising Ixhautan Gold
Project in Mexico, which Kinross Gold Corporation has been
exploring and evaluating under an option agreement to acquire up to
a 70% interest in exchange for future cash payments to Linear Gold
of up to US$115 million; and
- Provides shareholders with a significant stake in the combined
company that is well positioned to participate in expected future
consolidation in the gold industry.
For Linear Gold,
- Adds current production of approximately 45,000 ounces of gold
per year
- Adds planned production growth, as Central Sun projects 2010
gold production of 130,000 ounces based on the re-commencement of
production at the Orosi project;
- Significantly increases estimated mineral reserves and
resources;
- Adds skilled mining operations team, experienced in
successfully operating and developing mines;
- Provides exposure to exploration success at Central Sun's
Limon, Orosi and Mestiza-La India projects; and
- Provides shareholders with a significant stake in the combined
company that is well positioned to participate in expected future
consolidation in the gold industry.
CSM Board of Directors' Recommendations
The Transaction will be subject to approval of the shareholders
of CSM. The Board of Directors of Central Sun has determined to
recommend that CSM shareholders vote in favour of the Transaction.
In addition, the Central Sun directors have indicated that they
intend to vote their CSM shares in favour of the Transaction.
Transaction Details
The Transaction is expected to be structured as a plan of
arrangement between Central Sun and a newly formed, wholly-owned
subsidiary of Linear Gold. Under the terms of the Transaction, CSM
shareholders will receive 0.4 common shares of Linear Gold for each
common share of Central Sun held. Each outstanding Central Sun
convertible security will become exercisable for Linear Gold common
shares based on the exchange ratio and resulting price adjustment.
Under certain circumstances, prior to closing, Linear Gold
shareholders will be entitled to receive up to 7.5 million warrants
of Linear Gold exercisable at $1.00 per share and expiring in 24
months. The Board of Directors of the combined company will be
comprised of three representatives of Linear Gold and three
representatives of Central Sun. Wade Dawe shall be appointed as
Chairman and Peter Tagliamonte will be appointed as President and
Chief Executive Officer of Linear Gold.
Linear Gold has entered into lock-up agreements with CSM
officers, directors and shareholders who hold approximately 10.5%
of the outstanding CSM common shares, pursuant to which they have
agreed to vote in favour of the Transaction on the terms proposed
above, subject to certain conditions.
The letter agreement includes a commitment by Central Sun not to
solicit alternative transactions to the proposed Transaction.
Linear Gold has also been provided with certain other rights
customary for a transaction of this nature, including the right to
match competing offers made to CSM. The Letter Agreement also
provides for a break fee of CDN$1,000,000 to be payable to Central
Sun or Linear Gold in certain circumstances.
The Transaction is subject to the parties entering into a
definitive agreement by January 29, 2009 and the receipt of all
necessary regulatory approvals and necessary shareholder approvals
at special meeting(s) to be held no later than April 30, 2009.
Closing of the Transaction is set to occur by no later than May 31,
2009.
The parties have agreed that the shareholders of the combined
company will consider a special resolution changing the name of the
combined company to Central Sun Mining Corp., at its first annual
general meeting.
Linear Gold's legal counsel is Cox & Palmer. Central Sun's
legal counsel is Cassels Brock & Blackwell LLP.
About Linear Gold
Linear Gold Corp. is actively exploring for gold and base metal
deposits through joint ventures with Kinross Gold in Mexico and
Everton Resources in the Dominican Republic.
About Central Sun
Central Sun Mining Inc. is a gold producer with mining and
exploration activities focused in Nicaragua. Central Sun operates
the Limon Mine in Nicaragua and is converting the Orosi Mine in
Nicaragua to conventional milling to increase the annual gold
output. It also holds an option to acquire a 100% interest in the
Mestiza gold property which is located 70 kilometres by road east
of the Limon Mine. The Company is focused on efficient and
productive mining practices to establish high quality and cost
effective operations. Central Sun is committed to growth by
optimizing current operations, expanding mineral reserves and
resources at existing mines, exploring its extensive land holdings
and seeking strategic mergers or acquisitions in the Americas.
Peter Tagliamonte, P.Eng., who is the President and CEO of
Central Sun and a qualified person under National Instrument
43-101, has reviewed the scientific and technical information in
this press release relating to Central Sun and its properties.
This communication does not constitute an offer to purchase or
exchange or the solicitation of an offer to sell or exchange any
securities of Central Sun or an offer to sell or exchange or the
solicitation of an offer to buy or exchange any securities of
Linear Gold, nor shall there be any sale or exchange of securities
in any jurisdiction (including the United States) in which such
offer, solicitation or sale or exchange would be unlawful prior to
the registration or qualification under the laws of such
jurisdiction. The distribution of this communication may, in some
countries, be restricted by law or regulation. Accordingly, persons
who come into possession of this document should inform themselves
of and observe these restrictions. The solicitation of offers to
buy Linear Gold shares in the United States will only be made
pursuant to a prospectus and related offer materials that Linear
Gold expects to send to holders of Central Sun securities, subject
to the requirements of applicable law. The Linear Gold shares may
not be sold, nor may offers to buy be accepted, in the United
States prior to the time the registration statement (if any is
filed) becomes effective or an exemption from such requirements is
available. No offering of securities shall be made in the United
States except (i) by means of a prospectus meeting the requirements
of Section 10 of the United States Securities Act of 1933, as
amended, which would contain detailed information regarding Linear
Gold and its management, as well as its financial statements, or
(ii) pursuant to an exemption from the registration requirements of
the United States Securities Act of 1933, as amended.
Cautionary Note Regarding Forward-Looking Information This press
release contains "forward-looking information" within the meaning
of applicable Canadian securities legislation. Forward-looking
information includes, but is not limited to, statements with
respect to the future financial or operating performance of Linear
Gold and Central Sun and its projects, statements regarding
exploration prospects, statements regarding synergies and financial
impact of the proposed transaction, the terms and conditions of the
transaction, the benefits of the proposed transaction, the
identification of mineral reserves and resources, costs of and
capital for exploration and development projects, exploration and
development expenditures, timing of future exploration and
development activities, expected production, requirements for
additional capital, government regulation of mining operations,
environmental risks, reclamation expenses, title disputes or
claims, limitations of insurance coverage and the timing and
possible outcome of pending litigation and regulatory matters.
Generally, forward-looking information can be identified by the use
of forward-looking terminology such as "plans", "expects" or "does
not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or state that
certain actions, events or results "may", "could", "would", "might"
or "will be taken", "occur" or "be achieved".
Forward-looking information is based on various assumptions and
on the nest estimates of CSM or Linear Gold, as the case may be, as
of the date hereof, and is subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of the Company (and
the company resulting from the successful completion of the
proposed transaction) to be materially different from those
expressed or implied by such forward-looking information, including
but not limited to: general business, economic, competitive,
political and social uncertainties; the actual results of current
exploration activities; delay or failure to receive board or
regulatory approvals; timing and availability of external financing
on acceptable terms; the business of Linear Gold and Central Sun
not being integrated successfully or such integration proving more
difficult, time consuming or costly than expected; not realizing on
the potential benefits of the proposed transaction; conclusions of
economic evaluations; changes in project parameters as plans
continue to be refined; future prices of mineral prices; failure of
plant, equipment or processes to operate as anticipated; accidents,
labour disputes and other risks of the mining industry; and, delays
in obtaining governmental approvals or required financing or in the
completion of activities, and as well as those risks identified
under "Risk Factors" disclosure sections in the documents filed
under the profile of SEDAR by CSM and/or Linear from time to time.
Although the Company has attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward-looking information, there may be other
factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such information will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking information. The Company does not undertake to
update any forward-looking information, except in accordance with
applicable securities laws.
Schedule A
MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES
COMBINED CENTRAL SUN MINING INC. AND LINEAR GOLD CORP.
(as at January 31, 2008)
Mineral Reserves
Mine Tonnes Grade (g/t) Gold (ounces)
----------------------------------------------------------------------------
LIMON(2)
Proven 156,400 6.04 30,400
Probable 1,224,600 4.75 186,900
----------------------------------------------------------------------------
Total 1,381,000 4.89 217,200
OROSI(3)
Probable 11,017,000 1.44 509,500
----------------------------------------------------------------------------
Total 11,017,000 1.44 509,500
Total Proven and Probable
Mineral Reserves 12,398,000 1.82 726,700
Mine Tonnes Grade (g/t) Gold (ounces)
----------------------------------------------------------------------------
LIMON(2)
Measured 30,000 4.65 4,500
Indicated 354,100 5.02 57,200
----------------------------------------------------------------------------
Total 384,000 4.99 61,600
OROSI(3)
Indicated 4,126,000 1.51 200,400
----------------------------------------------------------------------------
Total 4,126,000 1.51 200,400
IXHUATAN(5)
Measured 1,320,000 4.8 204,000
Indicated 8,050,000 2.5 648,000
Total 9,370,000 2.8 852,000
Total Measured & Indicated
Mineral Resources 13,880,000 2.48 1,114,000
----------------------------------------------------------------------------
Inferred Mineral Resources
Mine/Project Tonnes Grade (g/t) Gold (ounces)
----------------------------------------------------------------------------
LIMON(2)
Total 1,291,000 5.91 246,000
OROSI(3)
Total 3,371,000 0.76 82,600
MESTIZA(4)
Total 558,000 8.80 158,600
IXHUATAN(5)
Total 7,130,000 1.6 374,000
----------------------------------------------------------------------------
Total Inferred 12,350,000 2.15 861,200
Notes:
(1) The mineral reserves and resources reported herein are based on the CIM
Definition Standards for Mineral Resources and Mineral Reserves adopted
by the CIM Council on December 11, 2005 ("CIM Standards"). Mineral
Resources that are not mineral reserves do not have demonstrated
economic viability. Mineral resources are in addition to Mineral
Reserves.
(2) Mineral Reserve and Mineral Resource estimates for the Limon mine were
prepared by CSM mine personnel under the supervision of Dr. William
Pearson, P.Geo. and Mr. Graham Speirs, P.Eng. both of whom are
Qualified Persons as defined under National Instrument 43-101.
(3) The Mineral Reserve and Resource at Orosi (formerly La Libertad) was
prepared as of January 31, 2008 by Scott Wilson Roscoe Postle &
Associates Ltd. (Scott Wilson RPA).
(4) The Inferred Mineral Resource for Mestiza was prepared by CSM
exploration personnel under the supervision of Dr. William Pearson,
P.Geo. a Qualified Person as defined by NI 43-101. The estimate is
based on historical drilling and recent trench sampling and drilling
by CSM.
(5) The Independent Qualified Person responsible for the Ixhuatan resource
estimates is Gary Giroux, P. Eng. of Giroux Consultants Ltd. A
Technical Report prepared to National Instrument 43-101 requirements
has been filed on SEDAR.
(6) Totals may not add up due to rounding.
Contacts: LINEAR GOLD CORP. Wade K. Dawe President and Chief
Executive Officer (902) 422-1421 Website: www.lineargoldcorp.com
CENTRAL SUN MINING INC. Peter Tagliamonte President and Chief
Executive Officer (416) 860-0919 Email: ir@centralsun.ca
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