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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Date of Report)
SEPTEMBER 16, 1996
COMMISSION FILE NUMBER 0-12207
PEGASUS GOLD INC.
(Exact name of registrant as specified in its charter)
PROVINCE OF BRITISH COLUMBIA NONE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 W. FIRST AVE., SUITE 1500, SPOKANE, WASHINGTON 99204
(Address of principal executive offices) (Zip Code)
(509) 624-4653
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On September 16, 1996, Pegasus Gold Inc. ("Pegasus") issued a press release
announcing an agreement to merge with Dayton Mining Corp. ("Dayton"). Under the
terms of the agreement, Pegasus, through a wholly owned subsidiary, will
amalgamate with Dayton. Each Dayton shareholder will be entitled to 0.75 of a
Pegasus share per Dayton share which places a value on the transaction of $390
million (C$530 million).
Completion of the merger will be subject to, among other things, a two-week
final due diligence period by both parties, receipt and acceptance of fairness
opinions, and receipt of the requisite shareholder, court and regulatory
approvals. The transaction is intended to constitute a pooling-of-interests
under U.S. generally accepted accounting principles and is expected to be
completed no later than December 31, 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION, AND EXHIBITS.
(a) Financial statements - not applicable.
(b) Pro forma financial information - not applicable.
(c) Exhibits:
(99.1) Joint News Release issued by the Company and Dayton
Mining Corporation dated September 16, 1996.
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FORM 8-K
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEGASUS GOLD INC. (Registrant)
Date: September 19 , 1996 By: /s/ Phillips S. Baker, Jr.
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Phillips S. Baker, Jr.
Vice President, Finance and Chief
Financial Officer
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PEGASUS GOLD INC. DAYTON MINING CORPORATION
601 WEST FIRST AVENUE 200 BURRARD STREET
SUITE 1500 SUITE 1610, WATERFRONT CENTRE
SPOKANE, WASHINGTON 99204 VANCOUVER, B.C. V6C 3L6
(509) 624-4653 - FAX (509) 838-8317 (604) 662-8383 - FAX (604) 684-1329
JOINT NEWS RELEASE
PEGASUS GOLD AND DAYTON MINING AGREE TO MERGE
September 16, 1996
Pegasus Gold Inc. (PGU: AMEX, TSE, ME) and Dayton Mining Corp. (DAY: AMEX,
TSE) are pleased to announce that they have entered into an agreement to merge.
Under the terms of the agreement, Pegasus, through a wholly owned subsidiary,
will amalgamate with Dayton. Each Dayton shareholder will be entitled to 0.75
of a Pegasus share per Dayton share which places a value on the transaction of
US$390 million or Cdn$530 million. This represents a 23 percent premium to
Dayton's closing share price on September 13, 1996. The combined company will
be called Pegasus Gold Inc. with an estimated market capitalization, based on
the exchange ratio and Pegasus' closing share price on September 13, 1996, of
US$860 million or Cdn$1.2 billion.
The combined company on a pro forma basis provides:
- - 1997 cash flow from mining operations of US$60 million rising to in excess
of US$100 million in 1998,
- - the world class Andacollo Gold Mine, which significantly lowers overall
cash costs, and
- - multiple exploration targets at seven producing mines on three continents.
Werner G. Nennecker, President and Chief Executive Officer of Pegasus said "We
are building an even more exciting, high-growth, intermediate gold producer with
enhanced cash flow and lower cash costs. Andacollo is a superior asset. We
believe this mine has the potential to host over three million ounces of minable
reserves. The average grade of this operation is 25 percent higher than
Pegasus' overall reserve grade. The acquisition of this low-cost production
contributes significantly to our objectives of lowering our overall cost profile
to below the industry average and producing one million profitable ounces by the
year 2000. This investment in Chile is consistent with our strategy of building
a strong presence in the countries in which we choose to operate."
"The Andacollo Gold Mine's low operating cost and substantial exploration
potential combined with our heap leach expertise, financial resources and strong
growth profile provides both groups of shareholders with sustainable benefits
from this transaction."
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Dayton's Chairman and Chief Executive Officer, Wayne McClay said "Dayton's
board and senior management support the transaction with Pegasus. Their multi-
mine portfolio gives asset diversification to our investors. The Company
provides an ideal partner to take Andacollo to the next stage of aggressive
production and reserve growth. This transaction also provides Dayton
shareholders a tax-efficient route to achieve an immediate premium, with
continued participation in Andacollo's upside. Dayton will contribute to the
strong growth profile of Pegasus and helps to create what will be North
America's eighth largest gold producer".
Dayton's key asset, the Andacollo Gold Mine is located in Chile about 400
kilometers north of Santiago. It has been in commercial production since
January 1, 1996. During 1997, it is expected to produce 145,000 ounces of gold
at a cash cost of US$180 per ounce. Andacollo is an under-explored district
that has historically produced approximately three million ounces of gold. The
development expertise gained at Andacollo complements Pegasus' investment in the
Pullalli gold project some 250 kilometers to the south.
BENEFITS TO PEGASUS SHAREHOLDERS
The proposed merger is a significant step towards achieving Pegasus' objective
of adding shareholder value through reserve growth, production growth and
lowering overall cash costs.
As of January 1, 1996, Andacollo added 1.3 million ounces of minable gold
reserves, bringing the total minable reserves of the new Pegasus to 8.6 million
ounces. Based on the companies' latest published figures, total resources for
the new Pegasus would increase by 2.6 million ounces to a total of 17 million
ounces of gold.
Estimated 1997 gold production is projected to increase over 20 percent to
740,000 ounces. During 1998, with the Mt. Todd Mine operating at full capacity,
gold production will total an estimated 880,000 ounces for the new entity. The
addition of Andacollo brings Pegasus a major step closer to achieving its
production goal of one million ounces by the year 2000.
Andacollo immediately reduces the projected average cash cost for 1997 of the
combined Company to US$255 per ounce. Going forward, as Pegasus' current
construction and development projects come into full production, the cash cost
continues to decline to US$245 and US$240 per ounce in 1998 and 1999,
respectively.
The overall effect of lowering the cash and total cost of the new company
positively impacts operating cash flow to fund continued growth. In 1997, the
operating cash flow increases by 50 percent from the addition of the cash flow
from Andacollo. During 1998 and 1999, cash flow from mining operations is
expected to exceed US$100 million per year. Additionally, cash flow from
Andacollo can provide a tax-efficient source of funding for the US$50 million
capital requirement for the Pullalli project in Chile.
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PRODUCTION AND COST FORECAST OF THE NEW PEGASUS
1997 1998 1999
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Gold Production (oz.) 740,000 880,000 880,000
Cash Costs (US$/oz.) 255 245 240
Total Costs (US$/oz.) 350 350 350
Operating Cash Flow 60 100 115
(US$million)
BENEFITS TO DAYTON SHAREHOLDERS
The terms of the transaction represent a 23 percent premium to the market.
Further, the proposed amalgamation significantly increases the leverage to gold
price movements for existing Dayton shareholders. The merger offers instant
geographic diversification of the company's assets, while giving Dayton
shareholders an equity stake in an exciting gold production growth profile. The
new company will become the eighth largest North American gold producer.
EXPLORATION
There have been 2.6 million ounces of gold resources discovered on the property
at a finding cost of under US$10 per ounce. In 1996, drilling of 12,000 meters
produced 350,000 ounces of resource. Drilling results of 9,000 meters are
anticipated in the last quarter of 1996.
Dayton recently acquired three grass roots exploration properties which have
excellent potential to host additional gold mineralization.
OTHER TERMS OF THE TRANSACTION
Dayton's Wayne McClay has agreed to accept a position on Pegasus' Board of
Directors. Mr. McClay and the other directors and officers of Dayton, holding
an aggregate of 8,153,359 shares, representing approximately 20 percent of the
outstanding shares of Dayton, have entered into an agreement entitling Pegasus
to vote their shares of Dayton in favor of the transaction at the Dayton
shareholders' meeting. Pegasus currently holds no Dayton shares. The plan of
arrangement provides for the payment of a break-up fee, based on the value of
the transaction, in the event the transaction is not completed as a result of a
competing transaction.
Completion of the merger will be subject to, among other things, a two-week
final due diligence period by both parties, receipt and acceptance of fairness
opinions, and receipt of the requisite shareholder, court and regulatory
approvals. Pegasus has retained CIBC Wood Gundy Securities Inc., and Dayton has
retained Nesbitt Burns Inc. as financial advisors for the transaction. The
merger is expected to be accounted for as a pooling-of-interest under U.S.
generally accepted accounting principles and to be completed no later than year
end.
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Statements in this news release which are not historical data, are forward
looking and involve a number of risks and uncertainties, including but not
limited to the price of gold and other commodities and currencies, production,
construction and permitting or regulatory delays, reserve estimation of tonnage,
grade and metallurgical recoveries, exploration success and reserve growth,
litigation, capital costs, and other risks that are detailed in the companies'
SEC filings.
FOR FURTHER INFORMATION CONTACT:
PEGASUS GOLD INC. DAYTON MINING CORPORATION
John W. Pearson Diane R. Thomas
Director Investor Relations Vice President, Investor Relations
(509) 624-4653 (604) 662-8383
