Sherwood Copper and Capstone to merge in $244.4-million deal

By The Canadian Press

VANCOUVER - Sherwood Copper Corp. (TSXV: SWC.V) and Capstone Mining Corp. (TSX: CS.TO) have agreed to merge in a deal that will create a bigger player in the North American copper mining sector.

Under terms of the deal, Sherwood shareholders will get 1.566 shares of Capstone - based on the 20-day volume weighted average share price of the two - for each share they currently hold, valuing Sherwood at about $244.4 million based on trading prices at the close Friday.

"Capstone and Sherwood have each looked at numerous merger and acquisition possibilities over the past year and have concluded that this is the most compelling consolidation opportunity in the sector," Capstone president and CEO Darren Pylot said in a release.

"The combined management teams are a great fit, with complementary skills and experience and a common focus on acquiring and operating high grade, low cost operations in mining-friendly, politically stable jurisdictions."

The new company is forecast to have production of 85 million pounds of copper in 2008 moving up to 110 million pounds in 2009, "with significant byproducts of gold, silver, lead and zinc."

The companies also said the deal will gain Sherwood shareholders improved market exposure through Capstone's listing on the main board of the TSX.

The combined company's board would include four current Sherwood directors, one current Capstone director and one Capstone nominee. Pylot would become vice-chairman and CEO and Sherwood CEO Stephen Quin president and chief operating officer.

The deal requires approval from two-thirds of Sherwood's shareholders.

Shares in Sherwood gained 18 cents or four per cent at $4.63 on the TSX Venture Exchange.