- Secured $4.5 million of committed capital from strategic investor -
- Hudbay agrees to sell its 51% stake in Back Forty to merged entity -
TORONTO, Nov. 7, 2013 /CNW/ - Aquila Resources Inc. (TSX: AQA) (OTCQX: AQARF) (FKT: JM4A) ("Aquila") and REBgold Corporation (TSX.V: RBG) ("REBgold") announced today that they have entered into a
definitive agreement to complete a business combination whereby Aquila
will acquire all of the outstanding shares of REBgold in exchange for
Aquila shares on a 1-for-1 basis ("the Business Combination"). The
companies also announced that they have:
-
reached an agreement with Baker Steel Capital Managers LLP, on behalf of
investment funds managed or controlled by it ("Baker Steel", REBgold's
largest shareholder) for Baker Steel to invest $4.5 million in the
combined entity as part of a private placement financing (the
"Financing"); and
-
entered into a binding agreement with Hudbay Minerals Inc. ("Hudbay") to
acquire its 51% interest in the Back Forty Project, a poly-metallic
asset located in Michigan, in exchange for shares of Aquila, future
milestone payments tied to the development of the project and a 1% net
smelter return royalty on production from certain land parcels in the
project (the "Back Forty Acquisition").
Upon completion of the Business Combination, the Financing and the Back
Forty Acquisition (collectively, the "Proposed Transaction"), the
combined entity, which will continue to operate as Aquila, will own
100% of the Back Forty Project, have a strengthened balance sheet and
be focused on advancing development of Back Forty.
"Our plans to merge and advance the development of Back Forty have
received strong support from our partners and a reputable investor in
the resource sector who have all subscribed at a premium to current
market price," said Barry Hildred, CEO of Aquila. "By bringing together
two management teams that have significant mining sector and capital
markets experience, we believe we will expedite the development of Back
Forty and create significant value for the shareholders of both Aquila
and REBgold."
"Our merger with Aquila is consistent with our strategy of identifying
advanced stage but under-valued projects," commented Mark Burridge,
Chairman of REBgold. "We believe that Back Forty represents an
opportunity to develop a significant project with the potential for
both lower initial capital requirements and ultimately greater
production than previously envisioned."
Benefits of the Transactions
Upon completion of the Proposed Transaction, Aquila and REBgold
shareholders will benefit from:
-
a strong board and leadership team with experience in mine development,
operations, and capital markets;
-
strategic investor backing from Baker Steel Capital and a supportive
significant shareholder in Hudbay;
-
100% ownership of the high-grade, poly-metallic Back Forty Project,
located in the Great Lakes Region, which contains approximately 1
million oz of gold and 1 billion lbs of zinc in the M&I categories,
with additional upside potential;
-
100% ownership of the Bend Copper-Gold Project, a VMS deposit located in
the Great Lakes Region;
-
100% ownership of the Reef Gold Project, a high-grade deposit
potentially amenable to open-pit mining;
-
a highly prospective joint venture in Finland with established
resources; and
-
REBgold's metallurgical capabilities and proprietary bioleaching
technology.
The Business Combination
Aquila and REBgold have entered into an arrangement agreement whereby
Aquila will acquire 100% of the outstanding shares of REBgold in
exchange for Aquila shares on a 1-for-1 basis by way of a statutory
plan of arrangement pursuant to the Canada Business Corporations Act. Completion of the Business Combination is subject to completion of the
Financing (described below) and the Back Forty Acquisition, the receipt
of all necessary court, shareholder and stock exchange approvals and
other customary conditions.
The board of directors of Aquila and REBgold have unanimously approved
the Business Combination and resolved to recommend that the Aquila
shareholders and REBgold shareholders, respectively, vote in favour of
the Business Combination. In connection with its consideration of the
Business Combination, the REBgold board of directors received an
opinion from Clarus Securities Inc. to the effect that the Business
Combination and related transactions are fair, from a financial point
of view, to the REBgold shareholders.
The Back Forty Acquisition
Aquila and REBgold have entered into a purchase agreement with Hudbay to
acquire 100% of the shares of Hudbay Michigan Inc., Hudbay's
wholly-owned subsidiary which holds its 51% interest in the Back Forty
Project, in exchange for consideration consisting of:
-
$2.25 million - up to a maximum of $2.5 million worth of Aquila common
shares (based on 50% of the Financing) issued upon closing of the Back
Forty Acquisition;
-
up to $9 million in post-closing milestone payments tied to development
of the Back Forty Project as follows:
-
$3 million payable upon completion of any form of financing for purposes
including the commencement of construction of Back Forty (up to 50% of
such amount to be payable, at Aquila's option, in Aquila shares with
the balance payable in cash);
-
$2 million in cash payable 90 days after the commencement of commercial
production;
-
$2 million in cash payable 270 days after commencement of commercial
production; and
-
$2 million in cash 450 days after commencement of commercial production;
-
a 1% net smelter return (NSR) royalty on production from certain land
parcels on the Back Forty property, capped at $7M.
"We fully support this transaction as it allows us to focus on our core
strategy while maintaining the ability to participate in the potential
upside at Back Forty through our increased equity holding in an
invigorated Aquila," said Hudbay's CEO David Garofalo.
If Hudbay has not received any milestone payments or received at least
$2.5 million in proceeds from the sale of the Aquila shares it receives
on closing within 10 years, it will have the right to repurchase a 51%
interest in the Back Forty Project in exchange for its initial
consideration shares or $2.5 million in cash.
Completion of the Back Forty Acquisition is subject to completion of the
transactions, the receipt of all necessary shareholder and stock
exchange approvals and other customary conditions.
The boards of directors of each of Hudbay, Aquila and REBgold have
unanimously approved the Back Forty Acquisition and the board of
directors of Aquila has unanimously resolved to recommend that the
Aquila shareholders vote in favour of the Proposed Transaction. In
connection with its consideration of the Back Forty Acquisition, the
Aquila board of directors received a formal valuation from Jennings
Capital Inc. in accordance with National Instrument 61-101 - Protection
of Minority Security Holders in Special Transactions. Jennings Capital
Inc. also provided its opinion to the Aquila board of directors that
the Proposed Transaction is fair, from a financial point of view, to
Aquila.
The Financing
In connection with the Business Combination and the Back Forty
Acquisition, Aquila and REBgold intend to complete the Financing by way
of a non-brokered private placement of up to $6 million at a price of
$0.13 per share. The Financing will be structured as a sale of REBgold
common shares which will be issued immediately prior to closing of the
Business Combination and be exchanged for Aquila shares on a 1-for-1
basis in accordance with the terms of the Business Combination. Baker
Steel has committed to purchase $4.5 million of REBgold shares under
the Financing. Completion of the Financing will be subject to the
concurrent completion of the Business Combination and the Back Forty
Acquisition, receipt of stock exchange approval and other customary
closing conditions.
Voting Agreements
Aquila shareholders holding approximately 23% of the outstanding Aquila
shares have agreed to vote in favour of the resolutions to be
considered by Aquila shareholders relating to the Business Combination
and Back Forty Acquisition.
REBgold shareholders holding approximately 50% of the outstanding
REBgold shares have agreed to vote in favour of the Business
Combination.
Post Closing Capitalization
Prior to the Proposed Transaction, Aquila had 98,099,896 outstanding common shares and upon its completion, assuming that the entire $6 million private
placement is subscribed for, Aquila is expected to have:
-
approximately 192,604,694 million shares issued and outstanding, of
which Baker Steel will own approximately 23.6% and Hudbay will own
approximately 17.4%.; and
-
outstanding stock options, convertible debentures and warrants that will
collectively be exercisable for or convertible into an aggregate of
approximately 24,000,000 shares.
Post Closing Directors and Management
Upon completion of the Business Combination, Aquila's board of directors
and management team will be comprised of select individuals from the
existing leadership teams of both Aquila and REBgold, chosen for their
proven track records and industry expertise.
The board of directors will be led by Mark Burridge, who will serve as
Chairman of Aquila. Barry Hildred will continue to serve as Chief
Executive Officer. Mr. Hildred will also be appointed a director of
Aquila.
Two additional directors from the existing board of directors of each
Aquila and REBgold will be nominated to serve on the Aquila board and a
seventh director will be jointly nominated. Details on board
nominations and composition will be included in the joint management
information circular that will be distributed to shareholders of record
in advance of the shareholder meeting.
Shareholder Meetings
Aquila and REBgold will each be calling a special meeting of its
shareholder for purposes of seeking approval of the Proposed
Transaction. A joint management information circular containing further
information with respect to the Proposed Transaction, the matters to be
considered at the meeting and the combined entity will be mailed to
Aquila and REBgold shareholders in due course.
About Aquila Resources
Aquila Resources Inc. (TSX: AQA) (OTCQX: AQARF) (Frankfurt: JM4A) is a mineral exploration Company focused on the discovery and
development of high grade base and precious metal projects in highly
prospective regions of North America. The Company is led by an
experienced management team that has identified significant ore
deposits over the last 30 years.
About REBgold Corporation
REBgold (TSX.V:RBG) is a public mining company whose primary objective
is to acquire and develop economic interests in gold assets, in
particular assets where it can utilize its competitive advantages to
create shareholder value. The Company's key competitive advantages
include an experienced board and management team, strategic investor
backing and proprietary technology.
About the Back Forty Project
The Back Forty Project is a high-grade, poly-metallic deposit located in
the Penokean Volcanic Belt in the Great Lakes Region. A 2012
preliminary economic assessment, based on a 2010 resource estimate,
provided encouraging project economics, including a $73.6M net present
value @ 8% and an internal rate of return of 18.2%. Results from the
2012 drilling program demonstrate potential for continued resource
expansion at Back Forty. A 2013 updated resource estimate delineated a Measured and Indicated
(M+I) resource of 15.1 million tonnes (Mt) and an Inferred Resource of
2.3Mt. The updated M+I resource estimate contains 987,236oz Au,
11.91Moz Ag, 1.02Blbs Zn, 74.3Mlbs Pb and 110.4Mlbs Cu. An additional
155,885oz Au, 1.99Moz Ag, 113.3Mlbs Zn, 17.2Mlbs Pb and 18.6Mlbs Cu are
included in the Inferred category.
Open Pit Resource
|
Category
|
Tonnes
|
Au (ppm)
|
Ag (ppm)
|
Cu (%)
|
Pb (%)
|
Zn (%)
|
Meas.
|
4,720,716
|
2.24
|
26.77
|
0.55
|
0.13
|
3.49
|
Ind.
|
4,926,783
|
1.90
|
18.30
|
0.14
|
0.21
|
1.49
|
Meas. + Ind.
|
9,647,498
|
2.07
|
22.45
|
0.34
|
0.17
|
2.47
|
Inf.
|
152,488
|
2.76
|
34.56
|
0.19
|
0.39
|
2.86
|
Underground Resource
|
Category
|
Tonnes
|
Au (ppm)
|
Ag (ppm)
|
Cu (%)
|
Pb (%)
|
Zn (%)
|
Meas.
|
1,982,087
|
1.97
|
28.56
|
0.29
|
0.31
|
5.04
|
Ind.
|
3,504,462
|
1.96
|
27.78
|
0.33
|
0.32
|
3.57
|
Meas. + Ind.
|
5,486,549
|
1.97
|
28.06
|
0.32
|
0.32
|
4.10
|
Inf.
|
2,184,246
|
2.03
|
25.96
|
0.37
|
0.33
|
2.15
|
About Baker Steel Capital Managers
Baker Steel manages approximately $540M of assets on behalf of a broad
range of financial institutions, wealth managers and professional
investors. Baker Steel's range of funds are focused on the natural
resources, precious metals, and commodities sectors. Baker Steel is led
by a management team with strong technical backgrounds in the
geo-sciences, mining, geology and engineering fields and covers
projects across North America, Asia, Australia, and Africa.
The Toronto Stock Exchange neither approves nor disapproves the
information contained in this News Release. Neither the TSX Venture
Exchange nor its Regulation Services Provider (as that term is defined
in the policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Thomas O. Quigley is the Qualified Person for Aquila Resources as
described in National Instrument 43-101.
This press release contains certain forward-looking statements. In
certain cases, forward-looking statements can be identified by the use
of words such as "plans", "expects" or "does not anticipate", or
"believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved". Forward-looking statements
and information include, but are not limited to, statements with
respect to the transactions contemplated under the arrangement
agreement, the Back Forty purchase agreement and the private placement
financing and the receipt of the requisite regulatory, court and
shareholder approvals in respect thereof. Forward-looking statements
and information are subject to various known and unknown risks and
uncertainties, many of which are beyond the ability of Aquila and
REBgold to control or predict, that may cause their actual results,
performance or achievements may be materially different from those
expressed or implied thereby, and are developed based on assumptions
about such risks, uncertainties and other factors set out here in,
including but not limited to: the risk that the transactions described
in the press release will not be approved by the TSX, the TSXV, the
court and the shareholders of Aquila or REBgold , as applicable; risks
and uncertainties related to the transactions not being completed in
the event that the conditions precedent thereto are not satisfied and
other related risks and uncertainties. Neither Aquila nor REBgold
undertakes any obligation to update forward-looking information except
as required by applicable law. Such forward-looking information
represents Aquila's and REBgold's best judgment based on information
currently available. No forward-looking statement can be guaranteed and
actual future results may vary materially. Accordingly, readers are
advised not to place undue reliance on forward-looking statements or
information. Furthermore, mineral resources that are not mineral
reserves do not have demonstrated economic viability.
SOURCE Aquila Resources Inc.