Circular Details - Looks BAD Cronology is outlined but nowhere were these risks detailed to the shareholders of IDM. All of these CAs that were signed were not disclosed to investors but this was material. IDM was desparate and that was NOT the message con
BACKGROUND TO THE ARRANGEMENT
On January 6, 2019, IDM and Ascot entered into the Arrangement Agreement, as amended February 7, 2019, which sets out the terms and conditions for implementation of the Arrangement. The Arrangement Agreement is the result of arm's length negotiations among representatives of IDM and Ascot and their respective legal and financial advisors. The following is a summary of the material events that preceded the execution and public announcement
of the Arrangement Agreement. Although IDM had pursued a strategy of developing the Red Mountain Gold Project on a stand-alone basis, it has taken a pro-active approach to managing the inherent difficulties it faces as a junior exploration and development company with a single asset project. Additionally, IDM Shareholders had conveyed support for consolidation of
junior companies, particularly in the Golden Triangle, to IDM. IDM’s management regularly had conceptual discussions with the management of multiple B.C. based companies, as well as others operating in western North America. The IDM Board regularly evaluates the strategic direction of IDM and considers potential strategic opportunities, including financings and corporate and asset transactions. In that regard, the IDM Board generally monitors activities of other participants in the mining industry, and in particular the gold sector, and routinely considers strategic alternatives to enhance shareholder value. IDM has entered into confidentiality agreements, which generally include standstill provisions, with a number of parties, including parties who requested the opportunity to conduct due diligence on IDM. IDM has also maintained a dialogue with potential counterparties to assist the IDM Board in determining whether these counterparties might have an interest in a corporate transaction involving IDM.
IDM has been aware of Ascot and the Premier Gold Project since IDM entered into an option agreement for the acquisition of the Red Mountain Gold Project in 2014. IDM and Ascot engaged in periodic high-level discussions regarding their respective businesses and operations and potential synergies in the event the two businesses were combined.
In October of 2017, Ascot appointed a new management team and several new directors and a Chairman.
In January 2018, members of management of IDM and Ascot met to discuss the potential for a transaction between the two companies.
In February 2018, IDM and Ascot executed a mutual confidentiality agreement that included a customary mutual standstill provision that, among other things, restricted the acquisition of shares of each party by the other and had a term of one year expiring in February 2019. Following the execution of the confidentiality agreement, IDM and Ascot each granted the other access to their respective data rooms, and IDM commenced initial technical due diligence of Ascot's properties.
On March 8, 2018, IDM formed the IDM Special Committee consisting of Andrew Farncomb (Chair), Andree StGermain, Duncan Middlemiss and David Parker, each of whom was determined to be independent of IDM, to consider various alternatives that may be available to IDM.
On March 21 and 22, 2018, as part of their respective due diligence, IDM management made a site visit to the Premier Gold Project and Ascot management made a site visit to the Red Mountain Gold Project.
On March 28, 2018, Ascot submitted a non-binding proposal (the "First Ascot Proposal") to IDM to acquire all of the IDM Shares in exchange for Ascot Shares. The First Ascot Proposal contained additional provisions, including a period of exclusive negotiations between Ascot and IDM.
On April 3, 2018, IDM received a non-binding proposal from a third party (the "First Third Party Proposal") which contemplated a merger of equals without any premium which was accompanied by a letter of support from one of the third party's major shareholders. The First Third Party Proposal contained additional provisions, including a period of exclusive negotiations between the third party and IDM. IDM management conducted technical due diligence on the third party’s projects, including a site visit on April 3 and 4, 2018.
On April 5, 2018, the IDM Board engaged Raymond James to act as its financial advisor. The IDM Special Committee and the IDM Board reviewed the First Third Party Proposal in onsultation with Raymond James and DuMoulin Black LLP, legal advisor to IDM, and determined that the First Third Party Proposal was not sufficient to warrant entering into exclusive negotiations.
On April 12, 2018, representatives of Raymond James and of Haywood Securities Inc., financial advisor to Ascot, met to discuss, among other things, the exchange ratio proposed by the First Ascot Proposal.
On or about April 12, 2018, the IDM Special Committee retained Borden Ladner Gervais LLP as its independent legal advisor and a formal retainer agreement was executed on April 16, 2018.
At a meeting of representatives of IDM and Ascot on April 13, 2018, Ascot submitted a revised proposal (the "Second Ascot Proposal") to acquire all of the IDM Shares at an increased exchange ratio, and also contemplated a period of exclusive negotiations between Ascot and IDM.
Later on April 13, 2018, the IDM Special Committee met to consider the Second Ascot Proposal and received advice from Raymond James and Borden Ladner Gervais LLP regarding, but not limited to, the fiduciary duties of each of the directors. The IDM Special Committee considered, among other things, the absence of a current NI 43-101 resource estimate for the Premier Gold Project, and determined that the IDM Special Committee and the IDM Board required additional information regarding Ascot's properties to properly consider the Second Ascot Proposal and discharge their fiduciary duties. Following the meeting, the Chair of the IDM Special Committee advised Ascot accordingly and requested that the two companies continue to work to further evaluate the relative values of the companies and the potential synergies.Throughout this period, IDM continued to respond to enquires and negotiate confidentiality agreements with third
parties and to provide confidential information to third parties already subject to confidentiality agreements. Following receipt of the Second Ascot Proposal, the IDM Special Committee instructed Raymond James to initiate a broad process targeted at canvassing third parties in respect of a potential strategic transaction with IDM, including a strategic financing or a corporate transaction. Raymond James engaged in discussions with several potentially
interested third parties. Concurrently, IDM contacted additional third parties and continued to have direct discussions with a number of other third parties that had previously expressed interest in IDM. As part of this process, 10 third parties signed confidentiality agreements with IDM and three third parties completed site visits to the Red Mountain Gold Project. The Company received two expressions of interest to provide financing, with one
being the sale of an additional royalty on the Red Mountain Gold Project and the other a proposed joint venture arrangement with an engineering firm. The two expressions of interest were determined by IDM, after receiving advice from Raymond James, to be unacceptable. No other proposals were received by IDM as a result of this process.
On April 17, 2018, IDM closed a $4.3 million equity financing.
On April 18, 2018, Ascot announced the commencement of its 2018 drill program of approximately 45,000 metres in 200 drill holes on the Premier Gold Project and its intention to complete an updated resource estimate for the Premier Gold Project in early May.
In early May 2018, IDM, at the request of the IDM Special Committee, engaged SRK Consulting (Canada) Inc. to perform an independent review of the Premier Gold Project. The technical review was presented to the IDM Special Committee and the IDM Board on June 21, 2018, and generally supported IDM management's assumptions regarding the technical aspects of the Premier Gold Project.
On May 10, 2018, Ascot announced an updated NI 43-101 resource estimate for the Premier Gold Project.
On June 19, 2018, IDM released an updated NI 43-101 resource estimate for the Red Mountain Gold Project.
Around this time, IDM identified its liquidity position as being a significant concern if a corporate transaction was not consummated, and the general market conditions continued to deteriorate. In particular, IDM required funding to incur qualifying flow-through expenditures of approximately $5.0 million by December 31, 2018.
In July 2018, IDM re-initiated discussions with Ascot. At a meeting held on July 25, 2018, Ascot's management advised IDM that Ascot was not in a position to present a proposal at that time due to Ascot’s other ongoing corporate initiatives. Between April and December, 2018, the primary points of contact between IDM and Ascot were the Chair of IDM’s Special Committee and Chair of Ascot.
On August 13, 2018, Ascot announced an unrelated transaction to acquire the Silver Coin Project from Jayden Resources Inc. and Mountain Boy Minerals Ltd.
On September 11, 2018, IDM received a second non-binding proposal with a 21% volume weighted closing price premium which contained an obligation to negotiate exclusively, from the same third party that made the First Third Party Proposal in April 2018. IDM elected, after consultation with its advisors, not to pursue this second proposal for various reasons, which included transaction uncertainty, financing uncertainty and other strategic considerations.
On October 3, 2018, IDM received a third non-binding proposal from this entity which was also declined for similar reasons.
As at September 30, 2018, IDM had cash on hand of approximately $300,000, accounts payable of $1.3 million, and approximately $3.8 million of flow-through expenditures required to be incurred by December 31, 2018.
IDM announced an equity financing on October 5, 2018, which was completed in two tranches on October 22, 2018 and November 20, 2018, respectively, for total gross proceeds of approximately $4.4 million. The proceeds from the October 2018 financing were primarily applied to exploration and development activities on the Red Mountain Gold Project, including approximately 10,000 meters of drilling in 40 underground holes. The resulting expenditures
satisfied IDM’s requirement to incur qualifying flow-through expenditures of approximately $3.8 million by December 31, 2018.
In October 2018, IDM was informed by the BC Provincial Government that its Environmental Application had been approved and certificate Issued.
On October 29, 2018, Ascot announced the completion of its acquisition of the Silver Coin Project from Jayden Resources Inc. and Mountain Boy Minerals Ltd.
IDM re-initiated discussions with Ascot, and, on December 11, 2018, Ascot delivered to IDM a new proposal to acquire all of the IDM Shares at an exchange ratio of 0.0625 of an Ascot Share for each IDM Share. The IDM Special Committee and the IDM Board reviewed the proposal with Raymond James and their respective legal advisors, and negotiated an increase in the exchange ratio to 0.0675 of an Ascot Share per IDM Share. On the basis of the increased
exchange ratio and after receiving the recommendation of the IDM Special Committee and advice from Raymond James, DuMoulin Black LLP and Borden Ladner Gervais LLP, including advice from DuMoulin Black LLP and Borden Ladner Gervais LLP regarding, but not limited to, the fiduciary duties of each of the directors, on December 21, 2018, IDM and Ascot executed an agreement that provided for a mutual exclusive negotiating period during which each of IDM and Ascot would only be able to discuss an acquisition transaction with each other.
From December 21, 2018 to January 6, 2019, IDM and Ascot negotiated the Arrangement Agreement, during which time IDM and Ascot continued their respective due diligence review process. As at December 31, 2018, IDM had cash on hand of approximately $450,000 and accounts payable of $2.1 million and additional equity financings or royalty sales to raise additional funds would be overly dilutive to IDM Shareholders. In addition, IDM had approximately $3.0 million of flow-through expenditure obligations required to
be incurred by December 31, 2019.
On January 2, 2019, the IDM Special Committee engaged Cormark on a fixed fee basis to act as independent financial advisor to the IDM Special Committee in connection with the proposed transaction. In the course of its review and evaluation of potential strategic alternatives, including the Arrangement, the IDM Special Committee held 15 formal meetings, and conducted informal meetings and consultations with management of IDM, Raymond James and Borden Ladner Gervais LLP.
On January 6, 2019, the IDM Board and IDM Special Committee held a meeting, at which DuMoulin Black LLP and Borden Ladner Gervais LLP were present, to, among other things, review the draft Arrangement Agreement, receive a presentation from each of Raymond James and Cormark on the methodologies underlying the Fairness Opinions and to receive the oral opinion of each of Raymond James and Cormark, which were later confirmed in writing, which concluded that, subject to the assumptions, limitations and qualifications and other matters set out therein, the Share Consideration to be received by the IDM Shareholders is fair, from a financial point of view, to such IDM Shareholders (other than Ascot and its affiliates).
On January 6, 2019, after receiving the Fairness Opinions, the IDM Special Committee held a separate meeting, at which Borden Ladner Gervais LLP was present, to, among other things, review the draft Arrangement Agreement and the Fairness Opinions and receive advice from Borden Ladner Gervais LLP regarding, but not limited to, the fiduciary duties of each of the directors. Following discussion, including the IDM Special Committee’s thorough review of, among other things, the terms of the Arrangement and factors and risks associated with the Arrangement, the IDM Special Committee unanimously resolved to recommend to the IDM Board that the IDM Board approve the Arrangement and recommend that the IDM securityholders vote in favour of the Arrangement.
Also on January 6, 2019, following the meeting of the IDM Special Committee, the IDM Board held a meeting, at which DuMoulin Black LLP and Borden Ladner Gervais LLP were present, to, among other things, receive and consider the recommendation of the IDM Special Committee. After discussion, including the IDM Board’s thorough review of, among other things, the terms of the Arrangement and factors and risks associated with the Arrangement, the IDM Board unanimously (i) determined that the Arrangement is in the best interests of IDM; (ii) determined that the Share Consideration is fair to the IDM Shareholders; (iii) approved the Arrangement and IDM’s entry into the Arrangement Agreement; and (iv) recommended that the IDM Securityholders vote FOR the Arrangement Resolution.
Late in the evening of January 6, 2019, IDM and Ascot executed the Arrangement Agreement, which was announced prior to market open on January 7, 2019.