Shore Gold, Kensington Resources to merge in stock

[Twist Capper]

www.cbc.ca/cp/business/050815/b081594.html



Shore Gold, Kensington Resources to merge in stock deal worth more than $200M
03:21 AM EDT Sep 30
CRAIG WONG

VANCOUVER (CP) - Shore Gold Inc. and Kensington Resources Ltd. announced a plan to merge Monday in an all-stock deal worth more than $200 million that executives said could accelerate mine development for the diamond exploration firms.

"We now have a company that is larger in every sense, it's larger with its capital, it's larger with its pool of expertise and all of this will drive us to production a lot sooner," Kensington Resources CEO Robert McCallum told a conference call with analysts.

Under the deal announced Monday, Shore said it will offer 0.64 of a Shore common share for each share of Kensington. The offer puts a $3.49 value on each Kensington share, based on the Friday closing price of Shore shares at $5.45, the firms said.

Shore shares (TSX:SGF) lost 31 cents to trade for $5.14 on the Toronto Stock Exchange on Monday, while shares of Kensington (TSXV:KRT), which trade on the TSX Venture Exchange, were up 75 cents or about 30 per cent at $3.15.

Once the merger is completed, Shore will have about 145 million shares and the basic ownership split will be about 65 per cent Shore and 35 per cent Kensington.

Shore CEO Kenneth MacNeill, who will lead the merged company, said as separate companies Shore and Kensington often competed for limited resources.

"This merger puts both our shareholders in one very strong company," MacNeill said.

"Both companies are growing rapidly and have complementary staff and diamond properties. The long-term synergies of this merger lie in what we can do in the

Fort a la Corne district."

MacNeill said the new company plans to aggressively pursue the development of the Star property in northern Saskatchewan with their joint venture partners.

The Fort a la Corne diamond project in Saskatchewan is a joint venture among Kensington Resources, De Beers Canada Inc., Cameco Corp. and UEM Inc.

The combined company will have a cash position of about $175 million with no debt, the firms said.

Former BHP Diamonds Inc. president James Rothwell will be non-executive chairman of the combined board of directors, which will consist of five existing Shore directors and three Kensington nominees, including McCallum.

The merger arrangement must be approved at a special Kensington shareholder meeting expected to be held on or before Oct. 27. It is also subject to regulatory and court approval.

Kensington's board has unanimously approved the arrangement agreement and is recommending that security holders vote in favour of it.

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.

The definitive agreement is not subject to a due diligence condition. Kensington and Shore have each agreed to pay a break fee of $7 million.

© The Canadian Press, 2005

[golden1101]

Holy crapadapolis batman . . . I almost bought some Shore gold a week ago too.
golden ;D

[Twist Capper]

I may jump on and buy Kensington in the am

[franko10]

Wow,.. what slow reporting,. lol

This has been going on for months,.. the fist PR on it was in:

Shore Gold Inc. and Kensington Resources Ltd. to merge

8/15/05

Stock Symbol: SGF:TSX Stock Symbol: KRT:TSX-V

SASKATOON and VANCOUVER, Aug. 15, 2005 (Canada NewsWire via COMTEX) --
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 3 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.

Neither the Toronto Stock Exchange nor the TSX Venture Exchange

have reviewed or accept responsibility for the adequacy or accuracy

of this news release.

SOURCE: Shore Gold Inc.

SOURCE: Kensington Resources Ltd.

please contact: Shore Gold Inc., Kenneth E. MacNeill, President & CEO, [phone] or Wade MacBain, Investor Relations, [phone]; Kensington Resources Ltd., Robert A. McCallum, President & CEO, [phone] or Mel Gardner, Manager, Investor Relations, 1-800-710-6083

Copyright (C) 2005 CNW Group. All rights reserved.