Capital Gold Corporation (Amex:CGC
- News) today sent a letter to
its stockholders pointing out the benefits of its merger with Gammon Gold.
The letter stressed the significant premium that stockholders will
receive under the merger with Gammon and the lengthy and robust process
undertaken by the independent members of the CGC board of directors to
achieve the best possible transaction reasonably available to the
stockholders of CGC. With the input of its advisors, the CGC board also
considered Gammon Gold's experienced management team and highly liquid stock
as compelling factors in determining that the Gammon transaction provided the
best available transaction to maximize CGC stockholder value.
The letter also urged CGC stockholders to reject the self-serving
attempt by Timmins Gold Corp. to take control of the CGC board and block the
Gammon Gold merger. At current trading levels, the Gammon offer
represents a significant premium to the Timmins offer. In addition, the
Timmins offer has a high degree of risk and conditionality, cannot be
consummated in the near term and has adverse tax consequences to U.S.
shareholders.
The letter to stockholders is available at the SEC's website at http://www.sec.gov
and will also be available at www.capitalgoldcorp.com
Stockholders with questions should contact Capital Gold's proxy
solicitors, MacKenzie Partners, toll-free at 1-800-322-2885,
or Laurel Hill Advisory Group, toll-free at 1-800-385-3006.
The text of the letter follows below:
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VOTE THE WHITE PROXY CARD
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FOR THE GAMMON MERGER
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YOUR VOTE IS VERY IMPORTANT- PLEASE VOTE TODAY.
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March 9, 2011
Dear Stockholders of Capital Gold Corporation:
We are asking you to vote the enclosed WHITE proxy card to approve the
merger of Capital Gold Corporation with Gammon Gold Inc. If the Merger
is completed, you will receive 0.5209 common shares of Gammon Gold and a cash
payment in the amount of $0.79 for each share of CGC common stock you own
immediately prior to the Merger. The Gammon deal represents a 58% premium
to CGC stockholders as of March 9, 2011. (1)
(1) Based on CGC trading on the NYSE AMEX during the 20 trading days
prior to September 24, 2010.
DO NOT BE MISLED
You may be getting conflicting information about our proposed
transaction with Gammon and the process that led your Board to unanimously
conclude that it was the best transaction reasonably available for all CGC
stockholders. Timmins Gold Corp. ("Timmins") is attempting to block
the Merger of CGC with Gammon and take complete control of your CGC board in
its self-serving attempt to acquire the company. We want to set the
record straight.
Timmins asserts that its proposal is superior to the Gammon offer.
THE TRUTH IS: The Timmins proposal is not in
the best interests of CGC stockholders.
- At
current trading levels, the Gammon offer has a value almost US$0.20 per
share, or 3.5%, higher than the Timmins offer.
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- The
Timmins offer will be fully taxable to U.S. holders. There are no adverse
tax consequences to U.S. holders for the stock they receive in the
Gammon offer.
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- The
Timmins offer is highly conditional. Their offer has not yet been
approved by U.S. and Mexican regulators or Timmins' own shareholders,
nor has Timmins been approved for listing on the NYSE AMEX. Even
if Timmins were to receive all of these approvals, it would take a
number of months to do so.
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- Don't
just take our word for it. Glass Lewis, a leading independent
proxy advisory firm issued a report to its
institutional stockholder clients, stating
that "we believe the Gammon deal is
superior to the Timmins' offer in almost every aspect." Glass
Lewis also said it considers "…Gammon's stock to be far
superior to Timmins' stock as a form of currency in executing a
transaction."
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- Gammon
management has demonstrated the underground mining expertise necessary
to develop the Nayarit Orion
project. Timmins does
not have the requisite mining experience.
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- Timmins
offer is also subject to a due diligence condition, which could result
in a lower offer or no offer at all.
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- Gammon
is ready to close its transaction and pay
you cash and liquid shares of Gammon stock!
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Timmins represents itself as a concerned stockholder of CGC.
THE TRUTH IS: Timmins owns 1,000 shares that it
purchased recently. Timmins is attempting to hijack the process by putting a
new board in place in order to halt the Gammon transaction and to force a
deal with CGC that is in fact inferior to the Gammon proposal.
- According to
Timmins' own proxy materials, not a single member of the Timmins
independent slate has any mining background at all. How can brand
new directors be expected to familiarize themselves with CGC and quickly
evaluate a transaction in a highly specialized industry with absolutely
no mining experience?
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- Even
if Timmins is successful in taking
control of your board and
terminating the Gammon transaction, there is no guarantee
that the Timmins offer, or any offer, will be consummated.
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- You
have a board of directors with experience in mining and in mergers and
acquisitions.
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- Your
board has demonstrated its responsibility to protect stockholder
interests by forming a special committee of
independent directors to oversee the
process, evaluating competing proposals with the advice and
input of independent advisors, and unanimously recommending that
stockholders support the transaction that provides the highest value,
least adverse tax consequences, least risk, and quickest path to
completion.
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Timmins is telling CGC stockholders that your board ran a "flawed
process."
THE TRUTH IS: The CGC board determined to
unanimously support the Gammon deal after carefully considering the input and
advice of independent financial and legal advisors with expertise in similar
transactions.
- CGC
accommodated every one of Timmins' meeting requests and seriously
evaluated its proposal four times.
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- On
September 7, 2010, the M&A Committee met via conference call with
the CEO and President of Timmins Gold, and their respective financial
advisors, during which a formal presentation was made with respect to
the Timmins proposal.
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- On
January 6, 2011, the M&A Committee met with Timmins because it was
determined at that time that Timmins' bid was reasonably likely to lead
to a proposal that was superior to the Gammon transaction.
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- CGC
made repeated efforts to conduct comprehensive due diligence which was
critical to its determination of whether the Timmins proposal was in
fact superior. After substantial delay, Timmins provided some
diligence materials, but failed to respond to specific due diligence
questions and requests and failed to provide support for several
representations it had made.
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- CGC
was provided with a fairness opinion by a reputable, nationally
recognized financial advisor that supported the Gammon transaction.
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- CGC
would have pursued further dialogue with Timmins if it determined that a
merger with Timmins was the best deal reasonably available to CGC
stockholders.
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- In
its report, Glass Lewis concluded that "… the board acted fair
and appropriate in seeking the best possible deal for shareholders among
a number of potential buyers."
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In its proxy materials, Timmins also tells you that it has a lockup
agreement with one stockholder, and support agreements with two other
stockholders.
- Why
has Timmins management repeatedly refused to provide CGC with copies of
these agreements or to make them publicly available?
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Financial Restatements and Changes in Projections Raises Serious
Concerns for CGC Stockholders
- The
conditionality associated with Timmins' offer is highlighted by Timmins'
desperate and self-interested attempt to oust the CGC board of directors
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- The
risk of their offer should be evident by the fact that Timmins has had
to make financial restatements in each of the past two consecutive
quarters.
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- The
fact that Timmins has had repeated instances of restating its financial
statements and has had to revise projected operating numbers raises
concerns with respect to the reliability of its financial statements and
internal controls.
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- More
troubling perhaps, is that in Timmins' most recently completed quarter,
it mined grades significantly higher than the average resource grade
(2). CGC stockholders must understand that this performance may not be
sustainable and may have to be reversed at some point– very
possibly encumbering the mine to the detriment of stockholders.
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The CGC Board believes that the Merger with Gammon Gold is clearly the
SUPERIOR Transaction for CGC Stockholders.
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Timmons Gold Corp.
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Gammon Gold
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Proposals
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2.27 TMM Shares
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0.5209 GAM Share + US$0.79
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Transaction Status
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Offer not commenced
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Merger agreement signed
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Proxy solicitation commenced
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Consideration
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All Stock
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Stock and Cash
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% of Basic Shares Issued
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107%
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24%
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Average Daily Trading Value (US$ MM)
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$1
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$18
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# of Days Required to Trade Shares Issued
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178 Days
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14 Days
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Capital Board / Management Support
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No
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Yes
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Acquirer Vote Required – Execution Risk
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Vote required
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Vote not required
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Subject to Due Diligence
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Yes
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No
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Timing / SEC
Clearance Process
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F-4 not yet effective at
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SEC has declared F-4
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SEC
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Effective
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Substantial (Multi-Year) Operating Expertise
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No
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Yes
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Cash Balance
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US$4 MM
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US$113 MM(1)
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Analyst Coverage
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6 Analysts
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13 Analysts
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Gold Hedging
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Yes
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No
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(2) Timmins Q3 production was at a grade of 0.939 g/t Au compared to
the reported M+I resource grade of 0.720 g/t Au.
Gammon Gold has a market capitalization of approximately
3x Timmins' market capitalization.
We believe Gammon Gold has much greater upside and is
trading at a lower valuation than Timmins; Therefore, Gammon Gold provides
better re-rating potential.
Gammon Gold has approximately 6x Timmins'
resources.
Gammon Gold has significant exposure to
silver and exceptional leverage to silver prices; Timmins has very limited
exposure to silver.
Gammon Gold has significant net cash; Timmins
has net debt.
The Merger with Gammon Gold presents the least amount of
transactional risk.
Your Vote is Important
Please vote and return the WHITE proxy card
It is very important that you return ONLY the WHITE proxy card and NOT
the GOLD proxy card or the BLUE consent card.
Even if you have already voted the GOLD proxy card or the BLUE consent
card, you can vote FOR the Gammon Merger using the enclosed WHITE proxy card.
If you have any questions or require assistance please contact our
proxy solicitors, MacKenzie Partners at 1-800-322-2885,
or Laurel Hill Advisory Group, toll-free at 1-800-385-3006.
Sincerely,
Steve Cooper,
Chairman of the Board
Important Additional Information
Capital Gold Corporation (“CGC” or the
“Company”) filed a definitive proxy statement with the Securities
and Exchange Commission (the “SEC”) on February 18, 2011 in
connection with the Special Meeting of Stockholders to be held on March 18,
2011 and mailed the definitive proxy statement and a WHITE proxy card to
stockholders and additional soliciting materials. CGC and its directors and
executive officers may be deemed to be participants in the solicitation of
proxies in connection with such meeting. The Company’s stockholders are
strongly advised to read CGC’s proxy statement as it contains important
information. Stockholders may obtain an additional copy of CGC’s
definitive proxy statement and any other documents filed by the Company with
the SEC for free at the SEC’s website at http://www.sec.gov.
Copies of the definitive proxy statement are available for free at www.capitalgoldcorp.com.
In addition, copies of the Company’s proxy materials may be requested
at no charge by contacting MacKenzie Partners, Inc.
at 1-800-322-2885 or via email at proxy@mackenziepartners.com.
Detailed information regarding the names, affiliations and interests of
individuals who are participants in the solicitation of proxies of
CGC’s stockholders is available in CGC’s definitive proxy
statement filed with SEC on February 11, 2011.
About Capital Gold
Capital Gold Corporation (CGC) is a gold production and exploration
company. Through its Mexican subsidiaries and affiliates, it owns 100% of the
"El Chanate" gold mine located near the
town of Caborca in Sonora, Mexico. On August 2,
2010, Capital Gold acquired Nayarit Gold Inc. Capital Gold is focused on
optimizing the El Chanate operations and advancing
the Del Norte deposit in the Orion District in the state of Nayarit, Mexico.
Capital Gold also owns and leases mineral concessions near the town of Saric, also located in Sonora, that are undergoing
exploration for gold and silver mineralization. Additional information about
Capital Gold and the El Chanate Gold Mine is
available on the Company's website, www.capitalgoldcorp.com.
Forward Looking Statements
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities laws.
The use of any of the words "plans", "expects", or
"does not expect", "is expected", "budget",
"scheduled", "anticipates", or "does not
anticipate", "continue", "estimates",
"forecasts", "objective", "ongoing",
"may", "will", "project", "should",
"believe", "intends" or variations of such words and
phrases or statements are intended to identify forward-looking information or
statements. Forward-looking information is based on the opinions and
estimates of management at the date the information is made, and is based on
a number of assumptions and subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ
materially from those projected in the forward-looking information.
More particularly and without limitation, this press release contains
forward-looking statements and information concerning Gammon Gold's proposed
acquisition of Capital Gold (the "Acquisition") and the
merger agreement pursuant to which such acquisition will be effected.
The forward-looking statements and information are based on certain key
expectations and assumptions made by Gammon Gold and Capital Gold. Although
Gammon Gold and Capital Gold believe that the expectations and assumptions on
which such forward-looking statements and information are based are
reasonable, undue reliance should not be placed on the forward-looking
statements and information because neither of them can give any assurance
that they will prove to be correct. Since forward-looking statements and
information address future events and conditions, by their very nature they
involve inherent risks and uncertainties. There are risks also inherent in
the nature of the Acquisition, including whether the completion of the
Acquisition will ultimately occur, whether the anticipated synergies of the
acquisition will occur, incorrect assessment of the value of the respective
properties of each of Gammon Gold and Capital Gold, and failure to obtain the
required security holder, regulatory, third party and other approvals. The
outcome of Timmins' consent solicitation to replace the Capital Gold board
and Capital Gold's corresponding consent revocation also impact the
assumptions on which forward-looking statement are based. Readers are
cautioned that the foregoing list of factors is not exhaustive. There may be
other factors that cause actions, events or results not to be anticipated,
estimated or intended. The forward-looking statements and information
contained in this press release are made as of the date hereof. There can be
no assurance that forward-looking information will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such information. Neither Gammon Gold nor Capital Gold
undertake any obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information, future
events or otherwise, except in accordance with applicable securities laws.
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For further information please
contact:
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Kelly Cody, Investor Relations Manager
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Capital Gold Corporation
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Tel: (212) 344-2785
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Fax: (212) 344-4537
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Email: kelly@capitalgoldcorp.com
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or
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