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Paramount Gold to acquire Klondex after Silvercorp withdraws unsolicited Klondex bid

Published: 21:26 27 Jul 2009 BST

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Paramount Gold and Silver Corp (NYSE, TSX: PZG) said  Silvercorp Metals Inc (TSX: SVM) has terminated its unsolicited offer to acquire all the outstanding shares of Klondex Mines Ltd (TSX:KDX), thus clearing the path for a business combination of Paramount and Klondex.

Paramount and Klondex have signed a binding letter agreement to combine the two companies in a transaction valuing Klondex at approximately C$80 million, which will see each Klondex share will be exchanged for 1.45 Paramount shares, implying a purchase price of C$2.32 per Klondex share and representing a premium of 33.3 percent using closing share prices on the TSX on July 17 2009.

Silvercorp announced in June 2009 it was planning to make a C$2.18 per share paper offer for Klondex valuing the company at approximately C$70 million. "We were unsuccessful in our efforts to engage Klondex in discussions regarding a negotiated transaction, and as a result we are presenting our proposal directly to Klondex shareholders,” it had said in a statement.

Paramount said today that the termination of the Silvercorp unsolicited proposal clears the way for the creation of powerful North American gold and silver explorer that offers substantial value to both Klondex and Paramount stockholders.

The deal will provide expanded and diversified operations with the potential for significant reserve/resource upside at two flagship projects in North America, San Miguel in Mexicoand Fire Creek in Nevada, it said.
FCMI Financial Corp, controlled by Albert D. Friedberg and Paramount's largest stockholder, has committed to provide a minimum of C$5 million and up to a maximum of C$15 million to fund future development at both the San Miguel and Fire Creek projects.