- 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.