Santa Fe Gold Corp. (
OTCBB: SFEG,
Stock Forum) and
Canarc Resource Corp. (
TSX: T.CCM,
Stock Forum) have executed a ‘strategic share exchange agreement’ and a planned restructuring of approximately $20 million of Santa Fe debt.
In a press release, the companies outlined the purpose of the share exchange, which is as follows:
To facilitate a significant turnaround for Santa Fe and a material new opportunity for Canarc, driven by the appointment of Canarc nominees to the Santa Fe management team and board of directors.
The recapitalization of Santa Fe, the restructuring of Santa Fe secured debt and re-development of its Summit gold-silver mine in New Mexico to production.
The preservation of Santa Fe’s net operating loss carry-forwards, totaling in excess of $78 million.
Under the agreement, Santa Fe will issue 66 million common shares to Canarc, which in turn will issue 33 million common shares to Santa Fe. Once the exchange is complete, Santa Fe will own 17% of Canarc’s outstanding shares and Canarc will own approximately 34% of Santa Fe.
Effective immediately, Canarc founder, Chairman and CEO Bradford Cooke becomes Chairman of Santa Fe. Cooke is also founder and CEO of
Endeavour Silver Corp. (
TSX: T.EDR,
Stock Forum).
Canarc CEO Catalin Chiloflischi has been named President and CEO of Santa Fe, which has entered into a “best efforts” placement agreement with an investment bank "with which Canarc and Endeavour Silver have enjoyed a long standing relationship."
Under the agreement, Santa Fe will place an estimated $22 million of 8% gold bonds due in 2018 that are redeemable in cash or gold ETF.
Jakes Jordan, Santa Fe’s departing Chairman and Interim CEO, said the share exchange means Santa Fe can benefit from Canarc’s high-grade New Polaris Gold mine property in British Columbia. “Through our 17% interest in Canarc, we anticipate future benefits as this project advances towards feasibility and production,’’ he said.
Canarc shares jumped 20% to 9 cents Tuesday, leaving a market cap of $14.2 million, based on 157.4 million shares outstanding. The 52-week range is 13 cents and 3.5 cents.