Canadian Diamonds!
Another underground hedge against inflation and a falling USD. Shore Gold + Kensington Resources!
Saskatoon, Saskatchewan and Vancouver, British Columbia -- August 15,
2005 -- Shore Gold Inc. (TSX: SGF) ("Shore") and Kensington Resources
Ltd. (TSX-V: KRT) ("Kensington"), two of Canada's most advanced diamond
exploration companies, announce that they have reached a definitive
agreement to merge. Under the terms of the agreement, Shore will offer
0.64 Shore common shares for each common share of Kensington. Based on
the closing price of Shore on August 12, 2005 of $5.45, this offer
values Kensington at $3.49 per share representing a premium of 35% to
Kensington based on both parties' respective 30-day average closing
share prices and a premium of 45% to Kensington's closing share price
on August 12, 2005.
"This is a truly synergistic combination that achieves our strategic
goals and further consolidates the Fort à la Corne diamond trend under
one public company. Both shareholder groups will have an unparalleled
opportunity to realize the growth potential of one of the largest
diamond fields in the world. We intend to aggressively pursue the
development of the Star property and the adjoining FALC ground with our
joint venture partners and to fully maximize the potential of the
region. Our goal is to create an exciting long term future for all
stakeholders," said Kenneth E. MacNeill, President and CEO of Shore
Gold Inc.
"The combination of our two companies presents a wonderful opportunity
for all stakeholders at Fort à la Corne. Kensington shareholders will
benefit from exposure to the potential for the near-term development of
a diamond mine at the Star Kimberlite, they will continue to
participate in the aggressive development of the Fort à la Corne joint
venture diamond project and they will realize an immediate premium to
the current share price," says Robert A. McCallum, President and CEO of
Kensington Resources Ltd. "With Board and management participation in
the new entity, Kensington's people will be an integral part of the
organization going forward."
Highlights of the combined company include:
Consolidation of the Highly Prospective Fort à la Corne Region
. Fort à la Corne is one of the world's largest diamond-bearing
kimberlite fields with proven macrodiamond and large stone potential
. Compelling combination of Shore's 100% interest in the Star
Kimberlite with over 240 million tonnes of kimberlite grading 15.7 cpht
and Kensington's 42.245% interest in 63 kimberlite bodies including
over 369 million tonnes of kimberlite with 35 million carats identified
to date
Aggressive Exploration and Development Plan
. Combined company will have a cash position of approximately $175
million ($220 million fully diluted), with no debt, to aggressively
pursue its exploration and development plans
. $21 million has been budgeted by Shore for 2005 to advance the Star
pre-feasibility study (total budget of $44 million with expected
completion in 2007)
. $26.5 million has been budgeted by Kensington and the other FALC
joint venture partners for the 2005 exploration program for the Fort à
la Corne joint venture diamond project as part of an aggressive three
year plan to identify 70 million carats and advance to a
pre-feasibility decision
. Combined company's FALC joint venture interest will continue to
benefit from the expertise, resources and technical skills of De Beers,
the global leader in the diamond industry
Synergy Potential
. Potential for significant development synergies and operational
economies of scale
. Combined company will have a market capitalization of over $780
million, increased trading liquidity, a larger, more diverse
shareholder base and an enhanced profile both domestically and
internationally, all of which are expected to provide it with better
access to capital
Strong Management and Board
. Kenneth MacNeill will be the President and CEO and will lead an
integrated management team
. James R. Rothwell (former President of BHP Diamonds Inc.) will be
non-executive Chairman of the combined board of directors
. The eight-member board of directors will consist of five existing
Shore directors (Kenneth MacNeill, Arnie Hillier, Neil McMillan, Ronald
Walker, Harvey Bay) and three Kensington nominees (James R. Rothwell,
Robert McCallum and William Stanley)
Strong Sponsorship
. Newmont is highly supportive of this transaction and has confirmed
their desire to maintain a 9.9% interest in the combined company
"As a major shareholder of Shore we fully support the combination of
Shore and Kensington. It will give the combined shareholders the
benefits of Shore's exciting, wholly owned development project and the
exploration potential on the FALC joint venture's 63 already known
kimberlites. The economies of scale to be realized from this merger
could also be significant," said Mr. Pierre Lassonde, President of
Newmont Mining Corp.
"Having been involved in the very successful early development of the
Canadian diamond industry, it is exciting now to participate in the
huge potential for development of Saskatchewan diamonds," says Jim
Rothwell, Chairman of Kensington Resources Ltd.
Transaction
The merger will occur by way of a Plan of Arrangement (the
"Arrangement") to be approved at a special meeting of Kensington
securityholders expected to be held on or before October 27, 2005. The
formal information circular containing the details and conditions of
the Arrangement is expected to be mailed to Kensington securityholders
in September 2005. The Board of Directors of Kensington has
unanimously approved the arrangement agreement and is recommending that
securityholders vote in favour of the arrangement at the Kensington
securityholders' meeting. Kensington's Board of Directors has received
a fairness opinion from BMO Nesbitt Burns stating that the
consideration to be received under the Arrangement is fair, from a
financial point of view, to Kensington shareholders. Shore has entered
into agreements with Kensington's directors and officers whereby such
shareholders have agreed to vote in favour of the Arrangement. Upon
closing, Kensington's outstanding warrants and options would be
replaced with Shore warrants and options with equivalent terms on the
basis of the exchange ratio for common shares of Kensington under the
Arrangement.
Upon completion of the merger, Shore will have approximately 145
million shares outstanding (162 million fully diluted) and the basic
ownership split will be approximately 65% Shore and 35% Kensington.
The transaction is conditional on approval from a minimum of 66 2/3% of
the votes cast at the Kensington securityholders' meeting and on the
receipt of all necessary regulatory and court approvals. The
definitive agreement is not subject to a due diligence condition.
Pursuant to the agreement, Kensington has agreed not to solicit third
party interest regarding an alternative acquisition of Kensington (a
"Competing Business Transaction"), subject to fiduciary obligations.
Kensington and Shore have each agreed to pay a break-fee of $7.0
million, payable in certain circumstances, including by Kensington
where Kensington concludes a Competing Business Transaction.
Shore has retained Genuity Capital Markets to act as Shore's financial
advisor and Bennett Jones LLP to act as Shore's legal advisor.
Kensington's Board of Directors has established a Special Committee to
evaluate the combination and to make a recommendation to the Kensington
Board of Directors. Kensington's Special Committee has retained BMO
Nesbitt Burns to act as its financial advisor and Lawson Lundell LLP to
act as its legal advisor.
Conference Call
A conference call is scheduled for Monday, August 15 at 2:00 p.m.
Eastern time. The call-in number is:
. North American toll-free: 1-866-250-4877
A replay of this conference call will be available from Monday, August
15 until September 5, 2005. The replay number is:
. Replay Number: 1-877-289-8525
. Passcode: 21134300
Shore is a Canadian based corporation engaged in the acquisition,
exploration and development of mineral properties. Shares of Shore
trade on the TSX Exchange under the trading symbol "SGF".
Kensington Resources Ltd. is an exploration and mine development
company currently focused on the high potential Fort à la Corne Diamond
Project in Saskatchewan. The Fort à la Corne Diamond Project is a
joint venture among Kensington Resources Ltd. (42.245%), De Beers
Canada Inc. (42.245%), Cameco Corporation (5.51%) and UEM Inc. (carried
10%). Shares of Kensington trade on the TSX Venture Exchange under the
trading symbol "KRT".
Cautionary Statements
The information in this news release contains certain forward-looking
statements that involve substantial known and unknown risks and
uncertainties, which are beyond Shore's control, including the impact
of general economic conditions and the price of diamonds. Shore's
actual results and performance could differ materially from those
expressed in, or implied by, such forward-looking statements and,
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur
or, if any of them do, what benefits Shore will derive from them.
Where to Find Additional Information About the Transaction
This press release is neither an offer to purchase securities nor a
solicitation of an offer to sell securities. Investors and
securityholders are strongly advised to read the arrangement agreement,
plan of arrangement and the information circular to be sent to
Kensington securityholders in connection with the special meeting, as
well as any amendments and supplements to those documents, when they
become available because they will contain important information.
For further information, please contact:
Shore Gold Inc.
Kenneth E. MacNeill
President & CEO
(306) 664-2202
or
Wade MacBain
Investor Relations
(306) 664-2202
Kensington Resources Ltd.
Robert A. McCallum
President & CEO
(604) 682-0020
or
Mel Gardner
Manager, Investor Relations
1-800-710-6083
