HI completes a C$25.3 Million PP and sale to Sweetwater LONGUEUIL, Quebec, Aug. 30, 2021 (GLOBE NEWSWIRE) -- Highland Copper Company Inc. (TSXV: HI, OTCQB: HDRSF) (the “Company” or “Highland”) is pleased to announce that, further to its news release dated August 3, 2021, it has completed the sale of its UPX properties located in the Upper Peninsula of the State of Michigan, U.S.A. to Sweetwater Royalties (“Sweetwater”), a privately held company owned by Orion Mine Finance (“Orion”), in exchange for cash consideration of US$3 million, the assumption by Sweetwater of the US$15 million principal amount owing under a promissory note, and other terms and conditions described below (the “Transaction”).
The Company also announces that it has completed the first tranche of its previously announced non-brokered private placement (the “Offering”) resulting in gross proceeds of C$25,292,993. The first tranche of the Offering consisted of the issuance of 252,929,930 units (“Units”) at a price of C$0.10 per Unit. Orion, a 30% shareholder of the Company, subscribed for 62,310,000 Units under the first tranche of the Offering for an aggregate cash consideration of approximately C$6.23 million.
Denis Miville-Deschnes, the Company’s CEO stated: “We are extremely pleased to have completed the Transaction and financing. It has been a long process, but we can now focus our efforts on plans to develop both the fully-permitted Copperwood Project and the White Pine North Project.”
Sale of UPX Minerals Inc.
The Company and its 100%-owned subsidiary Upper Peninsula Copper Holdings Inc. (“UPCH”) completed the sale of all of the issued and outstanding shares of UPX Minerals Inc. (“UPX Minerals”) to Sweetwater, for US$3 million in cash and the assumption by Sweetwater of amounts owing under the secured promissory note (the “Note”) in favor of RTX (as defined below). UPX Minerals holds a land package comprised of mineral rights and real properties in the Upper Peninsula, Michigan, originally acquired from Rio Tinto Nickel Company and Kennecott Exploration Company (collectively, “RTX”) in 2017. The Transaction results in Sweetwater controlling approximately 447,842 mineral acres in the Upper Michigan area near the Eagle Mine. In connection with the closing of the Transaction, the Company was released from its guarantee of approximately US$15 million owing under the Note.
C$25.3 Million Private Placement of Units
The Company completed the first tranche of the Offering resulting in gross proceeds of C$25,292,993. The first tranche of the Offering consisted of the issuance of 252,929,930 Units at a price of C$0.10 per Unit. Each Unit consisted of one common share of the Company and one half of one common share purchase warrant (each whole warrant, a “Warrant”), with each Warrant exercisable to acquire one common share at C$0.18 until August 27, 2023. In connection with the completion of the first tranche of the Offering, the Company paid cash finder’s fees in the aggregate amount of C$54,500.
Certain insiders of the Company acquired Units in the first tranche of the Offering, including Orion. Orion’s shareholding in Highland following the completion of the first tranche of the Offering is approximately 28%. Participation by insiders in the first tranche of the Offering, in each case, is considered to be a “related party transaction” as defined under MI 61-101 (as defined below). However, such participation, including by Orion, is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101.
The second tranche of the Offering of up to an additional 12 million Units for gross proceeds of up to approximately C$1,200,000 is expected to close during the week of August 30, 2021. The Offering is subject to final acceptance by the TSX Venture Exchange upon filing of final documentation.
Settlement of Credit Facility and Use of Proceeds
On closing of the Transaction and Offering, the Company settled all amounts due to Osisko Gold Royalties Ltd and Greenstone Resources LP pursuant to a Credit Agreement dated May 20, 2019 (including accrued interest), for a total amount of US$6,337,704. The Company will use the balance of the proceeds of the Offering, or approximately C$17.2 million, to advance the development of the Copperwood and White Pine North projects and for general working capital purposes.
Corporate Change
Concurrently with the closing of the Transaction and Offering, as part of the Company’s previously announced Board renewal process, long time director David Fennell will step down as Executive Chairman, effective today but will remain on the Board as an outside director until the next annual meeting of the Company to be held in December 2021.
Denis Miville-Deschnes commented: “Mr. Fennell has been instrumental in accumulating high-quality copper assets in the Upper Peninsula, Michigan, including the Copperwood and White Pine North projects, and setting the Company up for future success. We sincerely thank Mr. Fennell for his many contributions to the Company.”
Related Party Disclosure
Sweetwater, an affiliate of Orion, is considered to be a “related party” of the Company under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”) and the Transaction is considered to be a “related party transaction” under the MI 61-101. In addition, Orion Mine Finance Fund III LP, an affiliate of Orion, participated in the Offering and acquired 62,310,000 Units of the Company, and Greenstone Resource Partners, a party that held over 10% of the outstanding shares of the Company prior to the Transaction and Offering, also participated in the Offering and acquired 36,635,620 Units.
The Company relied on the exemption from the valuation and minority approval requirements provided by subsections 5.5(b) Issuer Not Listed on Specified Markets and 5.7(1)(e) Financial Hardship of MI 61-101. The Company does not have any securities listed on the markets specified in subsection 5.5(b). The Company is relying on the exemption from minority shareholder approval in subsection 5.7(1)(e) of MI 61-101 as the Transaction and Offering address the financial hardship of the Company. The Transaction and Offering are designed to improve the financial position of the Company and meets the criteria set out in subsection 5.5(g) of MI 61-101. See the Company’s material change report dated August 11, 2021 filed under the Company’s profile on SEDAR at www.sedar.com.