Here's the Deal This morning's news is welcome as the alternative was to simply issue $1 or $1.5 million of ICN shares and essentially give away 30% or 40% of all assets for cash. But, with this arrangement, you not only get access up to $5,000,000, you get management consolidation (G&A savings), and some promising properties in Nicaragua and also Colorado. It's obvious that this was in the works a since at least April 15, 2012 when Corazon decline to make the $2.5 million Santo Domingo payment. A simple check of google maps in Vancouver shows that Corazon and ICN are about 500 meters away from each other. And while Carl is a brilliant geologist, I’m not so sure about his Public Relations skills, so this plays to his strength. HOWEVER, if you look at the deal, I say this is far from over… from the news release:
“The Transaction is expected to close during the month of October and is subject to the satisfaction or waiver of the conditions set out in the Arrangement Agreement, including receipt of court approval, the approval of the TSX Venture Exchange and the approval of ICN shareholders, which is to be sought at a general and special meeting of such shareholders to be scheduled prior to mid October, 2012.
The Arrangement Agreement includes a commitment by the parties not to solicit alternative transactions, and ICN has agreed to pay a termination fee of $150,000 to Corazon under certain circumstances. In addition, Corazon has the right to match any unsolicited competing offer which may be made. A full copy of the Arrangement Agreement will be filed by each of Corazon and ICN under their respective profiles on SEDAR at www.sedar.com. In addition, a detailed description of the Arrangement Agreement will be included in the management information circular which will be mailed to ICN shareholders in advance of the proposed ICN Shareholders Meeting.
In contemplation of the proposed Transaction, on August 2, 2012, the Exchange approved a loan by Corazon to ICN in the aggregate amount of up to $500,000, which loan matures on the earlier of (i) 45 days after the ICN Shareholders Meeting, if the shareholders of ICN do not approve the Transaction and (ii) November 15, 2012. The loan bears interest at 10% per annum, calculated monthly and payable at maturity. The loan is secured by the assets of ICN, and of ICN's three US subsidiaries. The proceeds of the loan will be used by ICN for the payment of annual land claim assessment fees and other outstanding payables.”
The loan is very interesting isn’t it? It basically says, “we need $500k now, we can’t wait till October”. It’s also set up just like the Dec 2011 loan (the 10% rate, calculated monthly etc). It must mainly be to get going on drilling Goldfield. But why the big rush? Why not just do some bio-geochem and hunker down until October when the deal is done? What is interesting is that it states that ICN can’t solicit other offers and that Corazon can match any “unsolicited competing offer”… and only a $150k break fee to ICN… consider the timing as well: the loan matures on the earlier of either 11-15-12, or 45 days after the ICN meeting if shareholders turn down the offer. The meeting is scheduled ‘prior to mid-October”, so let’s just assume that the loan, at the earliest is due 11-15-12. That’s 3 months from now. But, between now and the ICN shareholder meeting in mid-October is about 2 months. Therefore, there is more to this story. The key is for ICN to get drilling on Goldfield asap (the loan was dated 8-2-12) and get the first batch of drill results out prior to the Shareholder Meeting in about 2 months, thus possibly increasing the value of Goldfield Bonanza, possibly driving up the ICN share price (remember 5-17-11?), and, depending on the value of Corazon shares, compel ICN shareholders to vote down the deal. Or, other suitors show up (are you listening IMZ?) and bid higher, which Corazon can match. It’s a curious structure for sure and seems designed to let ICN see more of what is in the ground at Goldfield prior to the merger. Otherwise, why not have the Shareholder meeting in a couple of weeks? In any case, the first card has been tossed down on the table, if anyone else is interested, they wil be compelled to show to now show their cards.
In theory, when adding the CGW and ICN shares, you have about 112,000,000 shares (rounding) with about $5,000,000 in cash, or about 4.5 cents per share in cash, with the remaining properties worth then another 2.5 cents per share, or about $2.8 million. Remember, Hog Ranch alone has a free ride of $8,000,000 of work from Pac Rim to retain a 35% cut. So this is “worth” $2.8 million by itself. Insane. As an aside, what is also interesting is that Corazon has 60,496,554 issued and outstanding (not sure of warrants and options), with 11,974,000 of this from an offering in April 2011 for 67 cents. It behooves these investors to of course at least break even from this investment.
Much more action to come from this merger folks. I would be surprised if there’s not an announcement very soon about Goldfield drilling commencement. Comments welcome to the above either on the bullboard on my inbox.