Xiana enters definitive deal for Cu-Au asset in Chile
Xiana enters definitive deal for Cu-Au asset in Chile
2018-05-22 12:08 MT - News Release
Mr. Carlos Ballon reports
XIANA TO ACQUIRE PRODUCING COPPER OPERATION IN CHILE AND ANNOUNCES FINANCING FOR UP TO C$20 MILLION
Xiana Mining Inc. has entered into a definitive agreement with subsidiaries of Glencore PLC to acquire 100 per cent of Minera Altos De Punitaqui (MAP), a producing copper-gold operation in Chile.
Commenting on the MAP acquisition, Carlos Ballon, chairman and chief executive officer of Xiana, said: "MAP is an excellent cornerstone asset for Xiana which combines an existing copper and gold production base with significant upside potential. The Xiana team has a track record of development and exploration successes, and we are excited by the geological potential of MAP. We look forward to building upon MAP's potential and enhancing shareholder value through organic growth and further acquisitions in Chile and Peru."
Overview of MAP:
- MAP is a producing copper-gold operation located in Region IV of Chile.
- The operations are located approximately 400 kilometres north of Santiago and 35 kilometres south of Ovalle in the Coquimbo region. They benefit from water and power supply and excellent infrastructure.
- The operations are in an established mining district with over 90 per cent of employees from Punitaqui or Ovalle.
- MAP has a 3,600-tonne-per-day concentrator on site, currently processing ore from three mines (open pit and underground).
- Production in 2017 comprised approximately 8,000 tonnes of copper metal and 21,000 ounces of gold (in concentrate).
- The properties comprise IOCG- (iron oxide/copper/gold), vein- and manto-style mineralization and are located in a prolific copper-gold district.
- The current mine life is over five years with significant upside potential to create a long-life, sustainable, medium-sized copper producer.
MAP acquisition agreement summary:
- Xiana and Xiana Chile SPA (a wholly owned subsidiary of Xiana) signed the MAP agreement on May 18, 2018, to acquire the 100-per-cent interest in MAP pursuant to an arm's-length transaction with Glencore.
- Xiana has agreed, pursuant to the terms of the MAP agreement, to pay Glencore total cash consideration of $25-million (U.S.) and to grant a net smelter royalty payable as follows:
- $5-million (U.S.) payable in cash at closing of the MAP acquisition;
- $20-million (U.S.) payable in cash, on the date of the second anniversary of the closing;
- A 1.5-per-cent net smelter royalty payable in excess of nine million tonnes of ore being processed at MAP, following the closing of the MAP acquisition.
- No finders' fees are payable to any person in connection with the MAP acquisition.
- Closing of the MAP acquisition is subject to the receipt of various customary regulatory approvals, including approval of the TSX Venture Exchange. If the closing of the MAP acquisition has not occurred on or by Sept. 30, 2018, either party may elect to terminate the agreement.
Concurrent financing:
- Concurrently with the MAP acquisition, Xiana will be conducting a financing for gross proceeds of up to $10-million through the issuance of units in the company at a price of 48 cents per equity unit. Each equity unit will comprise one common share in the capital of the company and one common share purchase warrant. Each warrant will be exercisable to purchase one common share at a price of 75 cents per common share for a period of five years from the date of issuance of the warrant.
- Xiana's existing shareholder, Tembo Capital Mining Fund GP LP, has confirmed its continued support for Xiana and agreed to subscribe for $3.8-million of equity units as part of the placement.
- In addition to the placement, Tembo has agreed to advance to the company a secured convertible loan facility in the principal amount of $9-million. The loan will be evidenced by a definitive agreement to be entered into by Tembo and Xiana, which will contain customary covenants, representations and warranties, events of default and conditions precedent.
- The loan will be convertible, at the election of Tembo, into units of the company at a conversion price of 60 cents per loan unit. Each loan unit will comprise one common share and one common share purchase warrant. Each underlying warrant will be exercisable to purchase one common share at a price of 75 cents per common share for a period of five years from the date of the loan agreement.
- Of the loan amount, $645,000 will be available for drawdown upon execution of the loan agreement. The remaining $8.4-million loan amount will be available for drawdown concurrent with the closing of the MAP acquisition.
- The loan shall be repayable on the date that is 18 months from the drawdown date.
- The loan will carry an interest rate of 10 per cent per year for the first year and thereafter 12 per cent per year (inclusive of financing costs), payable semi-annually. Interest on the loan will be payable in cash or in common shares, subject to TSX-V approval, or, at the election of Tembo, such interest may be added to the outstanding loan balance. Interest payments, which are payable in common shares, shall be based on the current market price of the common shares at the time such interest is payable which will be calculated based on the 20-day volume-weighted average price per common share immediately prior to the date such interest is payable.
- The loan will be secured by a pledge over the shares of Xiana Chile and the intercompany loans held by Xiana's subsidiaries (to the extent relevant).
- In connection with providing the loan, Tembo will be entitled to receive an arrangement fee equal to 3 per cent of the amount of the loan payable in cash.
- Following completion of placement, Tembo's stake in Xiana will increase to 21 per cent of the company (before conversion of the loan or exercise of any warrants issued in connection with the concurrent financing).
- The proceeds from the concurrent financing will be utilized for purposes of completing the MAP acquisition (including payment of the consideration due at closing and the transaction costs), financing required for MAP in respect of asset optimization, conducting development and exploration activities, and general corporate overhead expenses.
- Mr. Ballon and Tembo have each undertaken to enter into customary lock-up arrangements in respect of their holdings in the company for a period of 24 months from the date of closing of the concurrent financing.
Commenting on the concurrent financing, Mr. Ballon said: "We are delighted to have Tembo as our cornerstone investor and a continuing supporter of Xiana. The concurrent financing enables Xiana to complete the MAP acquisition and move forward on a strong financial footing to deliver value from the transaction. We look forward to working with the team on the execution of our strategy."
Additional items
The concurrent financing is integral to the proposed MAP acquisition, and, therefore, the company expects to rely on the part-and-parcel pricing exemption allowed by the TSX-V policies. Completion of the MAP acquisition and the concurrent financing are expected to occur during the third quarter of 2018 and are subject to satisfaction of a number of customary conditions precedent, including, without limitation, obtaining shareholder approval of the concurrent financing and the resulting creation of a new control person, the acceptance of the TSX-V and the satisfaction of any conditions which the TSX-V may impose.
All securities issued under the concurrent financing will be subject to a hold period of four months and a day from the date of issuance under applicable securities laws.
NRG Capital Partners is acting as financial adviser to Xiana.
Fasken Martineau LLP and Baker Mackenzie are acting as legal counsel to Xiana in relation to the MAP acquisition.
McCarthy Tetrault LLP is acting as legal counsel to Xiana in relation to the concurrent financing.
Qualified person
The technical information contained in this news release has been reviewed and approved by Robert Baxter, FAusIMM, a director of Xiana Mining and a qualified person as defined by National Instrument 43-101. Mr. Baxter is not independent of the company.
About Xiana Mining Inc.
Xiana Mining is a mineral exploration and development company focused on acquiring and developing mining assets in Peru and Chile.
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