Rio Alto Mining, headquartered in Vancouver, Canada, and Sulliden Gold Corp., headquartered in Toronto, have announced an agreement to combine their companies. Their primary assets are Rio Alto’s La Arena oxide gold mine and Sulliden’s Shahuindo gold development project, located approximately 30 km from each other in north-central Peru. The proximity of the two projects is expected to create a variety of opportunities to unlock value through capital, operational and other regional synergies.

La Arena started production in May 2011 and poured 214,742 oz of gold in 2013. The property has measured and indicated resources of 5.2 million oz of oxide gold (100.2 million metric ton (mt) grading 0.41 g/mt gold) and 3.8 million oz of gold and 3.7 billion lb of copper in sulphides (561.7 million mt grading 2.1 g/mt gold and 0.3% copper).

Sulliden completed a feasibility study of the Shahuindo project in September 2012, based on $1,415/oz gold and $27/oz silver, outlining a 10,000-mt/d, open-pit heap leach mine that would see production of approximately 85,000 oz/y gold over an estimated 10-year mine life. Cash costs are estimated at approximately $550/oz, based on mining 40% of the defined measured and indicated gold oxide resource. Production is currently targeted to begin by late 2015 or early 2016.

Pursuant to their agreement, Rio Alto will acquire each outstanding Sulliden common share for 0.525 of a Rio Alto common share. In addition, as part of the transaction, Sulliden shareholders will receive 0.10 of a common share in a newly incorporated company (SpinCo) for each Sulliden common share held. SpinCo will hold Sulliden’s 100% interest in the East Sullivan property in Val-d’Or, Quebec, and will be capitalized with approximately C$25 million in cash, which at Rio Alto’s option may be provided entirely in cash or C$15 million in cash and C$10 million in common shares of Rio Alto.

The implied transaction value before ascribing any value to SpinCo is approximately C$300 million. Upon completion of the transaction, Rio Alto shareholders and Sulliden shareholders will own approximately 52% and 48%, respectively, of the outstanding Rio Alto common shares.

Rio Alto President and CEO Alex Black said, “This transaction represents a logical combination for Rio Alto given the complementary nature and proximity of our respective operations. We are looking forward to expanding upon the excellent work completed to date by the management team of Sulliden and believe the development of Shahuindo leverages our core strengths as an organization and is analogous in many respects to our La Arena mine, which was built on time and on budget and has continuously outperformed expectations.”

The transaction will be carried out by way of a court-approved plan of arrangement and will require the approval of at least 66 2/3% of the votes cast in person or by proxy of the shareholders of Sulliden at a special meeting to be held no later than July 30. The transaction is also subject to obtaining approval by a majority of votes cast by the shareholders of Rio Alto at a special meeting of Rio Alto shareholders expected to take place on or about the same date as the Sulliden meeting.

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