VANCOUVER, Aug. 7, 2018 /CNW/ - Golden Reign Resources
Ltd. (TSXV: GRR) ("Golden Reign"), Marlin Gold Mining Ltd. (TSXV: MLN) ("Marlin") and Sailfish
Royalty Co rp. (TSXV: FISH) ("Sailfish") are pleased to announce that Golden Reign and Marlin have entered into
a definitive agreement (the "Arrangement Agreement"), unanimously approved by each of the boards of directors of Golden
Reign and Marlin, pursuant to which Golden Reign and Marlin propose to complete the previously announced business combination
whereby Golden Reign will acquire all of the issued and outstanding shares of Marlin (following completion of the Marlin
Reorganization (as defined below) and satisfaction of all closing conditions of the business combination) by way of plan of
arrangement (the "Transaction"). As a condition to closing the Transaction (the "Closing"), Sailfish has agreed to
restructure its existing gold stream on San Albino, as further discussed below.
The Arrangement Agreement
Under the terms of the Arrangement Agreement, Golden Reign will acquire all of the outstanding Marlin common shares in
exchange for 0.5138 of a Golden Reign common share (each whole common share, a "GRR Share") for each Marlin common share
acquired (the "Consideration"). In addition, Marlin will distribute an aggregate of 18,148,654 GRR Shares currently
held by Marlin to the Marlin Shareholders on the basis of 0.1022 GRR Shares for each Marlin common share, bringing the total GRR
Shares to be received by Marlin shareholders to 0.6160 of a GRR Share for each Marlin common share outstanding at Closing.
The Transaction will result in Marlin and certain of its subsidiaries, including Oro Gold de Mexico and Marlin Gold Trading, becoming wholly-owned subsidiaries of Golden Reign (the "Combined
Company"). In addition to certain terms and conditions described in this news release, the Arrangement Agreement includes
customary provisions, including covenants not to solicit other acquisition proposals and the right to match any superior
proposals. Termination fees of C$1 million will be paid to Marlin or Golden Reign in certain
circumstances should the Transaction not be completed.
Upon completion of the Transaction, it is expected that the shareholders of Marlin, as of the closing time, will own, in
aggregate, approximately 45% of the issued and outstanding common shares of the Combined Company (including the current Marlin
shareholding of Golden Reign) and the shareholders of Golden Reign, as of the closing time, will own, in aggregate, approximately
55% of the issued and outstanding common shares of the Combined Company.
"By acquiring Marlin, post spin-out of certain loans and assets, shareholders of Golden Reign (to be renamed Mako Mining
Corp.) will benefit from the producing La Trinidad Gold Mine in Mexico, over $6,000,000 in cash and no debt, and an unencumbered, fully permitted, high grade gold development asset in
Northern Nicaragua. With the issuance of new shares at an exchange ratio of 0.5138, Golden Reign will be issuing 91.2 MM
new shares in connection with this transaction, which will bring its shares issued and outstanding to 283.4 MM", stated
Kevin Bullock, CEO of Golden Reign. He went on to say "by amending the current Gold
Purchase Agreement with Sailfish, Golden Reign will benefit from building a fully permitted, unencumbered asset with security and
provisions commensurate with a standard, third party NSR agreement."
Akiba Leisman, Executive Chairman of Marlin and Chief Executive Officer of Sailfish stated:
"Since Marlin and Sailfish's original involvement with Golden Reign in 2014, it was our belief that the San Albino Gold
Deposit is the most attractive development asset in the Americas today. At Closing, Marlin's shareholders will own 45% of
the Combined Company and will be able to participate in this opportunity for decades to come. Furthermore, the restructuring
of the Gold Purchase Agreement will not only make the San Albino Gold Deposit even more robust, but in return, Sailfish will have
a diversified suite of assets including additional royalties, cash and an exploration property in a world-class mining
jurisdiction. Upon completion of the Transaction, Sailfish will be well-capitalized, have no funding obligations and intends
to aggressively grow its royalty business".
Marlin Reorganization
Under the terms of the Arrangement Agreement, as a condition to Closing, Marlin has agreed to undertake a corporate
reorganization, pursuant to which it will (i) sell its Commonwealth silver and gold property in Cochise
County, Arizona, to Wexford Capital LP or funds controlled by it ("Wexford"), Marlin's controlling shareholder,
which will extinguish all of Marlin's loans and any other debts and liabilities owing to Wexford; (ii) assign to Sailfish its 1%
net smelter return royalty on the Parral 2 claims on the La Cigarra project owned by Kootenay Silver Inc. (the "La Cigarra
Royalty") and its 1.5% net smelter return royalty on the majority of the concessions at the El
Compas project operated by Endeavour Silver Corp. (the "El Compas Royalty"), and grant an option to Sailfish to
purchase its Gavilanes property in Mexico, all as partial
consideration for Sailfish agreeing to enter into the amendment to the existing gold stream on San Albino; (iii) wind-up certain
of its non-material subsidiaries that will not be acquired by Golden Reign under the Transaction; and (iv) arrange for the sale
of 17,155,191 common shares of Golden Reign, currently held by Marlin, at a price of $0.1539 on a
private placement basis, pursuant to which Wexford will purchase at least 85% of such Golden Reign common shares and an aggregate
of at least 993,464 of such Golden Reign common shares will be purchased by current stock option holders of Marlin, consisting of
Akiba Leisman, Marlin's Executive Chairman, and Cesar Gonzalez,
Marlin's VP Corporate Development. The full amount of the gross proceeds from such private placement of $2,640,183.89 will remain in Marlin on the Closing of the Transaction. These pre-Closing transactions being
completed by Marlin are collectively referred to herein as the "Marlin Reorganization".
As a result of the Marlin Reorganization, Golden Reign will acquire Marlin and certain of its material subsidiaries on a debt
free and working capital neutral basis.
Revised Stream Agreement
Another key condition to the closing of the Transaction is that Golden Reign and its subsidiaries, Marlin and Sailfish enter
into a mutually acceptable agreement to restructure the existing gold stream on San Albino (the "Amended and Restated Gold
Purchase Agreement"). Accordingly, concurrent with the signing of the Arrangement Agreement, Golden Reign and its
subsidiaries, Marlin and one of its material subsidiaries and Sailfish have entered into a master agreement (the "Master
Agreement") whereby the parties have agreed:
(a) to the substantial form of and the terms and conditions of the Amended and Restated Gold Purchase Agreement,
equivalent to a 3% net smelter returns royalty, to be entered into effective as of the closing of the Transaction, with respect
to a certain area of interest on San Albino concession (the "AOI"), which includes as a schedule to the Amended and
Restated Gold Purchase Agreement, the substantial form of and terms and conditions of a new royalty agreement to be entered into
between Golden Reign and its subsidiaries, and Sailfish, with respect to a 2% net smelter returns royalty on production from the
San Albino concession (exclusive of the AOI) and the El Jicaro concession;
(b) that Marlin will make cash payments to Sailfish in respect of any amounts recovered by Marlin in certain lawsuits
Marlin has filed against the Mexican tax authority for the purpose of obtaining previously denied Mexican value added tax refunds
for an aggregate of $37,379,097 Mexican pesos ($7,490,437 Mexican
pesos of which have already been received), before certain interest and inflation adjustments and applicable legal fees;
(c) that Sailfish will extinguish Golden Reign's prepayment liability associated with the existing gold stream on San
Albino prior to Closing;
(d) that Sailfish's existing funding obligation of approximately US$13.9 million will be
eliminated prior to Closing; and
(e) to the substantial form of and the terms and conditions of certain assignment, option and royalty agreements, that will be
entered into as partial consideration to be paid to Sailfish in consideration for entering into the Amended and Restated Gold
Purchase Agreement. Such agreements provide for Marlin's assignment to Sailfish, for no additional consideration, of the El
Compas Royalty and La Cigarra Royalty in Mexico. Such agreements also provide for Marlin's
agreement to transfer its Gavilanes property in Mexico, to a
designee of Sailfish.
Management Team and Board of Directors
Upon Closing, senior management of the Combined Company will consist of Kevin Bullock as Chief
Executive Officer, Jesse Muñoz as Chief Operating Officer and Scott
Kelly as Interim Chief Financial Officer. The board of directors of the Combined Company is expected to be comprised of
seven members, consisting initially of three directors as determined by Golden Reign (which will include Kevin Bullock) and three directors as determined by Marlin, which shall include at least one independent
director. Golden Reign and Marlin will jointly determine one additional independent board member who will serve as non-executive
chairman.
Following Closing, it is expected that the name of the parent company will be changed from Golden Reign to "Mako Mining Corp."
or such other name as may be mutually determined by Golden Reign and Marlin.
Special Committee and Board Recommendations
The boards of directors of Golden Reign, Marlin and Sailfish, respectively, have each appointed a special committee to
consider the Proposed Transaction, as well as any strategic alternatives.
The special committee comprised of two independent Marlin directors (the "Marlin Special Committee") received an oral
fairness opinion (to be supplemented by a written report) from Red Cloud Klondike Strike Inc. stating that in its opinion, and
based upon and subject to certain assumptions, limitations and qualifications, the Consideration to be received by Marlin
shareholders is fair, from a financial point of view, to Marlin shareholders.
The special committee comprised of three independent Golden Reign directors (the "Golden Reign Special
Committee") received a fairness opinion from PI Financial Corp. stating that in its opinion, and based upon and subject
to the assumptions, limitations and qualifications set forth therein, the Consideration is fair, from a financial point of view,
to Golden Reign shareholders.
The special committee comprised of three independent Sailfish directors (the "Sailfish Special Committee") received a
fairness opinion from Noble Capital Markets stating that in its opinion, and based upon and subject to the assumptions,
limitations and qualifications set forth therein, the restructuring of the gold stream on San Albino as contemplated by the
Master Agreement is fair, from a financial point of view, to Sailfish shareholders.
Marlin's board of directors has determined that the Transaction is in the best interests of Marlin and its shareholders,
having taken into account advice from its financial advisor and the recommendations of the Marlin Special Committee, and has
unanimously approved the Transaction and the entering into of the Arrangement Agreement and recommends that Marlin's shareholders
vote in favour of the Transaction. The directors, senior officers and certain principal shareholders of Marlin, who together
control approximately 85.8% of the outstanding Marlin common shares, have signed voting support agreements and confirmed their
intention to vote their Marlin common shares in favour of the Transaction.
Golden Reign's Board of Directors has determined that the Transaction is in the best interest of Golden Reign and its
shareholders, having taken into account advice from its financial advisor and the recommendations of the Golden Reign Special
Committee, and has unanimously approved the Transaction and the entering into of the Arrangement Agreement and recommends that
Golden Reign shareholders vote in favour of the issuance of the GRR Shares in connection with the Transaction, including to
Wexford who will become a new "Control Person" of the Combined Company within the meaning of the TSX Venture Exchange policies on
closing of the Transaction. The directors and senior officers of Golden Reign, who control approximately 14.9% of the outstanding
Golden Reign common shares, have signed voting support agreements and confirmed their intention to vote their Golden Reign common
shares in favour of the issuance of the GRR Shares in connection with the Transaction.
Sailfish's board of directors has determined that the restructuring of the gold stream on San Albino as contemplated by the
Master Agreement is in the best interests of Sailfish and its shareholders, having taken into account advice from its financial
advisor and the recommendations of the Sailfish Special Committee, and has unanimously approved the gold stream restructuring and
the entering into of the Master Agreement and recommends that Sailfish's shareholders vote in favour of that transaction.
Transaction Conditions and Timing
The Transaction will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act
(British Columbia) and will require the approval of: (i) at least 66 2/3% of the votes cast by
the holders of Marlin common shares; and (ii) a simple majority of the votes cast by holders of Marlin common shares after
excluding any votes of certain persons required to be excluded under Multilateral Instrument 61-101 – Protection of Minority
Security Holders in Special Transactions ("MI 61-101"), at a special meeting of shareholders currently expected to
take place in the fall of 2018.
Golden Reign shareholders will also be asked to approve the issuance of the GRR Shares in connection with the Transaction by a
simple majority of the votes cast by holders of Golden Reign common shares after excluding any votes of certain persons required
to be excluded under MI 61-101 at a special meeting of shareholders currently expected to take place in the fall of 2018.
Additionally, Sailfish shareholders will be asked to approve the restructuring of the San Albino gold stream by a simple
majority of the votes cast by holders of Sailfish common shares after excluding any votes of certain persons required to be
excluded under MI 61-101 at a meeting of shareholders currently expected to take place in the fall of 2018.
In addition to obtaining the shareholder and court approvals, and the parties entering into the documents contemplated by the
Master Agreement and the Amended and Restated Gold Purchase Agreement, the Transaction is subject to closing conditions customary
in transactions of this nature. Marlin and Golden Reign currently anticipate that the Transaction
will be completed in October 2018. The effect of Marlin shareholders voting for the resolution to
approve the Transaction and the Transaction becoming effective will be the cancellation of the common shares of Marlin from
trading on the TSX Venture Exchange following Closing.
None of the GRR Shares to be issued pursuant to the Transaction have been or will be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws, and any GRR Shares
issued pursuant to the Transaction are anticipated to be issued in reliance upon available exemptions from such registration
requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This
press release does not constitute an offer to sell, or the solicitation of an offer to buy, any securities.
Further information regarding the Transaction will be included in the respective management proxy circulars of Golden Reign
and Marlin, which are currently expected to be mailed to Golden Reign and Marlin shareholders, respectively, in the late summer
or early fall of 2018. Copies of the Arrangement Agreement and management information circulars will be available on SEDAR at
www.sedar.com.
Golden Reign Bridge Loan
As previously announced, Golden Reign and Marlin entered into a definitive bridge loan agreement for a bridge loan from Marlin
to Golden Reign of C$4,000,000, having a term of one year and bearing interest at 8% per annum (the
"Bridge Loan"). On Closing, the Bridge Loan will become intercompany debt and terminated. In the event that (a) Golden
Reign shareholders vote not to approve the Transaction, or (b) or the Arrangement Agreement is terminated in accordance with
its terms, then all accrued interest under the Bridge Loan will become immediately due and the maturity date of the Bridge Loan
will accelerate to the earlier of the original maturity date or the date that is four months from the negative shareholder vote
or termination of the Arrangement Agreement.
Participation and Standstill Agreement
Effective as of the Closing, the Combined Company and Wexford will enter into a participation rights agreement pursuant to
which the Combined Company will grant to Wexford a right to participate in future equity financings of the Combined Company to
maintain its then current equity ownership in the Combined Company on terms no less favourable than those offered to other
investors in such financings, for so long as Wexford owns at least 20% of the issued and outstanding common shares of the
Combined Company, and Wexford will be subject to a standstill prohibiting Wexford from increasing its equity ownership in the
Combined Company beyond 45% (on a fully-diluted basis) without the prior written consent of the board of directors of the
Combined Company.
About Golden Reign
Golden Reign Resources Ltd. is a publicly listed (TSX-V: GRR) mineral exploration company engaged in exploring the San
Albino-Murra Property and the El Jicaro Property, both of which are located in Nueva Segovia,
Nicaragua. The company's prime objective is to bring its San Albino Gold Deposit into production
quickly and efficiently, building cash flow to further advance a number of its other prospective exploration targets. The
Company's land package comprises 13,771 hectares (138 km2) of prospective ground for gold and silver mineralization. Hundreds of
historical mines and workings exist within the Corona de Oro Gold Belt, which is approximately 3 kilometres wide by 20 kilometres
long and is spanned by the company's land package. For additional information please visit our website at www.goldenreign.com and SEDAR www.sedar.com.
About Marlin Gold
Marlin is a growth-oriented gold and silver mining company focused on the Americas. The company owns three properties located
in Mexico and the USA and a portfolio of royalties. Marlin's
priority is to profitably operate its La Trinidad Mine, conduct further exploration on its other projects and enhance shareholder
value through a strategic relationship with Sailfish Royalty Corp. (TSX-V:FISH). Marlin is backed by a well-funded investor with
a successful track record in the resources sector. The La Trinidad Mine in Sinaloa, Mexico
declared commercial production on November 1, 2014 and is one of the highest grade open pit heap
leach gold mines in Mexico.
About Sailfish Royalty
Sailfish is a yield-focussed royalty company. Sailfish owns the TZ Royalty, which is a 3.5% royalty on revenues derived
from the sale of gold on Eldorado Gold Corp.'s advanced stage Tocantinzinho gold project, and also holds a gold stream agreement
on the San Albino gold project in Northern Nicaragua.
Forward-Looking Statements: Some of the statements contained herein may be considered "forward-looking
information" within the meaning of applicable securities laws which may include, but is not limited to, statements with respect
to management's assessment of the anticipated benefits to Marlin, Golden Reign and Sailfish shareholders of the Transaction and
matters contemplated by the Master Agreement and the Amended and Restated Gold Purchase Agreement, anticipated shareholder
meeting dates, timing for Closing and the delisting of the Marlin Shares from the TSX Venture Exchange. Often, but not always,
forward-looking statements can be identified by the use of words and phrases such as "plans," "expects," "is expected," "budget,"
"scheduled," "estimates," "forecasts," "intends," "anticipates," or "believes" or variations (including negative variations) of
such words and phrases, or state that certain actions, events or results "may," "could," "would," "might" or "will" be taken,
occur or be achieved.
Forward-looking information is based on certain expectations and assumption that are considered reasonable at the time,
however undue reliance should not be placed on the forward looking information as the companies can give no assurance that they
will provide to be correct. As forward-looking statements address anticipated future events and conditions, such forward-looking
information is subject to a variety of risks and uncertainties which could cause actual events or results to differ materially
from those reflected in the forward-looking information, including, without limitation, the risk that the Marlin Reorganization
is not completed as contemplated; that the requisite court, regulatory and/or shareholder approval is not obtained; uncertainties
associated with negotiations; misjudgements in the course of preparing forward-looking information; that the Transaction may not
close when planned or at all or on the terms and conditions set forth in the Arrangement Agreement; the benefits expected from
the Transaction not being realized; risks related to the integration of the acquisition of Marlin and its business; general
business, economic, competitive, political and social uncertainties; legal challenges to permits or permitting applications; the
actual results of current and future exploration and production activities; the actual results of reclamation activities;
conclusions of economic evaluations; meeting various expected cost estimates; changes in project parametres and/or economic
assessments as plans continue to be refined; future prices of metals; possible variations of mineral grade or recovery rates; the
risk that actual costs may exceed estimated costs; failure of plant, equipment or processes to operate as anticipated; accidents,
labour disputes and other risks of the mining industry; political instability, that the repayment of the Bridge Loan is
accelerated, that any party is unable to satisfy all closing conditions to completion of the Transaction (including extinguishing
or amending the existing gold stream agreement with Sailfish), that any anticipated reconstitution of the board of directors and
management of the Combined Company is not as anticipated, and other risks and uncertainties including those discussed in each
company's disclosure documents which can be found under each company's profile at www.sedar.com .
Although Golden Reign, Marlin and Sailfish have attempted to identify important factors that could cause actual actions,
events or results to differ materially from those described in forward-looking statements, there may be other factors that cause
actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein
are made as of the date of this press release and Golden Reign, Marlin and Sailfish each disclaims any obligation to update any
forward-looking statements, whether as a result of new information, future events or results, except as may be required by
applicable securities laws. There can be no assurance that forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
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.
SOURCE Golden Reign Resources Ltd.
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