Hochschild reduces stake in L

RNS Number : 4020U

Hochschild Mining PLC

14 October 2010

 



14 October 2010 

Hochschild reduces stake in Lake Shore Gold to 6%

Hochschild Mining plc ("Hochschild") announces today that it has entered into an agreement to reduce its stake in Lake Shore Gold Corp ("Lake Shore Gold") from approximately 35% to 6% at a price of C$3.60 per common share, representing a 33% gain on the average purchase price of C$2.70 per share. Total gross proceeds of C$392.4¹ million will mostly be used to support the Company's organic growth strategy through investment in its extensive and rapidly expanding exploration pipeline, including funding Azuca and Inmaculada to production.

Under the terms of the agreement, RBC Dominion Securities Inc., BMO Nesbitt Burns Inc. and CIBC World Markets Inc. will purchase 109,000,000 of the common shares of Lake Shore Gold held by Hochschild, on a bought deal basis for onward sale. Immediately following the closing of the offering, Hochschild will continue to hold 21,540,992 common shares of Lake Shore Gold, representing approximately 6% of issued and outstanding common shares. The transaction is expected to close on 3 November 2010.

Ignacio Bustamante, CEO of Hochschild Mining said:

"Today's transaction demonstrates our focus on value creation through organic growth and will provide the funds to progress our strategy of securing and developing early stage,highly value accretive projects which have significant upside potential and a clear path to control. Since we identified the geological potential of Lake Shore Gold in 2007, we have supported the company in moving towards production and we are delighted with the progress achieved to date which provides us with a profitable return on our investment."

Hochschild's stake in Lake Shore Gold is disclosed on its consolidated income statement under the equity method and as at 31 December 2009, the share of Lake Shore Gold's profit was US$47.0 million which included a one-off gain of US$101.5 million from the Group's share in Lake Shore Gold's acquisition of 100% of West Timmins' net assets. The asset value of the Lake Shore Gold holding is also disclosed on Hochschild's consolidated statement of financial position under "investments accounted under equity method". Following the transaction, Hochschild's remaining holding in Lake Shore Gold will be marked to market and will be disclosed under "available for sale financial assets".

¹ Prior to payment of expenses and underwriting fees

Enquiries:

Hochschild Mining plc

Isabel Lütgendorf                                                                                    [phone]

Head of Investor Relations

Finsbury

Faeth Birch                                                                                           [phone]

Public Relations

Lake Shore Gold Corp.

Tony Makuch

President & CEO                                                                                   [phone]

Mark Utting

Vice-President, Investor Relations                                                           [phone]

 

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