Toronto, Ontario--(Newsfile Corp. - February 16, 2021) - BB1 Acquisition Corp. (TSXV: BBA.P) ("BB1" or the "Corporation") and Cerrado Gold Inc. ("Cerrado") jointly announce that further to the news releases issued on August 4, 2020 and November 3, 2020, Cerrado has amended the terms of the subscription receipt financing the ("Amended Subscription Receipt Financing") to be completed in connection with the "Qualifying Transaction". In connection with the Amended Subscription Receipt Financing, Cerrado has terminated the agreement with the original syndicate of agents and negotiated a subsequent engagement letter dated February 1, 2021 (the "Engagement Letter") with Cormark Securities Inc. and Haywood Securities Inc. as the co-lead agents (the "Co-Lead Agents"), and including Stifel Nicolaus Canada Inc. and H.C. Wainwright & Co., LLC (together with the Co-Lead Agents, the "Agents").
Pursuant to the terms of the Engagement Letter, the Agents will undertake a brokered private placement of subscription receipts (each, a "SubscriptionReceipt") of Cerrado, on a best-efforts basis and at C$1.35 (the "Offering Price"), to raise gross proceeds of up to C$15,000,000 (the "Maximum Financing"). The minimum gross proceeds remain C$10,000,000, by way of the issuance of 7,407,407 Subscription Receipts (the "MinimumFinancing"). Each Subscription Receipt will entitle the holder thereof to receive, without any further action and without payment of additional consideration by the holder, and subject to adjustment in certain circumstances, one Resulting Issuer Share (each, a "SubscriptionReceiptShare") upon the satisfaction or waiver of certain Escrow Release Conditions (as defined below) prior to the date that is 45 days following the closing of the Subscription Receipts Financing (the "TerminationDate"). The Subscription Receipts will be issued pursuant to the terms of a subscription receipt indenture to be entered into among Cerrado, a subscription receipt agent to be determined and the Lead Agents, for and on behalf of the Agents.
Cerrado intends to complete the Amended Subscription Receipt Financing under exemptions from the prospectus and registration requirements of applicable securities law pursuant to subscription agreements between each participant in the Amended Subscription Receipt Financing and Cerrado. The Amended Subscription Receipt Financing is expected to close on or around February 17, 2021, immediately before the closing of the Qualifying Transaction.
The gross proceeds of the Amended Subscription Receipt Financing, less 50% of the Agents' fee and certain expenses, will be held in escrow and, upon the satisfaction or waiver of certain conditions (the "EscrowReleaseConditions"), including, without limitation, the satisfaction or waiver of all conditions to the closing of the Qualifying Transaction, the net proceeds will be released to the Resulting Issuer and the remaining Agents' fee will be released to the Agents. In the event that the Escrow Release Conditions are not satisfied by the Termination Date, the proceeds of the Amended Subscription Receipt Financing will be returned to the holders of the Subscription Receipts and the Subscription Receipts will be cancelled.
As contemplated under the Engagement Letter, Cerrado will pay to the Agents a cash fee of equal to 6% of the aggregate gross proceeds of the Amended Subscription Receipt Financing. As additional compensation, one or more of the Agents will be entitled, to broker warrants (the "BrokerWarrants"), exercisable to acquire such number of common shares of the Resulting Issuer (on a post-Consolidation basis) as is equal to up to 6% of the aggregate number of Subscription Receipts issued pursuant to the Amended Subscription Receipt Financing. Each Broker Warrant shall be exercisable at the Offering Price pursuant to the Amended Subscription Receipt Financing for a period of 12 months from the closing date of the Qualifying Transaction.
The net proceeds will be used by the Corporation upon completion of the Qualifying Transaction (the "Resulting Issuer") to fund exploration and development at Cerrado's properties in Argentina and Brazil and for general corporate working capital. Completion of the Qualifying Transaction remains subject to a number of conditions, including, but not limited to, the completion of the Amended Subscription Receipt Financing, approval by the shareholders of Cerrado for the amalgamation (among other things), approvals of all regulatory bodies having jurisdiction in connection with the Qualifying Transaction and approval of the TSX Venture Exchange, as applicable, as well as the satisfaction of applicable listing requirements. There can be no assurance that the Qualifying Transaction will be completed as proposed, or at all, or that the Escrow Release Conditions or the closing conditions pertaining to the Qualifying Transaction will be satisfied or waived on terms satisfactory to the parties.
The revised terms of the Amended Subscription Receipt Financing supersede and replace the description of the Subscription Receipt Financing set out in the Corporation's filing statement dated November 30, 2020 (the "Filing Statement") which is available on SEDAR. The following information is intended to update the information previously disclosed in the Filing Statement. Capitalized terms not otherwise defined herein will have the definition ascribed thereto in the Filing Statement.
Pro Forma Consolidated Capitalization
The following table sets forth the pro forma share and loan capital of the Resulting Issuer after giving effect to the Qualifying Transaction, in light of the Amended Subscription Receipt Financing.
| Designation of security(1) |
Amount authorized or to
be authorized |
Outstanding after giving effect to the Merger, the Special Warrant Financing, and the Minimum Financing(2) |
Outstanding after giving effect to the Merger, the Special Warrant Financing, and the Maximum Financings (3) |
| Resulting Issuer Shares(3)(4) |
Unlimited |
66,841,270 |
70,545,063 |
| Resulting Issuer Warrants(5) |
2,000,000 |
2,000,000 |
2,000,000 |
| Resulting Issuer Compensation Warrants |
1,295,412 |
1,073,184 |
1,295,412 |
| Resulting Issuer Options(6) |
14,082,538 |
4,000,000 |
4,000,000 |
| Resulting Issuer RSUs(6) |
14,082,538 |
6,780,003 |
6,780,003 |
(1) Certain securities of the Resulting Issuer are subject to escrow and/or an Undertaking. See "Information Concerning the Merger and the Financings" and "Information Concerning the Resulting Issuer - Escrowed Securities".
(2) Stated on a pro forma basis, after giving effect to the Merger and the Financings, assuming the completion of the Minimum Financing. See "Information Concerning the Merger and the Financings".
(3) Stated on a pro forma basis, after giving effect to the Merger and the Financings, assuming the completion of the Maximum Financing. See "Information Concerning the Merger and the Financings".
(4) Based on the unaudited pro forma balance sheet of the Resulting Issuer, there will be a deficit of $0.14 per Resulting Issuer Share on a consolidated basis.
(5) Includes both the Cerrado Warrants and the IPO Agent's Options.
(6) The aggregate number of Resulting Issuer Shares authorized for reservation pursuant to grants under the Omnibus Incentive Plan may not exceed 20% of the outstanding Resulting Issuer Shares immediately after giving effect to the Merger.
In connection with the completion of the Merger, it is expected that there will be approximately 70,545,063 Resulting Issuer Shares (assuming completion of the Maximum Financing) and 66,841,270 Resulting Issuer Shares (assuming completion of the Minimum Financing) issued and outstanding, on an undiluted basis, of which:
- former Cerrado Shareholders, excluding investors in the Financings (but including the holder of the shares issued in connection with the LC Acquisition which closed on January 22, 2021), will hold 48,650,688 Resulting Issuer Shares, representing approximately 68.96% (assuming completion of the Maximum Financing) or 72.79% (assuming completion of the Minimum Financing) of the outstanding Resulting Issuer Shares, investors in the Special Warrant Financing will hold 8,845,750 Resulting Issuer Shares, representing approximately 12.54% (assuming completion of the Maximum Financing) or 13.23% (assuming completion of the Minimum Financing) of the outstanding Resulting Issuer Shares, and investors in the Subscription Receipt Financing will hold 11,111,200 Resulting Issuer Shares, representing approximately 15.75% of the outstanding Resulting Issuer Shares (assuming completion of the Maximum Financing) or 7,407,407 Resulting Issuer Shares, representing approximately 11.08% of the outstanding Resulting Issuer Shares (assuming completion of the Minimum Financing); and
- former BB1 Shareholders will hold 1,937,425 Resulting Issuer Shares, representing approximately 2.75% (assuming completion of the Maximum Financing) or 2.90% (assuming completion of the Minimum Financing) of the outstanding Resulting Issuer Shares.
Available Funds and Principal Purposes
Funds Available
The following table sets forth the Resulting Issuer's expected sources of funds following completion of the Merger. The amounts shown in the table are estimates only, and are based on information available to BB1 and Cerrado as at the date of this Filing Statement:
| Source of Funds |
Amount
(Minimum
Financing) |
Amount
(Maximum
Financing) |
| Estimated BB1 working capital as at June 30, 2020 |
$518,976 |
$518,976 |
| Estimated Cerrado working capital as at June 30, 2020 |
$(1,658,000) |
$(1,658,000) |
| Gross proceeds on Special Warrant Financing |
$7,076,600 |
$7,076,600 |
| Estimated gross proceeds of the Subscription Receipt Financing(1) |
$7,337,834 |
$11,006,751 |
| Prepayment Facility(2) |
$2,500,000 |
$2,500,000 |
| Total |
$15,775,410 |
$19,444,327 |
(1) The USD equivalent has been calculated using the exchange rate of 1.3628 (as of June 30, 2020).
(2) Pursuant to an advance sales transaction entered into by Cerrado effective March 12, 2020, Cerrado receives advanced consideration of an additional $2,500,000 in exchange for future quarterly physical deliveries of gold and silver from the MDN Project to the counterparty (the "Prepayment Facility") The Prepayment Facility may be immediately renewable upon settlement of the monthly delivery of gold and silver concentrate.
Principal Purposes of Funds
The following table sets out information regarding the Resulting Issuer's intended principal uses of funds following the Closing. The intended uses of funds may vary based upon a number of factors, and variances may be material. The amounts shown in the table are estimates only and are based upon the information available to BB1 and Cerrado as of the date of this Filing Statement:
The net funds available to the Resulting Issuer are expected to be used, principally, as follows:
| Principal Use of Funds |
Amount
(Minimum
Financing) |
Amount
(Maximum
Financing) |
| Recommended exploration program for MDN Project(1) |
- |
- |
| Recommended exploration program for MDC Project - Phase 1(2) |
$3,376,158 |
$3,376,158 |
| Recommended exploration program for MDC Project - Phase 2(2) |
- |
$3,310,945 |
| Transaction expenses(3) |
$546,790 |
$546,790 |
| Agent's fees(4) |
$944,170 |
$1,403,900 |
| Financing and Acquisition Costs(5) |
$8,032,083 |
$8,032,083 |
| General, administrative expenses and working capital |
$2,649,870 |
$2,649,870 |
| Unallocated working capital |
$226,339 |
124,581 |
| Total |
$15,775,410 |
$19,444,327 |
Notes:
(1) Recommended exploration program of $700,000 as described in the MDN Technical Report will be funded via operating cash flow.
(2) Based on a recommended exploration program of $3,376,158 for Phase 1 and $3,310,945 for Phase 2 as described in the MDC Technical Report.
(3) Estimated transaction expenses include legal, accounting, advisory, listing fees, transfer agent fees, printing and other miscellaneous costs associated with the Special Warrant Financing, Subscription Receipt Financing and Merger.
(4) Includes fees paid pursuant to the Special Warrant Financing and the Subscription Receipt Financing. As additional compensation under the Subscription Receipt Financing, Cerrado will issue the SR Agents Broker Warrants of 6% of the aggregate number of Subscription Receipts issued pursuant to the Subscription Receipt Financing.
(5) Includes costs associated with the LP Acquisition, Prepayment Facility and the Sinking Fund.
The following tables states the fully-diluted share capital of the Resulting Issuer after giving effect to the Consolidation, the Financings and the Merger:
|
Assuming completion of the
Minimum Financing ($10,000,000) |
Assuming completion of the
Maximum Financing
($15,000,000) |
Designation of Security
|
Number
Outstanding
(#) |
Percentage
Outstanding
(%) |
Number
Outstanding
(#) |
Percentage
Outstanding
(%) |
| Resulting Issuer Shares |
|
|
|
|
| Issued |
66,841,270 |
82.83% |
70,545,063 |
83.37% |
| Reserved for issuance upon exercise of Resulting Issuer Options |
4,000,000 |
4.96% |
4,000,000 |
4.73% |
| Reserved for issuance upon exercise of Resulting Issuer Warrants (other than Resulting Issuer Compensation Warrants) |
2,000,000 |
2.48% |
2,000,000 |
2.36% |
| Reserved for issuance upon exercise of Resulting Issuer Compensation Warrants |
1,073,184 |
1.33% |
1,295,412 |
1.53% |
| Reserved for issuance upon vesting of Resulting Issuer RSUs |
6,780,003 |
8.40% |
6,780,003 |
8.01% |
| Total number of Resulting Issuer Shares (fully-diluted) |
80,694,457 |
100% |
84,620,478 |
100% |
Escrowed Securities
Due to the new Offering Price under the Amended Subscription Receipt Financing, the 2,254,325 Resulting Issuer Shares issued to Cerrado shareholders previously expected to be subject to the TSX Venture Exchange's seed share resale matrix and required to be held for four (4) months following closing of the Qualifying Transaction will no longer be subject to such hold requirements. No other changes are anticipated to the Escrowed Securities section of the Filing Statement.
This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
About BB1 Acquisition Corp.
The Corporation is incorporated under the Business Corporations Act (Ontario) and is a capital pool company listed on the TSXV. The Corporation has no commercial operations and has no assets other than cash. For further information please see the final prospectus of the Corporation dated October 5, 2018, filed on SEDAR at www.sedar.com.
For further information please contact:
Stephen Shefsky
Chief Executive Officer
(416)-366-4200
Cautionary Notes
Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV final acceptance. There can be no assurance that the Transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the management information circular or Filing Statement 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 a capital pool company should be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press 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.
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/74531
