2021-05-12 08:04 ET - News Release
Mr. Rick Trotman reports
BARKSDALE TO ACQUIRE 100% OWNERSHIP OF THE SUNNYSIDE PROJECT
Barksdale Resources Corp. has entered into a definitive agreement with Regal Resources Inc. whereby Barksdale will consolidate a 100-per-cent interest in the Sunnyside project, located in Santa Cruz county, Arizona.
Highlights
- Barksdale to acquire the balance of the highly prospective Sunnyside copper-zinc-lead-silver project in Arizona, providing it with full control of the project moving forward.
- The transaction is immediately accretive to Barksdale shareholders and eliminates all future Barksdale work commitments contained in the 2017 option agreement between Barksdale and Regal.
- The transaction values Regal shares at 37 cents per share, which includes repayment of all of Regal's outstanding debt and a partial payment of taxes owing on the transaction.
- The transaction allows Regal shareholders to participate in a larger, more liquid company that not only holds the consolidated Sunnyside project but also the 100-per-cent-owned San Antonio, Goat Canyon and Canelo copper porphyry exploration projects near Sunnyside as well as the San Javier copper-gold project in Sonora, Mexico.
- Transaction approved by both companies' board of directors.
Transaction details
The transaction for Barksdale to acquire the remaining interest in the Sunnyside project has been agreed to with Regal through a definitive purchase agreement dated May 11, 2021, where Barksdale will acquire the shares of Regal Resources USA Inc., which is a wholly owned subsidiary of Regal.
Total consideration for the transaction consists of the following:
- Issuance of up to 18.15 million common shares of Barksdale;
- Release of 3.85 million common shares of Barksdale that have been held in escrow per the 2017 option agreement;
- Acquisition and forgiveness of up to $4-million of Regal&'s existing debt facilities;
- Future payments by Barksdale of a portion of U.S. Federal FIRPTA taxes on behalf of Regal.
The transaction is immediately accretive to Barksdale shareholders, as the company is consolidating 100-per-cent ownership of the Sunnyside asset and eliminating the existing option agreement between Regal USA and the company's wholly owned subsidiary, Arizona Standard (U.S.) Corp., dated Aug. 10, 2017.
Debt acquisition
Upon signing of the purchase agreement, Barksdale will (i) acquire an existing $1.73-million secured demand loan from DIC Ltd., which has registered security over all Regal assets; and (ii) enter into a new bridge loan facility with Regal for $1.43-million. Following approval of the transaction by Regal shareholders, Barksdale will acquire all remaining debts of Regal and will offset the debts against the transaction cost, including the bridge loan and demand loan. Repayment of the debts will be financed through cash on hand, issuance of Barksdale common shares, or a combination thereof. Over all, Barksdale has entered into various agreements with Regal and certain holders of Regal debt obligations, totalling approximately $3.2-million.
Barksdale will acquire the demand loan in exchange for $1-million in cash and 1,345,310 common shares of the company at the five-day volume-weighted average price of 54 cents per share, subject to TSX Venture Exchange approval. The demand loan bears an interest rate of 8 per cent per annum, compounded annually, and is due on Oct. 27, 2021. The common shares issued related to the demand loan will be subject to a four-month-and-one-day hold period from the date of issuance.
The bridge loan will be secured over Regal's assets, bear an interest rate of 8 per cent per annum and is due on Oct. 27, 2021. The proceeds of this loan will be utilized for the expressed purpose of repaying an existing third party debt obligation of Regal's that has defaulted. Following the acquisition of the demand loan and the issuance of the bridge loan, Barksdale will become Regal's largest secured creditor.
Consideration shares
Upon completion of the transaction, Barksdale will release from escrow 3.85 million common shares of Barksdale that are currently held in Regal's name but escrowed pursuant to the contribution agreement.
Additionally, Barksdale will issue up to an additional 18.15 million common shares to Regal in three tranches, as follows:
- 3,483,333 common shares to be issued upon completion of the transaction;
- 7,333,333 common shares to be issued four months after completion of the transaction;
- 7,333,334 common shares to be issued eight months after completion of the transaction.
The issuance of the second tranche shares and the third tranche shares will be conditional upon Regal having distributed the first tranche shares and escrow shares, by way of a dividend, a return of capital, or otherwise, to the shareholders of Regal. These issuances shall be in accordance with applicable securities laws and policies of the TSX Venture Exchange, such that no recipient will hold more than 20 per cent of the shares of Barksdale, which would require the company to seek shareholder approval. Each of the three tranches of consideration shares will be subject to four-month-and-one-day hold periods from the date of issuance. Barksdale may hold back a certain number of consideration shares to partially offset taxes that may be owed on the transaction.