Company Updates From Management – Sun 16 Dec, 2012

First Majestic Announces Friendly Acquisition of Orko Silver

First Majestic Silver Corp. (“First Majestic”) and Orko Silver Corp. (“Orko”) are pleased to announce that the companies have entered into a definitive agreement (the “Arrangement Agreement”) pursuant to which First Majestic has agreed to acquire all of the issued and outstanding common shares of Orko for consideration of 0.1202 of a common share of First Majestic (the “Exchange Ratio”) plus $0.0001 in cash per Orko common share. The offer implies a value of C$2.72 per Orko share based on the closing prices of both First Majestic and Orko’s common shares on the Toronto Stock Exchange (“TSX”) and TSX Venture Exchange, respectively, on December 14, 2012. The offer represents a premium of approximately 69% to Orko’s 30-day volume-weighted average price (“VWAP”) for the period ending December 14, 2012. The transaction will be implemented by way of a plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia).

BENEFITS TO FIRST MAJESTIC SHAREHOLDERS

•       Adds La Preciosa, one of the largest undeveloped primary silver resources globally, to First Majestic’s already robust growth portfolio of Mexican assets
•       Further enhances First Majestic’s land position in the Sierra Madre Belt, one of the world’s most prolific silver and gold regions
•       Increases leverage to silver with very large, predominantly silver, resource base
•       La Preciosa’s planned development timeline blends well with First Majestic’s existing organic growth strategy, with anticipated start up timed after the ramp up of Del Toro and La Guitarra
•       La Preciosa, located in the State of Durango, is in close proximity to First Majestic’s existing La Parrilla and Del Toro mines, allowing First Majestic to strengthen its position in the area, employ its in-country expertise in mine development and realize potential operational synergies
•       The transaction is accretive to First Majestic’s net asset value per share, resources per share and longer-term production and cash flow per share

BENEFITS TO ORKO SHAREHOLDERS

•       Provides Orko shareholders with a significant premium to the current market price
•       Opportunity to participate in a leading silver producer through an all-share transaction
•       Diversifies Orko’s single asset risk profile and provides exposure to First Majestic’s diversified portfolio of producing and development assets in Mexico
•       Obtains access to First Majestic’s mine building experience, operating expertise and financial strength reducing risk of the development of La Preciosa
•       Enhances capital markets presence with a pro forma market capitalization in excess of $3 billion based on current share prices including increased analyst coverage, trading liquidity and a broader institutional investor base

Keith Neumeyer, President & CEO of First Majestic, stated: “We believe this transaction provides an exceptional opportunity for the shareholders of both companies. Orko is an excellent strategic fit within First Majestic, further strengthening our presence in Mexico by providing another high quality development project to our existing asset portfolio in an area that we are already very familiar with. Orko shareholders stand to realize a substantial premium and to capitalize on the track record of value creation that First Majestic brings.”

Gary Cope, President & CEO of Orko, said: “We believe this transaction is highly attractive to Orko shareholders and is the culmination of many years of success Orko has had in growing and advancing one of the largest undeveloped primary silver deposits in the world. We are very pleased to join forces with First Majestic in a transaction which brings the necessary capital and mine building expertise that is required to advance La Preciosa to production.”

TRANSACTION SUMMARY

Under the terms of the Arrangement Agreement, on closing, each Orko shareholder will receive 0.1202 common shares of First Majestic plus $0.0001 in cash per Orko common share held. Pursuant to the transaction, First Majestic will (assuming exercise of all existing Orko stock options) issue approximately 17.1 million common shares, valuing Orko’s equity at approximately C$387 million. Following the completion of the transaction, the current shareholders of Orko will hold approximately 13% of the issued and outstanding shares of First Majestic. 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 by the shareholders and optionholders of Orko, voting together as a single class, at a special meeting expected to take place in February 2013. In addition to shareholder and court approvals, the transaction is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature.

The Arrangement Agreement includes customary provisions, including non-solicitation of alternative transactions, right to match superior proposals and fiduciary-out provisions. In addition, Orko has agreed to pay a termination fee to First Majestic of C$11.6 million upon the occurrence of certain events.  First Majestic and Orko have each agreed to reimburse the other party for certain expenses upon the occurrence of certain other events.

The Board of Directors of Orko has unanimously approved the transaction and will provide a written recommendation that Orko securityholders vote in favour of the transaction which will be included in the information circular to be mailed to securityholders in connection with the Arrangement. Each of the directors and senior officers of Orko, who hold in the aggregate approximately 9% of the issued and outstanding Orko shares (assuming exercise of all existing Orko stock options) have entered into a voting agreement with First Majestic and have agreed to vote in favour of the transaction at the special meeting of Orko securityholders to be held to consider the Arrangement.

Full details of the Arrangement will be included in a Management Information Circular to be filed with the regulatory authorities and mailed to Orko securityholders in accordance with applicable securities laws. Orko expects to mail the Management Information Circular in January 2013.

ADVISORS AND COUNSEL

Dundee Capital Markets acted as exclusive financial advisor and McCullough O’Connor Irwin LLP acted as legal counsel to First Majestic. Dundee Capital Markets has provided an opinion to the First Majestic Board of Directors that, based upon and subject to the assumptions, limitations and qualifications in the opinion, the consideration being offered by First Majestic to Orko pursuant to the transaction is fair, from a financial point of view, to First Majestic.

BMO Capital Markets and GMP Securities L.P. acted as financial advisors and Stikeman Elliott LLP acted as legal advisor to Orko. BMO Capital Markets and GMP Securities L.P. have each provided an opinion to the Board of Directors of Orko that, based upon and subject to the assumptions, limitations, and qualifications in the opinions, the consideration to be received is fair, from a financial point of view, to the shareholders of Orko.

CONFERENCE CALL

First Majestic and Orko will host a joint conference call and webcast on December 17, 2012 at 8:30 am Eastern time / 5:30 am Pacific time for members of the investment community to discuss the proposed transaction. The call-in details are as follows:

Toll Free Canada & USA:         1-800-319-4610
Outside of Canada & USA:                1-604-638-5340
Toll Free Germany:                      0800 180 1954
Toll Free UK:                           0808 101 2791

Click on WEBCAST on the First Majestic homepage as a simultaneous audio webcast of the conference call at www.firstmajestic.com.

The Conference call will be recorded and you can listen to an archive of the conference by calling:

Toll Free Canada & USA:         1-800-319-6413
Outside of Canada & USA:                1-604-638-9010
Pin Code:                       3928

An archived webcast of the conference call will also be available at www.firstmajestic.com.

ABOUT FIRST MAJESTIC

First Majestic is a producing silver company focused on silver production in México and is aggressively pursuing its business plan of becoming a senior silver producer through the development of its existing mineral property assets and the pursuit through acquisition of additional mineral assets which contribute to First Majestic achieving its corporate growth objectives.

For further information, contact info@firstmajestic.com, visit our website at www.firstmajestic.com or contact Todd Anthony, Investor Relations at 1.866.529.2807.

ABOUT ORKO

Orko Silver Corp. is developing one of the world’s largest undeveloped primary silver deposits, La Preciosa, located near the city of Durango, in the State of Durango, Mexico.

For further information, contact Orko Silver Corp. at 604.687.6310 or via our website online at www.orkosilver.com.

ON BEHALF OF THE BOARD OF
FIRST MAJESTIC SILVER CORP.

“Keith Neumeyer”

Keith Neumeyer
President & CEO

ON BEHALF OF THE BOARD OF
ORKO SILVER CORP.

“Gary Cope”

Gary Cope
President & CEO

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This news release includes certain “Forward-Looking Statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” under applicable Canadian securities laws. When used in this news release, the words “anticipate”, “believe”, “estimate”, “expect”, “target”, “plan”, “forecast”, “may”, “schedule” and similar words or expressions, identify forward-looking statements or information. These forward-looking statements or information relate to, among other things: completion of the Arrangement and the various steps thereto, including filing and mailing of securityholder documents and holding securityholder meetings; liquidity of First Majestic shares; future growth potential for First Majestic and its business; future mine development plans; the price of silver and other metals; the accuracy of mineral reserve and resource estimates and estimates of future production and costs of production at our properties; estimated production rates for silver and other payable metals produced by us, the estimated cost of development of our development projects.

These statements reflect First Majestic’s current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by First Majestic, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements or information and First Majestic has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: satisfaction or waiver of all applicable conditions to closing of the Arrangement including, without limitation, receipt of all necessary securityholder, court, stock exchange and regulatory approvals or consents and lack of material changes with respect to First Majestic and Orko and their respective businesses, all as more particularly set forth in the Arrangement Agreement; fluctuations in general macro-economic conditions; fluctuations in securities markets and the market price of First Majestic’s shares; fluctuations in the spot and forward price of silver, gold, base metals or certain other commodities (such as natural gas, fuel oil and electricity); fluctuations in the currency markets (such as the Canadian dollar and Mexican peso versus the U.S. dollar); changes in national and local government, legislation, taxation, controls, regulations and political or economic developments in Canada or Mexico; operating or technical difficulties in connection with mining or development activities; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins and flooding); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom First Majestic does business; inability to obtain adequate insurance to cover risks and hazards; and the presence of laws and regulations that may impose restrictions on mining, including those currently enacted in Mexico; employee relations; relationships with and claims by local communities and indigenous populations; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses, permits and approvals from government authorities; diminishing quantities or grades of mineral reserves as properties are mined; First Majestic’s title to properties; and the factors identified under the caption “Risk Factors” in First Majestic’s Annual Information Form, under the caption “Risks Relating to First Majestic’s Business”.

Readers are cautioned against attributing undue certainty to forward-looking statements or information. Although First Majestic has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be anticipated, estimated or intended. First Majestic does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements or information, other than as required by applicable law.

This News Release may contain forward-looking statements including but not limited to comments regarding the completion of the Arrangement and the various steps thereto, including filing and mailing of securityholder documents and holding securityholder meetings, value of Orko shares, liquidity of First Majestic shares, future growth potential for First Majestic and its business, future mine development plans, the price of silver and other metals, the accuracy of mineral resource estimates, reasonable prospects of economic extraction of a mineral resource, timing and content of upcoming work programs, geological interpretations, receipt of property title, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements and Orko undertakes no obligation to update such statements, except as required by law. The resource estimate is based on a geological model based on interpretations of multiple veins in wide spaced drill holes. There is risk that the interpreted continuity and orientation of the veins could change with additional drilling. The sample values in the drill core may not be representative of those portions of the deposit as precious metal deposits are subject to nugget effect and rapid changes to grade over relatively short distances. Sampling gaps in the modelled veins may allow higher grade samples to be projected into unsampled lower grade areas of the model. This could cause overestimation of tonnes and grade. The converse is also true. Density values of the blocks are based on a model that may not be accurate and may cause local biases in tonnage estimates. Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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Comments:
  1. On December 16, 2012 at 6:42 pm,
    Dennis M. O'Neil says:

    This is a win win kind of deal.

  2. On December 16, 2012 at 7:27 pm,
    benb says:

    I think this is news, I recommended FR years ago, went up 5 times from the time I recommended it last I looked. I got out at a triple. Orko I never did look at but heard some good things. I just might have to look at this one again.

    • On December 17, 2012 at 6:26 am,
      JJ says:

      Well done benb, this is the only pm stock I own which I’ve traded for years, % returns show FR is the mid-tier silver stock to own as it outpaces even SLW

      Keith Neumeyer is a fantastic CEO and FR is Eric Sprott’s teams #1 silver stock pick….I like those odds!!….if Sprott doesn’t own it I won’t

      What most don’t know is FR is really a pure silver investment as Keith gets aggressive towards silver’s future…….from the Aug Q2 report

      In addition to cash, First Majestic was carrying 574,000 PSLV (Sprott Physical Silver Trust) units at quarter end with an approximate market value of $6.65 million and 100 Silver Futures contracts representing 500,000 ounces of silver valued at $1.7 million including the unrealized gain and the margin requirement. The Company is currently holding 150 contracts representing 750,000 ounces of silver at an average cost basis of $27.277.

      I’ll be taking advantage of the share dip during the takeover

      • On December 17, 2012 at 8:54 am,
        Big Al says:

        Interesting news for Gary Cope and the team at Orko!

      • On December 17, 2012 at 3:29 pm,
        Jerry(Gator) M says:

        JJ: Haven’t we seen the worst of the decline upon the news of the take over?

  3. On December 17, 2012 at 1:16 pm,
    Mike says:

    So First Majestic stock drops 10% today….what up with that??????

    • On December 17, 2012 at 2:01 pm,
      Jerry(Gator) M says:

      Doesn’t look like the shareholders liked the take over. I hold a lot of shares and don’t like it either, the drop that is.

    • On December 17, 2012 at 4:18 pm,
      Big Al says:

      See my comment to Doc (Richard). Mike, I really believe what I wrote in that comment.

      Best,

      Big Al

      • On December 18, 2012 at 7:30 am,
        Mike says:

        Okay Al….So I bought some first majestic this morning.

        • On December 18, 2012 at 10:05 am,
          Big Al says:

          Remember, Mike, I have never suggested anyone buy any particular stock.

          By the way, I hope that it performs well for you.

          Best,

          Big Al

  4. On December 17, 2012 at 4:24 pm,
    JJ says:

    Guys, FR is increasing its outstanding shares by 17.1 mill (common shares) to finance the takeover of OK….it has absolutely nothing to do with shareholders likes or dislikes and everything to do with how the deal is structured….thats why I said I will be buying the dip, increased shares outstanding revalues FR lower…imo its a buying opp

    The increase in shares is ruffly 14% above the previous 116 mill O/S which is why FR dropped today….doesn’t mean it will drop a further 4% as the pro’s will be taking advantage of the situation and short FR from higher levels….real buyers will put in the floor at ??…I didn’t buy any shares today as I rarely buy on the first day…let the action chop trade to see where a clearer bottom to feed is….eventually the street revalues FR higher when either the deal falls through as the issuance of shares is not needed or with the deal going through creates a better FR going forward….time will tell???

    • On December 17, 2012 at 4:43 pm,
      Big Al says:

      Thanks JJ,

      Big Al

    • On December 17, 2012 at 6:33 pm,
      Matthew says:

      The price action after news of a takeover always has something to do with shareholder likes and dislikes. For example, when Primero (PPP) announced it would acquire Cerro Del Gallo last Thursday, PPP fell 10% or so but climbed right back to finish slightly up on the day. The next day, it didn’t come within 30 cents of the low. The third day (today), it still did not come within 30 cents of Thursday’s low. The day of the news, volume was elevated but nothing like the increase First Majestic saw. FR also closed very near the low for the day. The Primero deal would also dilute shareholders 15%. What this action is telling us is that PPP shareholders like the deal and think that the value added is greater than the price paid -in finance speak, the deal really is accretive. To me, it is already clear that FR shareholders were not as enthusiastic about their deal; but the shares did trade up 1.5% in after hours trading, so the low could be in. If the stock stabilizes above 15% down, I would see that as shareholders being net-positve on the deal. If it hangs around 15% down for the next few days, I would view that as a neutral shareholder opinion (which, to me would be somewhat negative). Of course, if it continues lower than 15% down, the shareholders hated the deal.
      As an aside, I do know that there were some in the business that thought La Preciosa wasn’t viable. Perhaps doubts remain. Either way, I wouldn’t hastily dump my Orko shares if I had any. I’ve been through more than a few of these deals and a lot can happen.

      • On December 17, 2012 at 8:38 pm,
        JJ says:

        Sorry Matthew but you should read the structure of the Primero deal vs FR’s deal they are structured completely different, completely!

        Therefore the reaction, revaluation is a different situation.

        • On December 17, 2012 at 9:20 pm,
          Matthew says:

          Both acquisitions result in similar dilution. For our purposes, the differences don’t mean much.
          To state that the price action “has absolutely nothing to do with shareholders likes or dislikes” is absurd.

          • On December 18, 2012 at 9:01 am,
            Big Al says:

            I will be interviewing Gary Cope today and will discuss your point among others.

            Best,

            Big Al

      • On December 17, 2012 at 9:05 pm,
        Big Al says:

        Thanks for your input, Matthew!

        Big Al

        • On December 18, 2012 at 8:52 am,
          JJ says:

          Just got 2500sh of FR at $20.11 from an unhappy shareholder to a happy shareholder or weak hands to strong hands

          I’ll buy another 2500sh at $19.11 if FR catches up to silver falling in the background as the other silver stocks are getting hammered by unhappy shareholders.

          My average position is at much lower levels so I’m not building a position at $20.11….even I’m not that agressive…..this is more about being US$ BEARISH

          Tis the season to be Merry!!!!

  5. On December 18, 2012 at 10:22 am,
    Jerry(gator)M says:

    I’ll see your 2500 and raise 2500. All in.

  6. On December 18, 2012 at 5:04 pm,
    SB says:

    Those investors second guessing the FR/Orko deal should consider the silver resource base ORKO will bring to the table. How much would FR have to spend on greenfields exploration to identify a resource base like that? Anyone who has followed FR for the past 6 years should have well founded confidence in their ability to develop a property and bring it to production. KN and the FR team know exactly what they are doing. Think ahead to 2015 when FR is producing 15 million ozs Ag per year @ $90/oz. Relax and be long FR.