Letter of Intent for the Acquisition of Channel Resources by West African Resources
August 13 2013 - 11:00PM
Marketwired Canada
NOT FOR DISSEMINATION IN THE UNITED STATES OR OVER UNITED STATES NEWSWIRE SERVICES
Channel Resources Ltd. ("Channel") (TSX VENTURE:CHU) and West African Resources
Limited ("West African") (ASX:WAF)(ACN 121 539 375) jointly announce the signing
of a letter agreement (the "Letter Agreement") pursuant to which the parties
intend that West African will acquire, by way of a Plan of Arrangement, all of
the issued and outstanding common shares and options of Channel (the
"Transaction"). The Transaction has been unanimously approved by the board of
directors of both companies.
The Letter Agreement states that the parties intend that all of the common
shares of Channel ("Channel Shares") will be exchanged for ordinary shares of
West African ("West African Shares") at a ratio of four (4) Channel Shares for
one (1) West African Share. In addition, Channel shareholders will receive 1
(one) share purchase warrant ("Warrant") for each two (2) West African shares
received in the transaction, each Warrant being exercisable to acquire one (1)
West African Share at a price of A$0.40 for 36 months from completion of the
Transaction. Each outstanding Channel option to acquire a Channel Share will be
replaced or exchanged for one quarter (1/4) a West African option. The
Transaction will result in West African issuing approximately 29.84 million West
African Shares, resulting in Channel shareholders holding 13.2% of the total
outstanding shares of West African.
The Transaction represents an approximate 100% premium over Channel's recent
trading price, based on West African's last closing share price of AUD$0.16 on
July 29, 2013, the last full day of trading prior to the imposition of a
voluntary trading halt pending news of the Transaction (current exchange rates
of approximately 1 AUD$ = 0.9460 CDN$).
Insiders of Channel holding approximately 8% of Channel Shares have signed
lock-up agreements to support the Transaction. Under certain circumstances, the
lock-up agreements grant to West African the option to buy such shares at the
arrangement price if the Transaction does not complete and if West African
elects to proceed with an 'any-and-all' takeover bid offer.
Private Placement Financing in Channel Resources
Pursuant to the terms of the Letter Agreement, West African has committed to
purchase 29,650,936 shares of Channel at a price of $0.05 per share by way of a
private placement subscription (the "Channel Financing"). Following the closing
of the Channel Financing, which will occur as soon as exchange and other
regulatory approvals are given, West African will own 19.9% of the Shares of
Channel.
Gross proceeds of the placement will total $1,482,546, which will be used to
fund transaction costs and for working capital purposes. Completion of the
Channel Financing is subject to execution and delivery of standard documentation
and receipt of all required regulatory approvals and consents, including the
approval of the TSX.V. Securities issued pursuant to this private placement are
subject to a four-month hold period in compliance with applicable securities
laws and the policies of the TSX.V.
Primary Objectives of the Transaction
Channel shareholders are expected to benefit from participation in West
African's exploration projects in Burkina Faso, encompassing 6,370 square
kilometres of landholdings, including the Sartenga permit (hosted within the
broader Boulsa project), which hosts a significant initial resource of gold,
copper, molybdenum and silver (see "about West African" below). West African
shareholders will benefit from Channel's 90% interest in the Tanlouka gold
exploration permit ("Tanlouka") in Burkina Faso (see "about Channel" below).
Colin McAleenan, President and CEO of Channel stated: "Market conditions have
taken a heavy toll on Channel in the past year; however, under the proposed
Transaction Channel shareholders have the opportunity to benefit from West
African's ability to realize the value of Tanlouka and also to participate in
the exploration and development of its extensive landholdings which are
contiguous with Tanlouka, numerous gold prospects and its flagship Sartenga
copper-gold project. Importantly, West African is managed by a team with a long
operational history in West Africa, that operates a fleet of cost-effective
Company-owned drilling rigs, has a solid track record in financing junior
resource companies and has the primary objective of establishing a gold mining
operation on the properties as rapidly as possible."
Richard Hyde, Managing Director of West African said: "Channel's Tanlouka
Project borders West African's Boulsa Project, and is located within 10
kilometres of advanced exploration targets at our Moktedu gold prospect. We will
capitalise on near-term production potential resulting from the consolidation of
shallow gold mineralisation at both Moktedu and Tanlouka, by directing our fleet
of drilling rigs in the coming months on oxide mineralisation in both areas.
Channel shareholders will also benefit from the growth potential of the
large-scale Sartenga copper-gold project, which we will continue to diamond
drill throughout the current wet-season and into 2014, allowing for resource
estimates updates to be completed by the end of 2013 and again in 2014. We look
forward to recommencing work at Moktedu and Tanlouka as soon as possible,
updating resource estimates by year end and undertaking scoping studies in early
2014.
Transaction Terms
Implementation of the Transaction is subject to a number of conditions including
the receipt by Channel of a favourable fairness opinion, approval by
shareholders of Channel by way of special 2/3 majority together with approval by
a simple majority of minority shareholders, as well as approval by regulatory
and judicial authorities including the TSX Venture Exchange, the Australian
Stock Exchange and the Supreme Court of British Columbia. Other conditions
include negotiation of a definitive agreement which will provide for each party
to complete a due diligence review of the other party limited to confirming the
party's public record and representations given by it and for customary closing
deliveries for a transaction of this nature. The transaction is expected to
close in late October.
West African has reserved the right to seek a capped amount of interim equity
funding while Channel will not seek any additional financing after the Channel
Financing is completed. In conjunction with the Transaction, West African
intends to list its Shares on the TSX Venture Exchange.
The Letter Agreement contains binding and non-binding terms. Binding terms
include the Channel Financing, confidentiality provisions and a C$150,000 break
fee if Channel accepts a superior proposal from a third party.
Upon completion of the Transaction, the current management team of West African
will manage the affairs of Channel, and one nominee from Channel will join the
board of directors of West African.
About Channel
Channel is a mineral exploration company with a portfolio of properties that
includes the Tanlouka gold project in Burkina Faso, West Africa and a
mineral-bearing brine property in Alberta, Canada. Channel's Tanlouka Project
has been its primary focus and the company has advanced it rapidly from initial
discovery in 2010 to the publication in 2012 of a maiden resource estimate for
the Mankarga 5 target. Channel has set the stage for the continued expansion of
Mankarga 5 as well as for potential new discoveries on mineralized targets in
the north and central regions of the Tanlouka permit, allowing for significant
exploration upside. Existing infrastructure in the area together with that
introduced by Channel during its exploration programs will allow for work to
proceed quickly to both expand the project as well as to assess the potential
for its development.
Further information on Channel is available on the company's website at
http://www.channelresources.ca.
About West African
West African is an Australian based exploration company involved in the
exploration of gold and copper-gold projects in Burkina Faso.
Since its listing on the Australian Securities Exchange in 2010, West African
has acquired a large land position in Burkina Faso and identified multiple
targets that it has been exploring with its own fleet of seven drilling rigs,
substantially reducing drilling costs compared to drilling by contractors.
West African holds mineral tenements covering the Boulsa Gold Project within
central Burkina Faso's Manga-Sebba belt. The Boulsa Gold Project, of which West
African Resources owns 100 per cent, covers 6,370 square kilometres and 200
kilometres of strike length of prospective early Proterozoic Birimian
granite-greenstone terrain, and is located 90 kilometres east of the capital
Ouagadougou.
The Sartenga prospect, which is part of the Boulsa project, hosts West African's
most significant drilling results to date. West African discovered Sartenga in
June 2012 and announced a substantial initial copper, gold, molybdenum and
silver Inferred Resource at Sartenga in June 2013, and expects to update this
estimate by the end of 2013 and again in 2014.
The Sartenga maiden Inferred Mineral Resource estimate contains 174,000 tonnes
of copper, 651,000 ounces of gold, 11,000 tonnes of molybdenum and 2.5 million
ounces of silver (Table 1). The maiden Inferred Mineral Resource, independently
calculated by Ravensgate Mineral Industry Resource Consultants (Ravensgate),
comprises 70 million tonnes at 0.2% copper, 0.3 g/t gold, 166 g/t molybdenum and
1.1 g/t silver (Table 1).
----------------------------------------------------------------------------
Table 1: Sartenga Inferred Mineral Resource - June 2013
(0.45% Copper Equivalent cut-off grade)
----------------------------------------------------------------------------
Grade Contained Metal
----------------------------------------------------------------------------
Tonnes Cu Au Mo Ag Copper Gold Molybdenum Silver Copper Eq(i)
Zone (Mt) % g/t g/t g/t (Kt) (Koz) (Kt) (Koz) (Kt)
----------------------------------------------------------------------------
Oxide 13.5 0.3 0.3 87 1.1 44 112 1 470 -
----------------------------------------------------------------------------
Trans 4.0 0.3 0.4 65 1.0 11 48 - 124 24
----------------------------------------------------------------------------
Fresh 52.8 0.2 0.3 194 1.1 119 491 10 1868 292
----------------------------------------------------------------------------
Total 70.4 0.2 0.3 166 1.1 174 651 11 2,463 316
----------------------------------------------------------------------------
See notes on copper equivalency and contained metal assumptions below
West African has an experienced management team, including:
Francis Harper LLB (Hons), BEc
Non-Executive Chairman
A founding Director of Blackwood Capital Limited which manages private equity
funds primarily for high net worth clients in Australia and the USA. Blackwood
has raised more than $250 million for listed resources companies within the past
three years. Prior to forming Blackwood Capital in 2002, Mr. Harper spent 15
years with NM Rothschild within resources corporate finance in the UK, USA and
Australia.
Richard Hyde BSc (Geology and Geophysics), MAusIMM
Managing Director
A Geologist with 18 years' experience in the minerals industry and has more than
14 years of experience in West Africa. Mr. Hyde has managed large exploration
and development projects in a range of different geological environments in
Australia, Africa and Eastern Europe. He has consulted extensively to the mining
industry as a Senior Consultant with RSG Global and Coffey Mining based in West
Africa and Australia. Mr. Hyde is a founding Director and shareholder of West
African Resources and is Member of the Australian Institute of Mining and
Metallurgy.
Further information on West African Resources is available on the company's
website at http://www.westafricanresources.com.
Forward Looking Information
This news release contains "forward-looking information" within the meaning of
applicable Canadian and Australian securities legislation, including information
relating to West African's or Channel's future financial or operating
performance may be deemed "forward looking". All statements in this news
release, other than statements of historical fact, that address events or
developments that West African or Channel expects to occur, are "forward-looking
statements". Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words "expects",
"does not expect", "plans", "anticipates", "does not anticipate", "believes",
"intends", "estimates", "projects", "potential", "scheduled", "forecast",
"budget" and similar expressions, or that events or conditions "will", "would",
"may", "could", "should" or "might" occur. All such forward-looking statements
are based on the opinions and estimates of the relevant management as of the
date such statements are made and are subject to important risk factors and
uncertainties, many of which are beyond West African or Channel's ability to
control or predict. Forward-looking statements are necessarily based on
estimates and assumptions (including that the Transaction will be completed
successfully on the terms agreed upon by the parties and that the business of
Channel will be integrated successfully into the West African organization) that
are inherently subject to known and unknown risks, uncertainties and other
factors that may cause actual results, level of activity, performance or
achievements to be materially different from those expressed or implied by such
forward-looking statements. In the case of Channel and West African, these facts
include their anticipated operations in future periods, planned exploration and
development of its properties, and plans related to its business and other
matters that may occur in the future. This information relates to analyses and
other information that is based on expectations of future performance and
planned work programs. Statements concerning mineral resource estimates may also
be deemed to constitute forward-looking information to the extent that they
involve estimates of the mineralization that will be encountered if a mineral
property is developed.
Forward-looking information is subject to a variety of known and unknown risks,
uncertainties and other factors which could cause actual events or results to
differ from those expressed or implied by the forward-looking information,
including, without limitation: exploration hazards and risks; risks related to
exploration and development of natural resource properties; uncertainty in West
African's ability to obtain funding; gold price fluctuations; recent market
events and conditions; risks related to the uncertainty of mineral resource
calculations and the inclusion of inferred mineral resources in economic
estimation; risks related to governmental regulations; risks related to
obtaining necessary licenses and permits; risks related to their business being
subject to environmental laws and regulations; risks related to their mineral
properties being subject to prior unregistered agreements, transfers, or claims
and other defects in title; risks relating to competition from larger companies
with greater financial and technical resources; risks relating to the inability
to meet financial obligations under agreements to which they are a party;
ability to recruit and retain qualified personnel; and risks related to their
directors and officers becoming associated with other natural resource companies
which may give rise to conflicts of interests. This list is not exhaustive of
the factors that may affect West African or Channel's forward-looking
information. Should one or more of these risks and uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described in the forward-looking information.
West African or Channel's forward-looking information is based on the reasonable
beliefs, expectations and opinions of their respective management on the date
the statements are made and neither West African or Channel assumes any
obligation to update forward looking information if circumstances or
management's beliefs, expectations or opinions change, except as required by
law. For the reasons set forth above, investors should not place undue reliance
on forward-looking information. For a complete discussion with respect to
Channel, please refer to Channel's financial statements and related MD&A, all of
which are filed on SEDAR at www.sedar.com.
None of the securities anticipated to be issued under the Transaction have been
or will be registered under the Securities Act of 1933, as amended, or any state
securities laws, and such securities are anticipated to be issued in the United
States pursuant to exemptions from such registration requirements. This press
release shall not constitute an offer to sell or solicitation of an offer to buy
any securities in any jurisdiction where such an offer or sale would be
unlawful.
Information in this announcement that relates to West African's exploration
results is based on information compiled by Mr Richard Hyde, a Director, who is
a Member of The Australian Institute of Mining and Metallurgy. Mr Hyde has
sufficient experience which is relevant to the style of mineralisation and type
of deposit under consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2004 Edition of the Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(the JORC Code). Mr Hyde is also a Qualified Person as defined by the Canadian
National Instrument 43-101 guidelines and takes responsibility for the technical
aspects of this report. Mr Hyde consents to the inclusion in this announcement
of the statements based on his information in the form and context in which they
appear. West African will be filing an NI 43-101 compliant report as part of the
Transaction.
The information in this announcement that relates to Mineral Resources for the
Sartenga Project is based on information compiled by Mr Don Maclean. Mr Don
Maclean is a consultant of Ravensgate Mineral Industry Consultants, an
independent consultancy group specialising in mineral resource estimation,
evaluation and exploration. Mr Don Maclean is a Member of the Australian
Institute of Geoscientists. He has sufficient experience which is relevant to
the style of mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person as defined in
the 2004 Edition of the "Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves". Mr Don Maclean consents to the inclusion in
this report of the matters based on information in the form and context in which
it appears.
The copper equivalent calculation represents total metal value for each metal,
summed and expressed in equivalent percent copper. No assumptions have been made
for potential metal recoveries. It is the Company's opinion that metals
considered here have a reasonable potential to be recovered as evidenced in
similar Au-Cu-Mo-Ag related mineralisation elsewhere in the World. Preliminary
metallurgical test work, while not definitive, has returned high recoveries for
transitional and sulphide material (greater than 90%) for copper and gold, other
contributing metals (Mo, Ag) are expected to yield recoveries in a similar
range. In oxide preliminary test work indicates greater than 90% recovery for
gold. The Company is investigating the potential to recover copper from oxide
material, and for the moment has excluded from reporting any contained
equivalent copper metal equivalent metal tonnages in oxide. Based on these
assumptions it is West African's opinion that copper equivalent values are
appropriate to use to assist in reporting exploration results and in the
resource modelling and reporting of the Sartenga deposit.
Copper equivalent conversion factors and long-term price assumptions used
are as follows:
Copper equivalent formula = Cu% + Au g/t x 0.70 + Mo g/t x 0.0006 + Ag
x0.016
Price Assumptions: Au (US$1300/oz) Cu (US$2.70/lb) Mo (US$15/lb) Ag
(US$30/oz)
Neither 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:
Channel Resources Ltd.
Colin McAleenan
President & CEO
604.684.7098
info@channelresources.ca
www.channelresources.ca
West African Resources Limited
Richard Hyde
Managing Director
604.684.7098
info@westafricanresources.com
www.westafricanresources.com
Channel Resources Ltd. (TSXV:CHU)
Historical Stock Chart
From May 2024 to Jun 2024
Channel Resources Ltd. (TSXV:CHU)
Historical Stock Chart
From Jun 2023 to Jun 2024
