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Montauk Metals Inc V.MTK

Alternate Symbol(s):  GAYGF

Montauk Metals Inc., formerly Galway Gold Inc., is a Canada-based mineral exploration company. The Company is focused on seeking new exploration projects. Its subsidiaries include Galway Resources Vetas Holdco Ltd. (Cayman Islands), Galway Resources Vetas Holdco Ltd. and Sucursal Colombia and Galway Gold US Inc.


TSXV:MTK - Post by User

Post by notafingeron Nov 24, 2023 1:37pm
165 Views
Post# 35751900

MD & A

MD & AOn October 19, 2023, the Corporation signed a non-binding term sheet (the “Term Sheet”) with Omni Bridgeway Capital (Canada) Limited (“Omni”) pursuant to which Omni outlined the terms upon which it may be willing to provide litigation funding to the Corporation with respect to the Arbitration (the “Litigation Financing”), subject to certain conditions. The Litigation Financing is contemplated to be provided to the Corporation in two stages: The first stage is a recourse loan (the “Recourse Loan”) intended to allow the Corporation to obtain a decision by the Tribunal on Phase One (the “Phase One Decision”). The second stage is non-recourse funding (the “Non-Recourse Funding”) for the legal fees, disbursements and enforcement of a potential Phase Two award granted to the Corporation by the Tribunal (an “Award”). Funding of the second stage will be at Omni’s election. The Litigation Financing and the provision of the Recourse Loan and Non-Recourse Funding is subject to certain conditions, including but not limited to shareholder approval, regulatory approvals including but not limited to the approval of the TSX Venture Exchange. The NonResources Funding is subject to the entering into of a definitive agreement between Omni, Lenczner Slaght LLP (the “Lawyers”) and the Corporation setting out the terms and conditions upon which Omni will provide the Litigation Financing (the “LFA”). On November 9 th, 2023, the Corporation and Omni executed a loan and option agreement (the “Loan Agreement”) pursuant to which Omni is will provide the Resource Loan to the Corporation. The Recourse Loan will be for US$200,000 and the Corporation will be required to use the Recourse Loan to fund the ICSID Payment in order for the Tribunal to render a ruling on Phase One. The Recourse Loan is expected to be provided to the Company forthwith upon receipt of Shareholder approval of the Litigation Financing. The Recourse Loan is contemplated to be lent to the Corporation on a resource basis, and shall accrue interest at a rate of 20%, compounded annually. In the event that the Tribunal finds that it does not have jurisdiction over the dispute and/or that the Government of Colombia did not breach its duties to the Corporation and/or any outcome which otherwise renders the Phase Two Election (as defined below) non-viable in the sole discretion of Omni, the Recourse Loan and accrued interest shall be repaid by the Corporation, 60 days after the Phase One Decision is transmitted to the Corporation. The repayment of the Recourse Loan and any such accrued interest shall be payable regardless of whether the Arbitration is successful and is a recourse obligation of the Company, payable from any and all assets of the Company. The Company will deliver promissory note (the “Note”) to Omni evidencing its obligation to repay Omni the Recourse Loan and any accrued interest. In the event that the Tribunal finds that it has jurisdiction over the dispute and that the Government of Colombia breached its duties to the Corporation, Omni will have the right, pursuant to the Loan Agreement, at its sole election to provide litigation funding to the Company in an initial amount of up to US$2,325,000 (the “Non-Recourse Funding Amount”) subject to certain conditions. The Non-Recourse Funding Amount may be increased in certain circumstances as may be agreed upon between the Company and Omni Omni will have the right to increase the Non-Recourse Funding Amount in order to accommodate the reasonable costs of pursuing any ancillary proceedings (the “Adjustment”). If Omni elects to provide the Non-Recourse Funding Amount for Phase Two and the enforcement of any Award, the Recourse Loan and interest shall be repaid through proceeds recovered in the litigation (and in the event there are no proceeds recovered in the litigation, such amount inclusive of such interest shall be payable by the Corporation at the conclusion of the litigation). Omni’s return on the Non-Recourse Funding Amount (the “Omni Return”) will be limited solely to recovery from the amount of money for which the Arbitration is settled, or for which a final, non-appealable award is given in favour of the Corporation (the “Litigation Proceeds). The Omni Return shall be an amount calculated as the sum of (a) a multiple of the amounts actually incurred of the Non-Recourse Litigation Funding Amount and (ii) a percentage of the gross recovery proceeds, both calculated when the recovery proceeds are received, as set out in the table below: Months Multiple Percentage 0-12 2.0x 12% 12-24 3.0x 14% 24+ 3.5x 16% If an Adjustment occurs, Omni’s percentage entitlements in the table above shall be adjusted by an amount equal to the pro-rata percentage increase in the total amount of the Non-Recourse Funding Amount. For any resolution of the Arbitration which occurs after three years, Omni shall be entitled to an increase on the return in the final row at a rate of 12% per annum, accruing and compounding monthly. A-7 If the Tribunal finds in favour of the Corporation and awards the Corporation Litigation Proceeds, the following table approximates the Omni-Return under certain award thresholds up to a maximum of US$180,000,000, being the maximum amount the Corporation estimates was their total loss of value is with respect to the Project. The below table is provided solely as a model of certain outcomes and assumes the Arbitration will take between 24 and 36 months and that the initial Non-Recourse Funding Amount of US$2,325,000 is provided to the Corporation. Accordingly, a multiple of 3.5x and percentage of 16% have been used in calculating the Omni-Return. Litigation Proceeds $10,000,000 $20,000,000 $50,000,000 $100,000,000 $150,000,000 $180,000,000 Omni Return $9,737,500 $11,337,500 $16,137,500 $24,137,500 $32,137,500 $36,937,500 Balance after Omni Return $262,500 $8,662,500 $33,862,500 $75,862,500 $117,862,500 $143,062,500
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