Tyhee Gold Corp. ("Tyhee" or the "Company") (TSX VENTURE:TDC) is pleased to
report that the Company has entered into an agreement (the "Implementation
Agreement") with RMB Australia Holdings Limited ("RMB") and Sutter Gold Mining
Inc. (TSX VENTURE:SGM)(OTCQX:SGMNF) ("Sutter") whereby, subject to certain
conditions, Tyhee will acquire: all of the issued and outstanding shares of
Sutter currently held by RMB and/or its affiliates; all of the issued and
outstanding shares of Sutter that are to be issued to RMB by Sutter upon the
proposed conversion of US$8 million of RMB's current debt exposure to Sutter;
and approximately US$17 million of RMB's additional debt exposure to Sutter (the
"Transaction".) Upon completion of the Transaction, Tyhee will hold
approximately 73% of Sutter's issued and outstanding shares, on a
non-fully-diluted basis.
Sutter Gold
Sutter currently holds a number of precious metals properties in California,
USA, including the permitted Lincoln underground mine near Sutter Creek,
California, as well as a new, permitted processing facility, located near the
entrance to the Lincoln Mine. In March 2014, the project was put on care and
maintenance while certain production issues are being evaluated and the Company
reduced costs due to capital constraints.
Sutter's assets cover 3.2 miles of what has been described as "the most
productive portion" of California's famed, 120 mile long Mother Lode District.
Sutter has established a National Instrument 43-101 compliant gold resource that
reflects only a small area of the gold mineralization identified to date.
RMB
RMB Australia Holds Limited is a wholly-owned subsidiary of FirstRand Limited, a
South African-based financial services group. RMB currently holds approximately
US$40 million in debt from Sutter as well as approximately 58.2 million (47%) of
Sutter's approximately 123 million outstanding shares.
The Agreement
The Implementation Agreement, which will be filed under Tyhee's and Sutter's
profiles on SEDAR, follows one year of extensive due diligence by Tyhee's
management and technical team, including comprehensive discussions, site
inspections and a review of Sutter's financial situation. Management believes
that gold production can be achieved at the Lincoln Mine following a significant
restructuring of Sutter's operations, mine plan and debt position, including an
investment by Tyhee after completion of the Transaction of up to US$17 million
to complete development of the Lincoln Mine and mill, with further production
expansions scheduled to be implemented over the subsequent several months.
Following completion of the Transaction, Tyhee's President and CEO, Brian
Briggs, will continue in that capacity, leading Tyhee's highly experienced
operating team.
Upon completion of this transaction, Tyhee's core assets will include majority
ownership of Sutter, which holds 100% of the Lincoln mine and mill and the
Keystone gold deposit, all in California, as well as a significant growth asset,
the larger but longer term Yellowknife Gold Project in Canada's Northwest
Territories.
The board of directors of both Sutter and Tyhee believe that the Transaction
will benefit each of the companies and their shareholders, and accordingly, the
directors of both boards have approved the Transaction.
The Transaction
Tyhee proposes to acquire certain of RMB's current interests in Sutter pursuant
to the Implementation Agreement as follows:
1. Tyhee will acquire all of the current stock position in Sutter held by
RMB and/or its affiliates (58,216,820 common shares) at C$0.02 per
share, paid in cash on closing of the Transaction;
2. RMB will reduce its debt exposure to Sutter by US$8 million, from no
more than US$40 million to no more than US$32 million by converting the
US$8 million into 108,454,603 Sutter common shares at a deemed price of
$0.0788 per share. Tyhee will then acquire such shares at C$0.02 per
share, paid in cash on closing of the Transaction; and,
3. RMB will assign to Tyhee up to US$17 million of RMB's debt exposure,
with RMB continuing to retain a US$15 million loan to Sutter, in
consideration for the following:
i. 90 million Tyhee common shares issued from treasury;
ii. US$4 million in cash;
iii.a covenant by Tyhee to consummate an additional financing to raise
the remaining balance necessary to achieve commercial production at
Sutter' s Lincoln-Comet mine, to a maximum of US$ 17 million; and
iv. a covenant by Tyhee to cause Sutter to make interest payments,
principal repayments, and mandatory prepayments on the retained
US$15 million loan from RMB to Sutter on a first ranking basis.
This transaction does not require a vote by the shareholders of either Tyhee or
Sutter.
Closing of the Transaction is also subject to customary closing conditions,
including receipt of the approval of the TSX-V and any other regulatory
approvals. In addition, the closing of the Transaction is subject to the
completion of certain debt restructurings by Sutter, noted below, and the
completion of a minimum of US$15 million financing by Tyhee, also discussed
below.
The Implementation Agreement contains a non-solicitation covenant on the part of
RMB and Sutter, subject to customary fiduciary out provisions. The
Implementation Agreement also provides Tyhee with the right to match any
potential third party proposal. Sutter is permitted to terminate the
Implementation Agreement under certain conditions, including the payment of a
$1.5 million break fee to Tyhee. In addition, Tyhee has agreed to pay a $750,000
fee to RMB, if RMB terminates the Transaction as a result of the concurrent
financing not being completed on or before August 15, 2014, or a fee of $1.5
million, if Tyhee does not complete the additional $14 million funding within 60
days of completing the concurrent financing.
Concurrent Financing
In connection with the Transaction, Tyhee intends to complete, through a
previously announced (see Tyhee release dated November 26, 2013) special purpose
vehicle (the "SPV"), a concurrent financing of a minimum of US$15 million. The
SPV would provide a loan or loans to Tyhee or its wholly owned US subsidiary
(the "SPV Loan"). The SPV would issue Convertible Debentures having the
following terms:
a. Face value: US$1,000 denominations.
b. Term: Five (5) years.
c. Interest Rate: Eight (8) percent per annum, payable annually in cash or
in ounces of gold, at the election of the holder of the Convertible
Debenture.
d. Security: Secured against the assets of Tyhee NWT Inc., Tyhee's wholly
owned Northwest Territories subsidiary.
e. Conversion: Principal to be convertible to Tyhee common shares at $0.30
per Tyhee common share.
f. Redemption: Principal amount to be redeemable by Tyhee after 24 months,
subject to payment of premium.
g. In addition, if at any time after 24 months from the issuance of the
Convertible Debentures gold trades at greater than US$2,000 per ounce
for a period of 30 consecutive business days or more, the holder would
have the option, subject to additional conditions to be determined, to
convert the principal amount outstanding on the SPV Loan to gold, at the
rate of one ounce for each US$2,000 outstanding (delivery terms and
timing of repayment remain to be determined), or payment in cash of an
amount equal to the principal owing.
Private Placement
Tyhee is also pleased to announce that it has proposed a separate Private
Placement financing of 10,000,000 units at $0.10 per unit, with each unit
comprising one common share in the Company's stock and one half warrant, whereby
one whole warrant would be exercisable for two years at $0.15. These units are
to be offered in blocks of 2.5 million units.
Terms of Loans to Sutter
a. US$15 million loan from RMB to Sutter - RMB will retain a secured US$15
million amortizing loan to Sutter. RMB and Sutter would amend and
restate the terms of its existing US$40 million debt facility to provide
for the following terms:
i. US$15 million principal amount;
ii. interest at 12% per annum, capitalizing until July 31, 2015 and paid
monthly commencing on August 31, 2015;
iii.repayment in up to 48 consecutive monthly instalments of equal
amounts, subject to certain conditions and adjustments, commencing
on August 31, 2015; and,
iv. such loan would be senior secured debt to Sutter and any other
Sutter debt would be fully subordinated on terms satisfactory to
RMB.
b. Approximately US$17 million note payable by Sutter to Tyhee - RMB will
assign to Tyhee US$17 of existing indebtedness owing under the
promissory note dated December 31, 2013 issued by Sutter to RMB and
Tyhee and Sutter will enter into a new promissory note having terms
similar to the note issued to RMB.
c. Funds to Restart Production - Further advances ("Tyhee Advances") to
Sutter by Tyhee or its related entities would be made up to US$17
million on the same terms as the SPV Loan that would be provided to
Tyhee, except that (i) interest on Tyhee Advances would accrue at 12%
per annum; and (ii) security for the Tyhee Advances will be equal
ranking to the Tyhee note described above.
Compelling Transaction
The proposed transaction would benefit both Tyhee and Sutter shareholders:
-- For Sutter, improved financial standing, with significantly improved
liquidity and access to capital to properly capitalize completion of
development of the Lincoln mine and mill to achieve commercial
production. For Tyhee, enabling the execution of its strategy of
building its production profile through additional acquisitions with
near-term production potential;
-- For Tyhee and Sutter, being transformed into a developing precious
metals production company with gold production planned from Lincoln;
-- For Tyhee and Sutter, significantly enhanced development and exploration
upside across a diverse portfolio of precious metals properties,
including the Keystone deposit in California as well as the large
undeveloped gold resources (Feasibility Study - August 2012) at the
Yellowknife Gold Project, NWT,
-- For Tyhee and Sutter, utilizing Tyhee's highly experienced underground
mining team that will be key to successful operations at Lincoln; and,
-- For Sutter, access to an expanded management team that includes
complementary experience in exploration, development, operations, and
financing.
Denis Taschuk, Tyhee's Chairman of the Board, said, "Given the many challenges
facing the junior resource sector, we are particularly pleased with both the
potential we see with this agreement and the support for our company's
capabilities from both RMB and Sutter's Board. This has taken a great deal of
work to get us to this point and we are confident that this represents a
tremendous opportunity to generate significant value for all of the stakeholders
involved."
Mark T. Brown, Sutter's Chairman of the Board, said, "Despite the issues we have
had with an orderly development and the difficulties of raising funding given
Sutter's financial position, we have always had confidence in the Lincoln
project. Our number one priority over the last many months has been to secure
the additional investment needed to achieve commercial production. We are
supportive of RMB and Tyhee's transaction, which will provide both the funding
and technical/operational expertise to make Lincoln a success, aligning all
parties' interests. We look forward to working with Tyhee to meet our common
objectives."
Tyhee CEO, Brian Briggs stated, "The blending of Tyhee's operational talent and
the remaining management at Sutter will provide an excellent team capable of
executing our comprehensive turn-around plan and to bringing the Lincoln Mine
into production in the coming months. In addition to the near term potential of
Sutter's assets, we see the opportunity to build the next, long term gold
producer in one of the richest trends in America."
Corporate Strategy
Tyhee has been aggressively pursuing new opportunities to enable the Company to
benefit from gold production in 2014. This revised corporate strategy is aimed
at enhancing Tyhee's shareholder value by taking advantage of corporate project
opportunities available in the current challenged resource investment
environment to generate cash-flow, accelerate growth and provide a strong
platform on which to build a new multi-project gold mining company. At the same
time, the Company will continue to progress its YGP, an advanced stage
wholly-owned gold project in the development and permitting stage.
In line with this strategy, Tyhee has announced plans to create a special
purpose vehicle (the "SPV"), through which funds of up to US$37.5 million are
intended to be raised through an offering of secured, convertible debt (the "SPV
Financing"). Closing on a minimum of US$15.0 million in the SPV Financing is a
condition to the closing of the Transaction, and the break fee noted above is
payable if RMB terminates the transaction as a result of such financing not
being completed by August 15, 2014. The SPV Financing is expected to fund the
acquisition of the RMB interests and the proposed cash injection into the
Lincoln Mine.
Up to 10 per cent of the funds raised through the SPV are to be used for general
corporate purposes, including the ongoing development of Tyhee's Yellowknife
Gold Project.
Yellowknife Gold Project
Tyhee's Yellowknife Gold Project, located near Yellowknife in Canada's Northwest
Territories, is a wholly-owned, gold project in the development and permitting
stage. A detailed, independent National Instrument 43-101-compliant Feasibility
Study ("FS") entitled "NI 43-101 Technical Report, Yellowknife Gold Project
Feasibility Study, Northwest Territories, Canada," was completed in October 1,
2012. This FS provided the Company with the economic and technical framework
supporting an operation that would produce approximately 100,000 ounces ("oz.")
of gold per year during the first eight full years of production. The study used
a base-case gold price of US$1,400/oz. and a projected 4,000 tonnes-per-day
processing plant comprised of a conventional recovery circuit
(gravity-flotation-CIL). Most of the reserves (approximately 75%) are contained
in the Ormsby open pit with the remainder from Nicholas Lake, Ormsby
Underground, Bruce Pit and a small amount of reserves from Clan Lake also.
According to the study's authors - SRK Consulting, Knight Piesold and Lyntek
Inc. out of their Denver, Colorado offices - the YGP is estimated to return a
pre-tax net present value ("NPV") at a 5% discount rate of approximately $216
million (post tax: $115 million) and an internal rate of return ("IRR") of 20%
(post tax: 15%)based on initial estimated capital cost of $193 million
(including a 10% contingency and, as noted, at a $1400/oz gold price.)
About Sutter
Sutter has two projects: the Lincoln Project located in Amador County, on the
California Mother Lode Gold Belt, and the Santa Theresa Project located in the
Northern Baja region of Mexico. Currently, the Company is completing the mill
construction and underground development of the Lincoln Mine Project, beginning
with the shallow portion of the Lincoln-Comet ore zone. The Lincoln-Comet and
Keystone zones have a NI 43-101 compliant Indicated Resource estimate (completed
in February 2008). Sutter currently controls approximately 3.6 miles of the
Mother Lode of Amador County, with 90% of the property still unexplored.
In Mexico, Sutter holds the rights to the geologically similar, high-grade El
Alamo district of northern Baja.
Forward-Looking Statements
This news release contains "forward-looking information" under Canadian
securities law. Any information that express or involve discussions with respect
to predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using words
such as "expect", "anticipate", "believe", "plans", "estimate", "scheduling",
"projected" or variations thereof or stating that certain actions, events or
results "may", "could", "would", "might" or "will" be taken, occur or be
achieved, or the negative of any of these terms and similar expressions) are not
statements of historical fact and may be forward-looking information.
Forward-looking information relates to, among other things: the price of silver
and gold; the accuracy of mineral resource and mineral reserve estimates; the
ability of the Company to finance its operations and capital expenditures;
future financial and operating performance including estimates of the Company's
revenues and capital expenditures and estimated production.
Forward looking statements made in this news release include all statements
related to: the Company's intention to establish a special purpose vehicle; the
Company's ability to implement the Company's corporate strategy; the anticipated
closing of the Transaction; the anticipated restructuring of the Lincoln Mine
operations, the plan to start and expand production from the Lincoln Mine; the
planned cash injection into Sutter; potential for additional acquisitions by the
Company; becoming the next generation of multi project gold mining company; the
heightened recognition of the Company resulting from the Transaction; the
potential benefits of the Transaction to shareholders of the Company and Sutter,
including improved financial standing, liquidity, access to capital and
near-term production potential; and the continued progress of the Company's
Yellowknife Gold Project.
Factors that could cause future events to differ from those anticipated in
forward looking statements include: inability to identify merger or acquisition
opportunities, or once identified, negotiate a transaction on terms acceptable
to Tyhee; inability to meet the conditions provided for in the Implementation
Agreement, including obtaining sufficient funding for the acquisition and the
proposed cash injection; delays in obtaining approvals for acquisition or merger
activity, including approval of the TSX Venture Exchange and securities
regulatory authorities; litigation, legislative, environmental and other
judicial, regulatory, political and competitive developments; fluctuations in
foreign exchange rates and interest rates; inability to achieve operational
efficiencies on any acquired property sufficient to overcome the costs of
acquisition or merger; discrepancies between actual and estimated reserves and
resources or between actual and estimated metallurgical recoveries; costs of
production; capital expenditure requirements; the costs and timing of any
acquisition or merger, including but not restricted to construction, expansion
or enhancement of new or existing operations; the success of exploration and
permitting activities; parts, equipment, labor or power shortages or other
increases in costs; mining accidents, labour disputes or other adverse events;
changes in applicable laws or regulations; that there are no material variations
in the current tax and regulatory environment or the tax positions taken by the
Company; that the regulatory and political environment within any country where
any such targeted entity or project may be located will support the development
of environmentally safe mining projects, and any other factors that may cause
Tyhee's actual results, performance or achievements to be materially different
from those expressed or implied by such information. In addition to the above,
the factors described or referred to under the headings "Financial Risks and
Uncertainties" and "Operational Risks and Uncertainties" in Tyhee's Management
Discussion and Analysis for the six months ended February 28, 2014, which is
available on the SEDAR website at ww.sedar.com, should be reviewed in
conjunction with the information found in this news release.
Although Tyhee has attempted to identify important factors that could cause
actual results, performance or achievements to differ materially from those
contained in forward-looking information, there can be other factors that cause
results, performance or achievements not to be as anticipated, estimated or
intended. There can be no assurance that such information will prove to be
accurate or that management's expectations or estimates of future developments,
circumstances or results will materialize. As a result of these risks and
uncertainties, any proposed transaction could be modified, restricted or not
completed, and the results or events predicted in these forward looking
statements may differ materially from actual results or events. Accordingly,
readers should not place undue reliance on forward-looking information.
The forward-looking information in this news release is made as of the date of
this news release, and Tyhee disclaims any intention or obligation to update or
revise such information, except as required by applicable law. This news release
does not constitute an offer to buy any securities or a solicitation of any vote
or approval or a solicitation of an offer to sell any securities.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
GT Investor Relations Inc.
Greg Taylor
O: 905 337-7673 C: 416 605-5120
gtaylor@tyhee.com
www.tyhee.com
Tyhee Gold
Brian Briggs
President
604 681-2877
info@tyhee.com
Amanda Miller
Chief Financial Officer
303 238 1438 ext. 223
amiller@suttergoldmining.com
www.suttergoldmining.com
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