TORONTO, May 14, 2018 (GLOBE NEWSWIRE) -- Rio2 Limited (“Rio2”) (TSXV:RIO) and Atacama Pacific
Gold Corporation (“Atacama Pacific”) (TSXV:ATM) are pleased to announce that they have entered into a definitive
arrangement agreement (the “Arrangement Agreement”) to combine their respective businesses via a court approved
plan of arrangement (the “Transaction”). The combined company will continue to operate under the name Rio2 Limited
and will be managed by Rio2’s existing executive team led by Alex Black as President and Chief Executive Officer.
Under the terms of the Arrangement Agreement, each Atacama Pacific shareholder will receive 0.6601 shares
of the combined company for each Atacama Pacific common share held and each Rio2 shareholder will receive 0.6667 shares of the
combined company for each Rio2 common share held. Upon completion of the Transaction and the Rio2 Financing (described below), the
combined company will have approximately 102 million basic common shares outstanding. Approximately 42.5% of the fully-diluted
in-the-money shares of the combined entity will be held by former Rio2 shareholders and 57.5% held by former Atacama Pacific
shareholders.
The exchange ratio represents consideration to Atacama Pacific shareholders of C$0.95 per Atacama Pacific common
share based on the closing price of Rio2 common shares of C$0.96 per share on the TSXV Exchange as at May 11, 2018. This value
implies a 58% premium over the May 11, 2018 closing price of Atacama Pacific’s common shares of C$0.60 and a 45% premium calculated
on the 20-day volume weighted average price (“VWAP”) of each respective company as of May 11, 2018.
Each of the Rio2 and Atacama Pacific Board of Directors have unanimously approved the Arrangement Agreement and
will recommend that their respective shareholders vote in favor of the Transaction.
Alex Black, President and Chief Executive Officer of Rio2, stated, “This transaction represents a logical
combination for Rio2 and Atacama Pacific given the development status of the Cerro Maricunga Gold Project. We are looking forward
to expanding upon the excellent technical work completed to date by the management team of Atacama Pacific and believe the
development of Cerro Maricunga leverages our core strengths as an organization and is analogous in many respects to the La Arena
gold mine and the Shahuindo gold mine, which were built by a company led by Rio2’s team. This acquisition positions Rio2 on a solid
footing with a significant starting resource base with the potential to support a long operating mine life. We have successfully
demonstrated through our development and operational track record that our management team is capable of generating solid returns
to shareholders and we see the opportunity to do that again with Cerro Maricunga. We already see several opportunities to unlock
significant value for shareholders at Cerro Maricunga through capital and operational optimization, which will be the focus of our
upcoming study work on the project.”
“We are very pleased with the outstanding opportunity presented by the combination of Atacama Pacific and Rio2,”
stated Carl Hansen, President and CEO of Atacama Pacific. “Since its formation in 2011, Atacama Pacific has completed over
105,000 metres of drilling on the Cerro Maricunga Gold Project outlining one of the largest undeveloped oxide-associated gold
deposits in the world. With a prefeasibility completed, which included extensive metallurgical and engineering studies, we were
preparing to undertake feasibility level studies and transitioning our management team from exploration to development. With
Rio2, Atacama Pacific’s shareholders will benefit from the extensive experience of a proven management team with a record of
developing and operating heap leach gold mines in South America and who will unlock the value inherit from Cerro Maricunga.”
Albrecht Schneider, Atacama Pacific’s Executive Chairman, wishes to take this opportunity to thank our dedicated
exploration and engineering staff, many who will join the combined company, for their efforts over the past years which led to the
greenfield discovery of the Cerro Maricunga deposit and its advancement to a Pre-Feasibility stage development project.
TRANSACTION HIGHLIGHTS
Rio2 and Atacama Pacific believe the combination delivers significant benefits to the shareholders of both
companies, including:
-
Attractive, all-share based premium transaction
- Atacama Pacific shareholders will receive an approximate 57.5% ownership interest on a fully-diluted in-the-money basis
in the combined company, providing continuing participation in the expected value creation and growth associated with the
Cerro Maricunga Gold Project.
- All-share based consideration preserves cash for funding the re-positioning of the Cerro Maricunga Gold Project in the
market.
-
Enhanced capital markets profile
- With a pro forma market capitalization expected to be approximately C$170 million based on the Rio2 Financing issue price
(described below), the combined company is expected to benefit from increased institutional and retail investor interest.
-
Attractive Americas focused gold portfolio
- With the diversification benefit from multiple jurisdictions, Rio2 will have a strong platform to expand within Chile,
Peru and Central America.
-
Rio2’s experienced team and financing strength will de-risk Atacama Gold’s development plans
- Rio2’s management team has successfully acquired and developed mines with an organizational culture that focuses on
prudent capital management and the development of high-margin, strong free-cash-flowing mining operations.
- Rio2 has a strong operating team in place, with experience in mine building and optimizing operations.
-
Low completion risk
- With support received for the transaction from both company’s directors and officers, and several top shareholders of
Rio2, plus a concurrent C$10 million dollar private placement being arranged by Rio2, the transaction has low completion
risk.
STRATEGIC PROPOSITION OF THE TRANSACTION
The value creation proposition is for the Rio2 team to surface value by undertaking the next phase of
development of the Cerro Maricunga Gold Project in Chile.
- Cerro Maricunga Gold Project is one of the largest undeveloped gold oxide projects in the Americas at the Pre-Feasibility
stage of development. The project hosts total measured and indicated resources of 5.3 million ounces of gold, including proven
and probable mineral reserves of 3.7 million ounces of gold.
- Development of the Cerro Maricunga Gold Project leverages the Rio2 core strengths as a team and is analogous in many respects
to the two open pit, gold heap leach projects that the team successfully built and operated with Rio Alto Mining Limited,
employing best practices on the safety, technical, social, and environmental fronts.
TERMS OF THE ARRANGEMENT AGREEMENT
The Transaction will be effected by way of a plan of arrangement completed under the Business Corporations
Act (Ontario) ("OBCA") through which both companies will amalgamate as a single entity. Prior to the
effective time of the Transaction, Atacama Pacific will continue from the Canada Business Corporations Act
("CBCA") to the OBCA.
The Transaction will require the approval by at least 66⅔% of the votes cast on a special resolution by Rio2
shareholders and Atacama Pacific shareholders present in person or represented by proxy at their respective shareholder meetings,
as well as a minority vote of Atacama Pacific common shareholders required under Multilateral-Instrument 61-101. The votes attached
to shares held by the Atacama Pacific CEO will be excluded from the minority vote on the basis that he is entitled to a collateral
benefit in the form of a change of control payment that exceeds 5% of the value of the shares he will exchange in the Transaction.
The number of excluded shares is 1,517,133 representing approximately 1.8% of the votes attached to all outstanding Atacama Pacific
common shares. In addition, Atacama Pacific will require the approval of its shareholders by special resolution to continue to the
OBCA from the CBCA in order to complete the Transaction. In addition to shareholder and court approvals, the Transaction is subject
to applicable regulatory approvals and the satisfaction of other closing conditions customary of this nature, including court
approvals, the approval of the TSX Venture Exchange, the completion of the financing concurrently announced today by Rio2, and that
there are no material adverse changes to either company.
Directors and senior officers of Atacama Pacific, collectively holding approximately 22.7% of the outstanding
Atacama Pacific shares, have entered into support agreements pursuant to which they have agreed to vote in favour of the
Transaction. Directors, senior officers and certain shareholders of Rio2, collectively representing approximately 50.8% of the
outstanding Rio2 shares, have entered into support agreements pursuant to which they have agreed to vote in favour of the
Transaction.
The Arrangement Agreement includes customary deal protection provisions including, among other things,
non-solicitation covenants on the part of Atacama Pacific, “fiduciary out” provisions that entitle Atacama Pacific to consider and
accept a superior proposal and a right in favour of Rio2 to match any superior proposal. The Agreement provides for a C$3.0 million
termination fee payable by one party to the other in certain instances and a cost reimbursement fee of up to C$750,000 payable by
one party to the other in certain circumstances if the Transaction is not completed.
Full details of the Transaction will be included in the joint management information circular of Rio2 and
Atacama Pacific to be mailed to their respective shareholders in June 2018. It is anticipated that both shareholders meetings and
the completion of the Transaction will take place by mid to late July 2018.
A copy of the Arrangement Agreement and the meeting materials and related documents will be filed under the
SEDAR profile of both Rio2 and Atacama Pacific at www.sedar.com.
RIO2 FINANCING
In connection with the Transaction, Rio2 will complete a concurrent private placement of subscription receipts
for gross proceeds of C$10 million at C$1.00 per share on a “bought-deal” basis, the details of which will be announced in a
subsequent news release. Subject to customary conditions the subscription receipts will convert to Rio2 common shares prior to the
Transaction and will participate in the plan of arrangement.
CORPORATE STRATEGY
Post Transaction, Rio2 will continue building itself as a multi-asset, multi-jurisdiction, precious metals
company focused in the Americas. With Cerro Maricunga as its first development project and exploration platforms in Peru and
Central America, Rio2 will continue pursuing additional strategic acquisitions to compile an attractive portfolio of precious
metals assets where it can deploy its operational excellence and responsible mining practices to create value for its
shareholders.
“This transaction provides a solid foundation to the corporate strategy of the combined company as we build a
multi-asset, multi-jurisdiction precious metals company focused on the Americas. The leadership team continues to be focused,
selective, and disciplined in the selection of projects that we consider can be developed into mines or existing mines where we can
add value and improve efficiencies.", commented Jose Luis Martinez, Executive Vice President and Chief Strategy Officer.
BOARD OF DIRECTORS’ RECOMMENDATIONS
The Board of Directors of each of Rio2 and Atacama Pacific has determined that the Transaction is in the best
interests of their respective shareholders based on a number of factors, including verbal fairness opinions received from their
respective financial advisors. The Board of Directors of each of Rio2 and Atacama Pacific has unanimously approved the terms of the
Transaction and recommends that their respective shareholders vote in favor of the Transaction.
ADVISORS AND COUNSEL
Rio2’s financial advisor is Raymond James Ltd. (“Raymond James”) and its legal advisors are DLA Piper (Canada)
LLP in Canada and Guerrero Olivos in Chile. Raymond James provided a verbal fairness opinion, subject to the assumptions,
limitations and qualifications stated therein and as of the date thereof to the Board of Directors of Rio2 Limited. Raymond James’
written fairness opinion will be included in the joint management information circular in respect of the Transaction.
Atacama Pacific’s financial advisor is BMO Capital Markets who also provided a verbal fairness opinion, and its
legal advisors are Stikeman Elliott LLP in Canada and Baker & McKenzie SpA in Chile. BMO’s written fairness opinion will be
included in the joint management information circular in respect of the Transaction.
ABOUT RIO2 LIMITED
Rio2 is building a multi-asset, multi-jurisdiction, precious metals company focused in the Americas. With
exploration platforms in Peru and Central America, Rio2 Limited will continue pursuing additional strategic acquisitions to compile
an attractive portfolio of precious metals assets where it can deploy its operational excellence and responsible mining practices
to create value for its shareholders. Rio2 Limited has assembled a highly experienced executive team to generate significant
shareholder value, with proven technical skills in the development and operations of mines and capital markets experience. Through
its strategy of acquiring precious metals assets at exploration, development, and operating stages, the executive team will grow
Rio2 Limited and create long-term shareholder value through the development of high-margin, strong free-cash-flowing mining
operations.
For more information about Rio2 Limited, please contact:
Alexander Black
President and Chief Executive Officer
alexb@rio2mining.com
Phone: 416.570.3155
ABOUT ATACAMA PACIFIC GOLD CORPORATION
Atacama Pacific’s business is the acquisition, exploration and development of precious metals resources
properties in Chile. Atacama Pacific’s principal mineral property is the Cerro Maricunga oxide-associated gold project, located in
Chile’s Region III, 140 kilometers by road northeast of the city of Copiapo. The pre-feasibility level Cerro Maricunga
deposit hosts 294.4 million tonnes at a grade of 0.40 grams per tonne gold of proven and probable reserves for 3.7 million ounces
of gold within a measured and indicated resource of 5.3 million ounces of gold (433.8 million tonnes grading 0.38 grams per
tonne).
For more information about Atacama Pacific Gold Corporation, please contact:
Carl B. Hansen
President and Chief Executive Officer
chansen@atacamapacific.com
Phone: 416.861.8267
NATIONAL INSTRUMENT 43-101 DISCLOSURE
As defined by National Instrument 43-101 (“NI 43-101”) of the Canadian Securities Administrators, the Qualified
Person for the Cerro Maricunga Gold Project is Sergio Diaz, a resident of Santiago, Chile. Mr. Diaz is a Public Registered Person
for Reserves and Resources N° 51, in Chile, and is also registered in the Colegio de Geólogos de Chile under N° 315. Mr. Diaz has
reviewed and verified the scientific technical contents of this news release. The scientific and technical content of this new
release has been reviewed and approved by Ian Dreyer, Senior Vice President - Geology, Rio2 Limited, a Qualified Person as defined
by National Instrument 43-101.
For additional information regarding the Cerro Maricunga Gold Project, including key parameters, assumptions and
risks associated with its mineral resource and reserve estimates, see Atacama Pacific Gold Corporation’s independent technical
report entitled “NI 43-101 Technical Report on the Cerro Maricunga Project Pre-Feasibility Study Atacama Region, Chile” dated
October 6, 2014 with an effective date of August 19, 2014, a copy of which document is available on SEDAR under Atacama Pacific
Gold Corporation’s SEDAR profile at www.sedar.com.
Cautionary Statement on Forward-Looking Information
Certain information set forth in this news release contains "forward-looking statements", and "forward-looking
information under applicable securities laws. Except for statements of historical fact, certain information contained herein
constitutes forward-looking statements, which include expectations about the completion of the Transaction, the composition of the
senior executive team of Rio2 following the completion of the Transaction, future performance and pro forma capitalization and
ownership, and are based on Rio2’s and Atacama Pacific’s current internal expectations, estimates, projections, assumptions and
beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by the use of conditional or
future tenses or by the use of such words such as "will”, “expects", “may”, “should”, “estimates”, "anticipates", "believes",
"projects", "plans", and similar expressions, including variations thereof and negative forms.
In respect of the forward-looking statements and information concerning the anticipated completion of the
proposed Transaction and the anticipated timing for completion of the Transaction, Atacama Pacific and Rio2 have provided them in
reliance on certain assumptions that they believe are reasonable at this time, including assumptions as to the time required to
prepare and mail shareholder meeting materials, including the required information circular; the ability of the parties to receive,
in a timely manner, the necessary regulatory, court, shareholder and other third party approvals; and the ability of the parties to
satisfy, in a timely manner, the other conditions to the closing of the Transaction, including that no material adverse change to
either company occurs and that the financing is completed as anticipated. These dates may change for a number of reasons, including
unforeseen delays in preparing meeting materials, the inability to secure necessary shareholder, regulatory, court or other third
party approvals in the time assumed or the need for additional time to satisfy the other conditions to the completion of the
Transaction. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in
this news release concerning these times.
Forward-looking statements also relate to the business of each of Atacama Pacific and Rio2, and of the combined
company. Forward-looking statements are not guarantees of future performance and undue reliance should not be placed on them. Such
forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and
financial results in future periods to differ materially from any projections of future performance or results expressed or implied
by such forward-looking statements. These risks and uncertainties include, but are not limited to: risks and uncertainties relating
to the completion of the transactions as described herein, the ability to successfully integrate operations and realize the
anticipated benefits of the Transaction; geological, mining and processing technical problems; inability to obtain required mine
licences, mine permits and regulatory approvals required in connection with mining and mineral processing operations; competition
for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the
value of acquisitions; changes in commodity prices and exchange rates; currency and interest rate fluctuations; various events that
could disrupt operations and/or the transportation of mineral products, including labour stoppages and severe weather conditions;
the demand for and availability of rail, port and other transportation services; the ability to secure adequate financing, and
management's ability to anticipate and manage the foregoing factors and risks. There can be no assurance that forward-looking
statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such
statements. Rio2 and Atacama Pacific undertake no obligation to update forward-looking statements if circumstances or management's
estimates or opinions should change except as required by applicable securities laws.
The reader is cautioned not to place undue reliance on forward-looking statements. Rio2 and Atacama Pacific
disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information,
future events or otherwise, except to the extent required by securities legislation.
Rio2 and Atacama Pacific have included the above summary of assumptions and risks related to forward looking
information provided in this news release in order to provide shareholders with a more complete perspective on the proposed
transaction and such information may not be appropriate for other purposes. Actual results, performance or achievement could differ
materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given
that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what
benefits may be derived there from.
Investors are cautioned that, except as disclosed in the management information circulars to be prepared in
connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or
complete and should not be relied upon. Trading in the securities of Rio2 and Atacama Pacific should be considered highly
speculative.
This announcement is for informational purposes only and does not constitute an offer to purchase, a
solicitation of an offer to sell the share or a solicitation of a proxy.
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.
