ANACONDA MINING AND OREX EXPLORATION EXECUTE ARRANGEMENT AGREEMENT
Anaconda Mining Inc. and Orex Minerals Inc. have entered into a definitive arrangement agreement, pursuant to which Anaconda has agreed to acquire all of the issued and outstanding common shares of Orex, by way of a court-approved plan of arrangement. Pursuant to the Agreement, the consideration to be received by the shareholders of Orex consists of 0.85 of a common share of Anaconda (each, an "Anaconda Share") for each common share of Orex (each an "Orex Share") held. Outstanding options of Orex ("Orex Options") that have not been duly exercised prior to the effective date on the Arrangement, will be exchanged for a fully vested option of Anaconda to purchase from Anaconda the number of Anaconda Shares (rounded down to the nearest whole share) equal to: (i) the exchange ratio, being 0.85, multiplied by (ii) the number of Orex Shares subject to such Orex Option immediately prior to the effective date of the Arrangement. Outstanding warrants of Orex ("Orex Warrants") that do not already contain adjustment provisions triggered by the Arrangement, will be amended to include such an adjustment feature, such that upon completion of the Arrangement, the holders of Orex Warrants will be entitled to receive, upon exercise of their securities, the number of Anaconda Shares which the holders would have been entitled to receive as a result of the Arrangement, if immediately prior to the effective date the holders had exercised their securities.
Following completion of the Arrangement, Orex will be a wholly owned subsidiary of Anaconda. Existing Anaconda and Orex shareholders will own approximately 54.9% and 45.1% of the combined company, respectively, on a non-diluted basis.
Arrangement Benefits
The Arrangement is intended to provide significant benefits for securityholders of both companies, including:
- -Acceleration of development of Orex's Goldboro Project ("Goldboro Project") by combining Orex's mineral resources with Anaconda's proven operating infrastructure at the Point Rousse Project ("Point Rousse Project") and experienced management team;
- -Potential for substantial capital cost reductions at the Goldboro Project through leveraging Anaconda's existing port, mill and tailings facilities;
- -Potential for gold producing operations in two mining friendly jurisdictions in Atlantic Canada - Newfoundland & Labrador and Nova Scotia;
- -Establishment of a strong position from which to participate in any future consolidation in the mining industry in Atlantic Canada; and
- -Greater market presence, enhanced liquidity and a broader capital markets profile.
Anaconda's Point Rousse Project has been producing gold for nearly seven years and, in that time, Anaconda has incrementally improved its operating infrastructure, which includes a 1,300-tonne per day mill, tailings capacity for approximately 15 years (based on the current mill throughput rate) and a port facility. Both the Point Rousse Project and Goldboro Project are located on tidewater. With favourable logistics and existing infrastructure in place, Anaconda expects it will be able to accelerate the development of the Goldboro Project at a lower capital cost than if it were a stand-alone project.
Combining the two companies will create a single enterprise with expanded mineral resources, most of which are high grade. On a pro-forma basis, the mineral resource portfolio will include 457,400 Measured and Indicated ounces of gold and 372,900 Inferred ounces at the Goldboro Project in Nova Scotia (see Orex's news release dated March 1, 2017); 107,230 Indicated ounces of gold and 37,030 Inferred ounces at the Point Rousse Project; and 83,000 Indicated ounces of gold and 31,000 Inferred ounces at the Viking Project ("Viking Project") in Newfoundland and Labrador (Table 1). Detailed resource tables (Table 2) prepared in accordance with National Instrument 43-101 ("NI 43-101") are presented below.
Table 1. A summary of Mineral Resources at Goldboro, Point Rousse and Viking Projects Goldboro, NS Point Rousse, NL Viking, NL Category Tonnes Grade^ (g/t) Ounces Tonnes Grade^ (g/t) Ounces Tonnes Grade (g/t) Ounces M+I 2,556,000 5.57 457,400 1,764,100 1.89 107,230 1,817,000 1.42 83,000 Inferred 2,669,000 4.35 372,900 460,700 2.50 37,030 847,000 1.15 31,000 ^ tonnage weighted average grade: NOTE: Goldboro includes all three zones described in the Technical Reports and Point Rousse includes the Pine Cove and Stog'er Tight deposits. M+I refers to Measured and Indicated resource categories
Dustin Angelo, President and CEO of Anaconda, said, "We believe that the Arrangement with Orex is a great opportunity for our shareholders and we are acquiring mineral resources at an attractive price. Over the last nearly seven years, we have built a scalable platform for growth with an ever-improving mill facility, plenty of tailings capacity and a new port facility. We have a track record of success, developing and operating gold mining projects. The Goldboro Project provides the mineral resources to extend the longevity of Anaconda and potentially increase annual production to much higher levels. We are excited to leverage our people, talents and Point Rousse infrastructure to meet our goal of bringing the Goldboro Project into production as soon as reasonably possible."
"The Orex board of directors is committed to building a profitable junior gold production company and has assessed a variety of financial and strategic options. The board believes the proposed business combination with Anaconda represents the best option. We have undertaken a thorough due diligence review of Anaconda's Pine Cove Mine and Mill facilities and exploration properties in Newfoundland and, equally importantly, we have had the opportunity to engage directly with Anaconda's management and operations team. We believe the combined business will (i) be capital efficient; (ii) reduce the time required to bring the Goldboro Project into production; (iii) be supported by an experienced operations team and (iv) redefine and revalue our business in the capital markets. The Orex board of directors unanimously recommends the proposed business combination and believes that this bold strategic undertaking is in the best long-term interest of our valued shareholders." said Jonathan Fitzgerald, CEO of Orex.
Board of Directors' Recommendations
The Anaconda and Orex board of directors have determined that the Arrangement is in the best interest of their respective shareholders and securityholders, as applicable, taking into account advice from their financial advisors, and have unanimously approved the Arrangement. The Anaconda and Orex board of directors recommend that their respective shareholders and securityholders, as applicable, vote in favor of the transactions.
Red Cloud Klondike Strike Inc. has provided a verbal fairness opinion to the board of directors of Anaconda to the effect that, as of the date of the fairness opinion and based upon and subject to the limitations and qualifications therein, the consideration payable by Anaconda pursuant to the Arrangement for the Orex Shares is fair, from a financial point of view, to Anaconda.
M Partners Inc. has provided a verbal fairness opinion to the special committee of the board of directors and to the board of directors of Orex to the effect that, as of the date of the fairness opinion and based upon and subject to the limitation and qualifications therein, the Arrangement is fair, from a financial point of view, to Orex.
Transaction Summary
Immediately prior to the Arrangement, Orex will be continued from the Province of Quebec into the Province of Ontario (the "Continuance"). The Arrangement will be carried out by way of a court-approved plan of arrangement pursuant to the Business Corporations Act (Ontario) and must be approved by the affirmative vote of two-thirds of the votes cast by Orex shareholders and certain warrantholders at a special meeting that is expected to be held in May 2017. Pursuant to the Agreement, the consideration to be received by the shareholders of Orex consists of 0.85 of an Anaconda Share for each Orex Share held. Following completion of the Arrangement, Orex will be a wholly owned subsidiary of Anaconda.
Outstanding Orex Options that have not been duly exercised prior to the effective date on the Arrangement, will be exchanged for a fully vested option of Anaconda to purchase from Anaconda the number of Anaconda Shares (rounded down to the nearest whole share) equal to: (i) the exchange ratio, being 0.85, multiplied by (ii) the number of Orex Shares subject to such Orex Option immediately prior to the effective date of the Arrangement. Outstanding Orex Warrants that do not already contain adjustment provisions triggered by the Arrangement, will be amended to include such an adjustment feature, such that upon completion of the Arrangement, the holders of Orex Warrants will be entitled to receive, upon exercise of their securities, the number of Anaconda Shares which the holders would have been entitled to receive as a result of the Arrangement, if immediately prior to the effective date the holders had exercised their securities.
In addition to applicable securityholder and court approvals, the Arrangement is subject to applicable regulatory approvals including Toronto Stock Exchange and TSX Venture Exchange approval and the satisfaction of certain other customary closing conditions customary in transactions of this nature.
The Arrangement is expected to be completed in May 2017. Following completion of the Arrangement, the number of directors on Anaconda's board will be seven and be comprised of five current members of the Anaconda board of directors and two directors who are current members of the Orex board of directors. In addition, Anaconda may consolidate the Anaconda Shares on terms to be determined by Anaconda (the "Consolidation"). The Arrangement is not conditional on the Consolidation.
For Orex, the Arrangement and Continuance will require approval by two-thirds of the votes cast by its shareholders and, in respect of the Arrangement, certain warrantholders at a special securityholders meeting. The issuance of the Anaconda Shares will require the approval of a simple majority of the shareholders of Anaconda at a special shareholders meeting. The Consolidation will require approval by two-thirds of the votes cast by Anaconda shareholders.
Officers and directors and certain principal shareholders of Anaconda, who together control approximately 20.64% of the outstanding Anaconda Shares, have entered into voting support agreements pursuant to which they have agreed to vote their Anaconda Shares in favor of the issuance of the Anaconda Shares pursuant to the Arrangement. Officers, directors and certain principal shareholders of Orex, who together control approximately 25.38% of the outstanding Orex Shares, have entered into voting support agreements pursuant to which they have agreed to vote their Orex Shares and other securities, as applicable, in favor of the Arrangement and Continuance.
Copies of the Agreement and certain related agreements are available through Anaconda and Orex's filings with the securities regulatory authorities in Canada on SEDAR at www.sedar.com.
None of the securities to be issued pursuant to the Arrangement Agreement have been or will be registered under the United State Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws, and any securities issued in the Arrangement are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities
Advisor and Counsel
Red Cloud Klondike Strike Inc. is acting as financial advisor to Anaconda with Cassels Brock & Blackwell LLP acting as its Canadian legal advisor and Neal, Gerber & Eisenberg LLP acting as Anaconda's US legal counsel.
M Partners Inc. is acting as financial advisor to Orex with Fasken Martineau DuMoulin LLP acting as Orex's Canadian legal advisor and Troutman Saunders LLP acting as Orex's US legal counsel.
NI 43-101 Resource Summary
Following completion of the Arrangement Anaconda's mineral resource portfolio will include three mineral projects with current NI 43-101 mineral resources including the Goldboro Project, the Point Rousse Project and the Viking Project. Mineral resources for each of these projects are summarized in Table 2.
Table 2: A summary of NI 43-101 Mineral Resources (e) (f) Goldboro, Nova Scotia Boston Richardson (a) zone West Goldbrook (a) zone East Goldbrook (a) zone Category Tonnes Grade (g/t) Ounces Tonnes Grade (g/t) Ounces Tonnes Grade (g/t) Ounces Measured 171,000 5.39 29,600 Indicated 1,507,000 5.27 255,400 464,000 5.39 80,400 414,000 6.91 92,000 Inferred 1,083,000 4.56 158,800 459,000 4.42 65,200 1,127,000 4.11 148,900 Point Rousse (PR)/Viking (VK), Newfoundland and Labrador Pine Cove (b) deposit (PR) Stog'er Tight (c) deposit (PR)Thor (d) deposit (VK) Category Tonnes Grade (g/t) Ounces Tonnes Grade (g/t) Ounces Tonnes Grade (g/t) Ounces Indicated 1,560,000 1.67 83,690 204,100 3.59 23,540 1,817,000 1.42 83,000 Inferred 208,700 1.57 10,570 252,000 3.27 26,460 847,000 1.15 31,000 Probable Reservesb 858,800 1.46 40,400 a.Resource stated using a 2.0 g/t cutoff as per Orex's news release of March 1, 2017. Any additional information regarding the current estimate will be available upon filing of a Technical Report. b.Resource is stated using a 0.7 g/t cutoff as per "NI43-101 Technical Report, Mineral Resource and Mineral Reserve Update on the Pine Cove Mine and Mineral Resource Estimate on the Stog'er Tight Deposit, Point Rousse Project, Baie Verte, Newfoundland and Labrador, Canada" with an effective date of October 22, 2015 and authored by independent qualified persons David Copeland, P. Geo. (an independent consultant) and Catherine Pitman, P.Geo. (AMC Mining Consultants (Canada) Ltd.) and qualified persons David Evans, P.Geo. (Silvertip Exploration Consultants Inc.), Paul McNeill, P. Geo. (Anaconda Mining Inc.) and Gordana Slepcev, P. Eng. (Anaconda Mining Inc.). c.Resource is stated using a 0.8 g/t cutoff as per "NI43-101 Technical Report, Mineral Resource and Mineral Reserve Update on the Pine Cove Mine and Mineral Resource Estimate on the Stog'er Tight Deposit, Point Rousse Project, Baie Verte, Newfoundland and Labrador, Canada" with an effective date of October 22, 2015 and independent qualified persons David Copeland, P. Geo. (an independent consultant) and Catherine Pitman, P.Geo. (AMC Mining Consultants (Canada) Ltd.) and qualified persons David Evans, P.Geo. (Silvertip Exploration Consultants Inc.), Paul McNeill, P. Geo. (Anaconda Mining Inc.) and Gordana Slepcev, P. Eng. (Anaconda Mining Inc.). d.Resource is stated using a 0.5 g/t cutoff as per "NI 43-101 Technical Report and Mineral Resource Estimate on the Thor Deposit, Viking Project, White Bay Area, Newfoundland and Labrador, Canada" with an effective date of August 29, 2016 and authored by independent qualified persons David A. Copeland, M.Sc., P.Geo., (an independent consultant), Shane Ebert, Ph.D., P.Geo. (an independent consultant) and Gary Giroux, MASc, P.Eng. (Giroux Consultants Ltd.). e.Mineral resources that are not mineral reserves do not have demonstrated economic viability. This estimate of mineral resources may be materially affected by environmental permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. f.Mineral Resource Estimate were prepared in accordance with NI 43-101 and the CIM Standards.
ABOUT ANACONDA MINING INC.
Anaconda is a growth-oriented, gold mining and exploration company with a producing project called the Point Rousse Project and three exploration/development projects called the Viking and Great Northern Projects and the Tilt Cove Property in Newfoundland.
The Point Rousse Project is approximately 6,300 hectares of property on the Ming's Bight Peninsula located in the Baie Verte Mining District in Newfoundland, Canada. Since 2012, Anaconda has increased its property control by ten-fold on the peninsula and gold production to nearly 16,000 ounces per year. In an effort to expand production, it is currently exploring three primary, prospective gold trends, which have approximately 20 km of cumulative strike length and include five deposits and numerous prospects and showings, all within 8 km of the Pine Cove Mill. A second project called the Tilt Cove Property, consisting of 350 hectares, is located approximately 60 kilometres by road from the Pine Cove Mill but is also within the Baie Verte Mining District and underlain by similar geology to the Point Rousse Project.
Anaconda also controls the Viking and Great Northern Projects, which have approximately 6,225 and 6,375 hectares of property, respectively, in White Bay, Newfoundland, approximately 100 kilometres by water (180 kilometres via road) from the Pine Cove Mill. The Viking Project contains the Thor Deposit and other gold prospects and showings and the Great Northern Project includes numerous prospects and showings within a similar geological setting as the Viking Project. Anaconda's plan is to discover and develop more resources within these project areas and substantially increase annual production at the Pine Cove Mill from its current rate of nearly 16,000 ounces.
As the only pure play gold producer in Atlantic Canada, Anaconda Mining is turning the rock we live on into a growing and profitable resource. With a young and motivated workforce, innovative technology and the support of local suppliers, Anaconda is investing in the people of Newfoundland & Labrador and giving back to the communities in which we operate - building a better future for all our stakeholders, from the ground up.
Paul McNeill, Anaconda's VP of Exploration and a qualified person pursuant to NI 43-101, has reviewed and approved the scientific and technical data of Anaconda contained in this press release.
ABOUT OREX EXPLORATION INC.
Orex is a mineral exploration company based in the Province of Quebec, Canada. Orex's principal asset is the Goldboro Project in Nova Scotia in which it holds a 100% interest. The Goldboro Project is located approximately 180 kilometres northwest of Halifax, on the eastern shore of Nova Scotia. The property comprises 37 contiguous claims, covering 600 hectares.
Mineral resources occur in three spatially contiguous zones along the Upper Seal Harbour anticline. These comprise the total "Goldboro Deposit" and consist of the Boston Richardson Zone, the East Goldbrook Zone and the West Goldbrook Zone.
Jean-Pierre Landry, P. Eng., director and consultant of Orex, is a qualified person pursuant to NI 43-101, has reviewed and approved the technical information relating to Orex contained in this press release.
We seek Safe Harbor.