newsTrevali and Kria Resources Announce Friendly Business Combination to Create Platform for a New Intermediate Base Metals Producer
12/16/2010 4:32:19 PM - Market Wire
Company Will Have Multiple Zinc-Lead-Copper-Silver Assets in Peru & Canada
Indicated Resources of 1.7 Billion Contained lbs Zinc
Inferred Resources of 2.8 Billion Contained lbs Zinc
Two Mines Slated to Enter Production in 2011-2012
VANCOUVER, BRITISH COLUMBIA, Dec 16, 2010 (Marketwire via COMTEX News Network) --
TrevaliResources Corp. ("Trevali" or the "Company")(TSX:TV)(OTCQX:TREVF)(FRANKFURT:4TI) and Kria Resources Ltd. ("Kria")(TSX VENTURE:KIA) are pleased to announce that they have entered into aletter of intent (the "Letter Agreement") to complete a businesscombination whereby Trevali will acquire all of the issued andoutstanding common shares of Kria and Kria will become a wholly ownedsubsidiary of Trevali (the "Transaction"). It is anticipated that theTransaction will occur by way of a plan of arrangement and will besubject to receipt of all necessary regulatory, court, and shareholderapprovals, including disinterested shareholder approval by the Kriashareholders as a consequence of Cardero Resource Corp. ("Cardero")(TSX:CDU) holding in excess of 10% of each of Trevali and Kria.
Pursuantto the terms of the Letter Agreement Trevali intends to acquire all ofthe issued and outstanding common shares of Kria on the basis of 0.2 of acommon share of Trevali for each common share of Kria (the "ExchangeRatio"). In connection with the proposed Transaction, it is proposedthat the name of the resulting issuer be changed to "Trevali MiningCorporation" (the "Name Change").
Based on the closing price ofTrevali on the Toronto Stock Exchange ("TSX") on December 15, 2010, theExchange Ratio implies an offer price of C
.334 per Kria common shareand values Kria's equity at approximately C$44 million on a fullydiluted in-the-money basis based on a closing price per share of Trevalion December 15, 2010 of $1.67.
The offer price represents a33.6% premium to the closing price of Kria on the TSX-V on December 15,2010 and a 25.2% premium based on the 30-day VWAPs of both companies forthe period ended December 15, 2010.
Upon completion of theTransaction, the combined company will have approximately 76.4 millionissued and outstanding common shares and, Trevali and Kria shareholderswill own approximately 74.2% and 25.8% of the combined company,respectively. The terms of the Transaction have been unanimouslyapproved by the boards of directors of both Trevali and Kria.
Dr.Mark Cruise, President and CEO of Trevali, stated, "The opportunity ofcombining our future production base in Peru with Kria's assets in theestablished New Brunswick base metal camp will provide both Kria andTrevali shareholders with significant cash-flow growth potential, lowerrisk with multiple production platforms and a strengthened managementteam."
Mr. Mike Hoffman, President and CEO of Kria, stated, "Weare very excited with the potential of combining with Trevali to formthe basis of a new mid-tier base metal producer in the Americas. Withnear term cash flow potential coming from our Halfmile Mine in 2011 andfrom Trevali's Santander towards the end of 2011, the combined companywill be positioned to strongly fund future growth."
CONFERENCE CALL
Themanagement teams of both Trevali and Kria will host a conference callto discuss the transaction will be held at 10.30 AM EST time (7:30 AMPST time) on Friday, December 17, 2010 to provide shareholders,securities analysts, and investors the opportunity to hear managementdiscuss the business transaction outlined herein. The call can beaccessed by dialing 1-416-340-2217 or 1-866-696-5910 (toll free) and usepasscode: 2002053. A corporate presentation of the proposed transactionwill be available on Trevali's website (www.trevali.com) for review inconjunction with the conference call.
HIGHLIGHTS OF COMBINED ENTITY
-- Operations diversified across two world-leading mining jurisdictions,
Peru and Canada
-- Provides diversification from a single advanced project to two mines
with production anticipated in 2011 - 2012
-- Cash flow expected in 2011 once Halfmile begins supplying feed on a
toll-milling basis to Xstrata Zinc's Brunswick 12 Mine and Santander
mill commissioning commences in late 2011
-- Significant increase in tonnages and contained metal in all resource
categories, including over 1.6 billion pounds of in-situ zinc indicated
resources and 2.8 billion pounds of in-situ zinc inferred resources
(Table 1)
-- Excellent resource expansion potential at Santander where all four newly
discovered polymetallic deposits (Magistral North, Central, South and
Puajanca South), in addition to the historic Santander Pipe, remain open
for expansion at shallow-to-moderate depths
-- Robust, advanced project pipeline (short-to-medium term) including
potential mill expansion at Santander and construction of a new mill at
Halfmile-Stratmat following planned closure of Xstrata's Brunswick 12
facility
-- Anticipated cash flow from Santander to help offset a portion of the
capital requirements necessary to fund the proposed new Halfmile-
Stratmat mill in approximately 2012 - 2013
-- Quality exploration portfolio at the Santander project - numerous high
priority targets scheduled for aggressive drill testing in early 2011
-- Company will have significant leverage to commodity price increases,
specifically zinc and silver in the near-term
-- Listing on the TSX with a senior Lima Stock Exchange (BVL) listing in
progress anticipated to result in improved stock liquidity and strong
re-rating potential based on a portfolio of multiple mines, near-term
cash flow and strong production growth profile
-- World-leading partners-Glencore International (Santander) and Xstrata
Zinc (Halfmile)
-- Expanded talent pool of experienced geoscientists, mining engineers,
management team and board of directors
Table 1 - Trevali and Kria Resource Estimates
---------------------------------------------------------------------------
Ag Zn Pb Cu Ag
Tonnes %Zn %Pb %Cu (gpt) (Mlbs) (Mlb) (Mlb) (Moz)
---------------------------------------------------------------------------
Indicated Resources
---------------------------------------------------------------------------
Trevali - 5,858,000 3.86 1.35 0.08 44 498 174 10 8.3
Santander
---------------------------------------------------------------------------
TV Santander 1,656,000 2.74 100
Tailings
---------------------------------------------------------------------------
Kria - Halfmile 6,262,000 8.13 2.58 0.22 31 1,122 356 30 6.2
---------------------------------------------------------------------------
Total Indicated 13,776,000 6.07 1.99 0.15 37 1,720 530 41 14.5
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Inferred Resources
---------------------------------------------------------------------------
Trevali - 4,806,000 5.08 0.44 0.07 21 538 47 7 3.2
Santander
---------------------------------------------------------------------------
Kria - Halfmile 6,078,000 6.69 1.83 0.14 21 896 245 19 4.0
---------------------------------------------------------------------------
Kria - Stratmat 5,524,000 6.11 2.59 0.40 54 744 315 49 9.6
---------------------------------------------------------------------------
Kria - Ruttan 19,750,000 1.47 - 1.17 - 640 - 509 -
---------------------------------------------------------------------------
Total Inferred 36,158,000 3.54 0.76 0.73 15 2,818 607 584 16.9
---------------------------------------------------------------------------
KriaHalfmile and Stratmat resources calculated on 5% Zinc equivalentgrades, Ruttan on a 1% copper equivalent and Trevali's Santanderresources calculated at 3% Zinc equivalent grades. See Kria PressReleases of September 23, 2008; March 2, 2009; and February 23, 2009,for further information on resource estimates and Trevali Press Releaseof November 2, 2010, on Trevali resource estimate. In addition detailedtechnical reports are available on www.sedar.com.
BOARD OF DIRECTORS RECOMMENDATIONS
TheTransaction will be subject to receipt of all necessary regulatoryacceptances/approvals and the approval of the Kria shareholders and theapproval of the Trevali shareholders. The Board of Directors of Kria andthe Board of Directors of Trevali have determined to recommend that theshareholders of Kria and the shareholders of Trevali, respectively,vote in favour of the Transaction.
TRANSACTION DETAILS
Theterms of the Transaction will be described in detail in the JointManagement Information Circular of Trevali and Kria to be filed with theregulatory authorities and mailed to Trevali and Kria shareholders inaccordance with applicable securities laws. Officers, directors andmajor shareholders of Kria who hold approximately 22.5% of Kria haveagreed to enter into lockup and support agreements with Trevali underwhich they have agreed to vote in favour of the Transaction. As well,officers, directors and major shareholders of Trevali who hold 26.3% ofTrevali have agreed to enter into lockup and support agreements withKria under which they have agreed to vote in favour of the Transaction.
Thenewly combined company will draw on the expertise from both companiesto fulfill management responsibilities. The newly combined board willcomprise the current Trevali directors and a representative of Kria,Mike Hoffman. Dr. Mark Cruise will remain President and CEO of thecombined company.
The Transaction comports with Trevali'sstrategy to create a mid-tier polymetallic (zinc-lead-copper-silver)mining company focused on the Americas. The combined entity will focuson generating value for its shareholders by maximizing value from itsadvanced, near-term production zinc, lead, copper, silver asset basewith the aim of commencing production from Kria's Halfmile and Trevali'sSantander projects in 2011-2012.
The Letter Agreement includes acommitment by Kria not to solicit alternative transactions to theproposed Transaction. Trevali has also been provided with certain otherrights customary for a transaction of this nature, including the rightto match competing offers made to Kria in the event Kria receives asuperior proposal. Pursuant to the terms of the Letter Agreement, theparties have agreed to pay the other party a break fee in the amount of3% of the market value of Kria in certain circumstances and Trevali willhave to pay to Kria a break fee of 3% of the market value of Kria incertain circumstances.
The Transaction is subject to the partiesentering into a definitive agreement by January 15, 2011 and the receiptof all necessary regulatory approvals and necessary shareholder anddisinterested shareholder approvals at special meetings of Kria andTrevali, respectively, to be held no later than April 29, 2011. Closingof the Transaction is set to occur shortly after the shareholdermeetings.
Trevali, in conjunction with partner GlencoreInternational A.G. has recently commenced pre-operation construction atits planned 2,000-tonne-per day Santander zinc-lead-silver mine projectin the Central Peruvian Polymetallic Belt, Peru. Mine commissioning iscurrently scheduled for late 2011 with full production to followimmediately thereafter.
Kria's Halfmile zinc-lead-silver-copperproject is located in the Bathurst Massive Sulphide Belt of NewBrunswick, Canada. Advanced permitting and engineering studies are inprogress with proposed production at a rate of 2,000-tonnes-per-dayanticipated to commence in 2011.
Cardero presently holds15,000,000 shares (15.2%) of Kria, plus warrants to acquire anadditional 15,000,000 shares. In addition Cardero holds 7,032,432 sharesof Trevali (12.36%) plus warrants to acquire an additional 2,857,144shares. As a consequence, the Transaction constitutes a "related partytransaction" within the meaning of Multilateral Instrument 61-101 -Protection of Minority Security Holders in Special Transactions ("MI61-101"), and will require approval by the shareholders other thanCardero.
CARDERO LOAN
Under the terms of the revisedHalfmile and Stratmat property purchase agreement dated July 15, 2009,between Kria and Xstrata Canada Corporation ("Xstrata"), Kria isobligated to make a payment of US$8,000,000 to Xstrata on or beforeJanuary 16th, 2011. Kria has entered into a term sheet with Carderowhereby Cardero has agreed to lend Kria US$8,000,000 to advance theproperty payment to Xstrata (the "Loan"). The Loan will be advanced toKria on or about January 14th, 2011, bear interest at 10% per annum,calculated monthly, not in advance and shall be repayable on or beforeJanuary 14, 2012. As security for the Loan, Kria will grant in favour ofCardero a first charge, mortgage and security interest over all itsassets and undertakings. In connection with the Loan, Kria has agreed toissue Cardero approximately 6,400,000 common share purchase warrants ofKria (the "Bonus Warrants"). Each Bonus Warrant will entitle the holderto acquire a common share of Kria at an exercise price of
.25 untilJanuary 14, 2012. As Cardero currently holds approximately 15.2% of theissued and outstanding common shares of company, Cardero and Kria arerelated parties within the meaning of MI 61-101. As such, the issuanceof the Bonus Warrants will remain subject to receipt of disinterestedshareholder approval by the Kria shareholders. Upon receipt ofdisinterested shareholder approval and the issuance of the BonusWarrants, the interest rate of the Loan will retroactively be reduced to8% to be calculated monthly, and not in advance.
ADVISORS
Trevalihas engaged Axemen Resource Capital Ltd. as its financial advisor. ASpecial Committee consisting of independent members of Trevali's Boardof Directors has been established to review the proposed transaction.Paradigm Capital Inc., financial advisor to the Special Committee, hasprovided an opinion to the Special Committee that the proposedtransaction is fair, from a financial point of view, to Trevali'sshareholders (other than Cardero).
Kria has engaged Raymond JamesLtd. ("Raymond James") to act as financial advisor to the specialcommittee of Kria, which is comprised of independent board members (the"Kria Special Committee"). Raymond James has provided an oral opinion tothe Kria Special Committee that, subject to certain assumptions andlimitations set out therein, the proposed transaction is fair, from afinancial point of view to the shareholders of Kria. Raymond James willprovide the Kria Special Committee with a written fairness opinion priorto the parties entering into the definitive agreement.
Thescientific and technical contents of this press release relating to Kriahave been supervised, reviewed and approved by Dayle Rusk, P. Geo.,Vice President Exploration of Kria, and Mike Hoffman, P. Eng., both ofwhom are Qualified Persons as defined under NI 43-101 guidelines.
Thescientific and technical contents of this press release relating toTrevali have been supervised, reviewed and approved by Dr. Mark D.Cruise, Trevali's President and CEO and a qualified person under NI43-101 guidelines.
ABOUT KRIA RESOURCES LTD.
Kria is abase metal exploration and development company focused on high-quality,advanced-stage base metal assets. Kria's primary asset is the HalfmileLake and Stratmat properties near Bathurst, New Brunswick. The HalfmileLake and Stratmat projects are optioned by Kria from Xstrata, which iscurrently the largest shareholder of Kria. Kria completed a preliminaryeconomic assessment ("PEA") on its Halfmile Lake project in September2010 that indicated the project's economics improve if the mineralresource from Kria's nearby Stratmat property is combined with themineral resource from Halfmile Lake. Please refer to the Kria'stechnical reports filed on SEDAR for details regarding the NI 43-101compliant resource estimates on Halfmile, Stratmat and Ruttan. Pricesand other assumptions mentioned in this press release are Kria'sinternal assumptions and estimates. Additional information is availableat www.kriaresources.com.
ABOUT TREVALI RESOURCES CORP.
Trevali,in conjunction with its partner, Glencore International A.G., hasentered into a definitive development agreement for the Santandersilver-lead-zinc project in west-central Peru that will see Glencoreprovide and operate on the property, a 2,000-tonne-per-day concentrateplant, undertake mining operations on a 'contractor/toll basis' andenter into a long-term concentrate off-take agreement with Trevali for100% of the Santander project's production at benchmark terms.
Additionally,through its wholly owned subsidiary, Trevali Renewable Energy Inc.,Trevali is undertaking a significant upgrade of the Tingo run-of-riverhydroelectric generating facility along with transmission line upgradesand extensions to allow, in addition to supplying power to the miningoperation on the property, the potential sale of surplus power into thePeruvian National Energy Grid.
The common shares of Trevali arecurrently listed on the TSX (symbol TV). For further details on Trevali,readers are referred to the Trevali's web site (www.trevali.com) and toCanadian regulatory filings on SEDAR at www.sedar.com.
On Behalf of the Board of Directors of TREVALI RESOURCES CORP.
Mark D. Cruise, President
Thisnews release contains "forward-looking statements" within the meaningof the United States private securities litigation reform act of 1995and "forward-looking information" within the meaning of applicableCanadian securities legislation. Statements containing forward-lookinginformation express, as at the date of this news release, the Company'splans, estimates, forecasts, projections, expectations, or beliefs as tofuture events or results and the company does not intend, and does notassume any obligation to, update such statements containing theforward-looking information. Such forward-looking statements andinformation include, but are not limited to statements as to: theaccuracy of estimated mineral reserves and resources, anticipatedresults of future exploration, and forecast future metal prices,anticipated results of future electrical sales and expectations thatenvironmental, permitting, legal, title, taxation, socio-economic,political, marketing or other issues will not materially affectestimates of mineral reserves. These statements reflect the Company'scurrent views with respect to future events and are necessarily basedupon a number of assumptions and estimates that, while consideredreasonable by the Company, are inherently subject to significantbusiness, economic, competitive, political and social uncertainties andcontingencies.
These statements reflect the Company's currentviews with respect to future events and are necessarily based upon anumber of assumptions and estimates that, while considered reasonable bythe company, are inherently subject to significant business, economic,competitive, political and social uncertainties and contingencies. Manyfactors, both known and unknown, could cause actual results, performanceor achievements to be materially different from the results,performance or achievements that are or may be expressed or implied bysuch forward-looking statements contained in this news release and thecompany has made assumptions and estimates based on or related to manyof these factors. Such factors include, without limitation: fluctuationsin spot and forward markets for silver, zinc, base metals and certainother commodities (such as natural gas, fuel oil and electricity);fluctuations in currency markets (such as the Peruvian sol versus theU.S. dollar); risks related to the technological and operational natureof the Company's business; changes in national and local government,legislation, taxation, controls or regulations and political or economicdevelopments in Canada, the United States, Peru or other countrieswhere the Company may carry on business in the future; risks and hazardsassociated with the business of mineral exploration, development andmining (including environmental hazards, industrial accidents, unusualor unexpected geological or structural formations, pressures, cave-insand flooding); risks relating to the credit worthiness or financialcondition of suppliers, refiners and other parties with whom the Companydoes business; inadequate insurance, or inability to obtain insurance,to cover these risks and hazards; employee relations; relationships withand claims by local communities and indigenous populations;availability and increasing costs associated with mining inputs andlabour; the speculative nature of mineral exploration and development,including the risks of obtaining necessary licenses and permits and thepresence of laws and regulations that may impose restrictions onmining,; diminishing quantities or grades of mineral reserves asproperties are mined; global financial conditions; businessopportunities that may be presented to, or pursued by, the Company; theCompany's ability to complete and successfully integrate acquisitionsand to mitigate other business combination risks; challenges to, ordifficulty in maintaining, the Company's title to properties andcontinued ownership thereof; the actual results of current explorationactivities, conclusions of economic evaluations, and changes in projectparameters to deal with unanticipated economic or other factors;increased competition in the mining industry for properties, equipment,qualified personnel, and their costs. Investors are cautioned againstattributing undue certainty or reliance on forward-looking statements.Although the Company has attempted to identify important factors thatcould cause actual results to differ materially, there may be otherfactors that cause results not to be as anticipated, estimated,described or intended. The Company does not intend, and does not assumeany obligation, to update these forward-looking statements orinformation to reflect changes in assumptions or changes incircumstances or any other events affecting such statements orinformation, other than as required by applicable law.
SOURCE: Trevali Resources Corp.
TrevaliResources Corp. Steve Stakiw Manager - Corporate Communications (604)488-1661 (604) 408-7499(FAX) sstakiw@trevali.com www.trevali.com
Copyright (C) 2010 Marketwire. All rights reserved