Discovery Metals Corp. (“
Discovery”) (TSXV: DSV)
and Levon Resources Ltd. (“
Levon”) (TSX: LVN) are
pleased to announce that they have entered into an arrangement
agreement (the “
Agreement”) to combine Discovery
and Levon to create a leading silver-focused exploration and
development company that will control several district-scale
projects in Mexico (the “
Transaction”).
Summary of the Arrangement
Pursuant to the Transaction, Discovery has
agreed to acquire, through a wholly-owned subsidiary, all of the
issued and outstanding common shares of Levon (collectively, the
“Levon Shares”) by way of a statutory plan of
arrangement under the Business Corporations Act (British Columbia)
(the “Arrangement”). Pursuant to the terms of the
Arrangement, shareholders of Levon (the “Levon
Shareholders”) will receive 0.55 (the “Exchange
Ratio”) of a common share of Discovery (each whole share,
a “Discovery Share”) for every Levon Share held,
based on the closing price of C$0.23 per Discovery Share on the TSX
Venture Exchange on May 29, 2019. Upon the closing of the
Transaction, former shareholders of Levon will hold 49.6% of the
Discovery common shares outstanding, while former shareholders of
Discovery will hold 50.4% of the Discovery common shares
outstanding.
Benefits of the Arrangement
The proposed Arrangement offers a number of
benefits to the shareholders of both Discovery and Levon,
including:
- a leading Mexican silver-focused
exploration and development company with an enhanced capital
markets profile;
- a larger corporate entity that
should attract broader institutional and retail investor interest
and enhanced trading liquidity;
- significant synergies between the
two management teams; and
- corporate general and
administrative cost savings.
For Levon Shareholders, the Transaction will
give them exposure to:
- an experienced management team and
a board with project development and financing expertise to
accelerate the development of the Cordero Project;
- the financial resources to continue
advancing the Cordero Project in the near-term; and
- a diversified asset base, adding
Discovery’s three drill-ready exploration projects with
considerable upside.
For shareholders of Discovery, the
Transaction:
- adds a significant resource base in
one of Mexico’s premier mining districts close to existing
infrastructure;
- diversifies Discovery’s asset base
to include a development-stage project where continued exploration
and project optimization offer the potential for resource
expansion; and
- gives exposure to another
underexplored regional property package with the potential for new
discoveries.
Discovery controls over 150,000 hectares of
historically mined and highly prospective ground in Coahuila State,
Mexico, encompassing three shallow and high-grade silver-zinc-lead
projects (Puerto Rico, Minerva, and Monclova), as well as several
other early-stage showings and prospects. Prior to Discovery’s
involvement, no systematic exploration or drill testing had been
completed. Discovery’s extensive mapping and sampling programs at
all three key projects has identified many priority drill
targets.
The Puerto Rico Project comprises several
past-producing, high-grade underground mines centered on an 8 km x
2 km mineralized corridor. Historical production from the Puerto
Rico Project has been estimated at 1 million tonnes (“Mt”) grading
approximately 40% zinc (“Zn”) along with high silver (“Ag”) and
lead (“Pb”) grades.1 Discovery’s recent systematic underground
sampling program comprising over 800 channel samples across three
historic mines returned strong Ag-Zn-Pb grades. At one of the
mines, 95 channel samples across mineralization had an average of
27.4% Zn equivalent (“Eq”) (137 g/t Ag, 18.0% Zn, 8.7% Pb). At the
Minerva and Monclova projects, recent channel sampling programs
also returned high Ag-Zn-Pb grades at surface, including an average
of 636 g/t AgEq (90 g/t Ag, 7.7% Zn, 2.0% Pb) in the top 30
mineralized samples at Minerva and an average of 1,090 g/t AgEq
(380 g/t Ag, 10.0% Zn, 2.5% Pb) in the top 25 mineralized samples
at Monclova.2
Levon’s primary asset is the 100%-owned Cordero
Project (“Cordero”) located in one of Mexico’s premier porphyry and
carbonate replacement deposit (CRD) districts in Chihuahua State,
Mexico. Levon published a Preliminary Economic Assessment on the
Cordero Project in April 2018.3 Based on more than 133,000 meters
of drilling, Levon has estimated an Indicated Mineral Resource of
990 Mt grading 32 g/t AgEq (13 g/t Ag, 0.37% Zn, 0.17% Pb, and 0.04
g/t gold (“Au”)) and an Inferred Mineral Resource of 282 Mt grading
56 g/t AgEq (21 g/t Ag, 0.75% Zn, 0.30% Pb and 0.04 g/t Au).3
Taj Singh, President and Chief Executive Officer
of Discovery, states: “We are excited to be combining our highly
experienced Mexican exploration teams to advance the combined
portfolio of properties. The new Discovery will have several
district-scale land packages in Coahuila and Chihuahua that offer
compelling exploration potential. The new Discovery will also
benefit by adding the Cordero Project, a development stage project
with potential to be optimized for the current metals price
environment.”
Vic Chevillon, Interim Chief Executive Officer
of Levon, further adds: “We are pleased to be combining with
Discovery and the Oxygen Capital team, a group that we are
confident has the expertise and resources to execute our late CEO
Ron Tremblay’s vision of building a world-class mine at
Cordero.”
Management and Directors
Concurrent with the closing of the Transaction, Vic Chevillon
(Interim CEO of Levon) and Daniel Vickerman (Chairman of Levon)
will be appointed to the board of directors of Discovery. Discovery
will provide the management team for the combined company with Taj
Singh continuing to serve as the President and Chief Executive
Officer and Murray John continuing in the role of Chairman of the
Board. The remaining members of the Discovery board of directors
will continue to be Dr. Mark O’Dea, Jeff Parr, Jose
Vizquerra-Benavides, and Jesus Hernandez-Garza. Dr. Moira Smith has
been nominated to join the Discovery board of directors as of the
upcoming Annual and General Special Meeting of Discovery scheduled
for June 26, 2019.
Advisors PI Financial Corp. is
acting as financial advisor to Discovery in connection with the
Transaction. Fort Capital Partners is acting as financial
advisor to Levon and has provided a fairness opinion to the Levon
board of directors that the Transaction is fair to the Levon
Shareholders from a financial perspective.
Boards of Directors’ Recommendations
The boards of directors of Discovery and Levon have
each unanimously approved the proposed Arrangement.
Directors, officers, and certain key Levon
Shareholders representing an aggregate of approximately 12% of the
issued and outstanding Levon Shares have signed lockup agreements
to vote their respective Levon Shares in favour of the
Arrangement.
Further Details The Arrangement
will be implemented through a triangular amalgamation under the
Business Corporations Act (British Columbia) in which a
wholly-owned subsidiary of Discovery will amalgamate with Levon to
become a wholly-owned subsidiary of Discovery. Levon Shareholders
will receive Discovery Shares based on the Exchange Ratio. The
Arrangement will be an Arm’s Length Transaction pursuant to the
policies of the Toronto Stock Exchange and the TSX Venture
Exchange.
Upon closing of the Arrangement: (i) all
outstanding stock options of Levon will be exchanged for options to
purchase Discovery Shares on the basis of the Exchange Ratio, and
will expire twelve months after the closing of the Arrangement; and
(ii) all unexercised Levon Share purchase warrants will be
exchanged for warrants to purchase Discovery Shares on the basis of
the Exchange Ratio and will expire in accordance with the current
expiry dates of the Levon Share purchase warrants.
The Agreement is dated May 29, 2019, and
contains representations and warranties for the benefit of each of
Discovery and Levon, conditions relating to shareholder, court, and
regulatory approvals, material adverse changes, and compliance with
the Agreement as are in each case customary in comparable
transactions of this nature.
Completion of the Arrangement is subject to a
number of conditions being satisfied or waived by one or both of
Discovery and Levon at or prior to closing of the Arrangement,
including: approval of the holders of Levon Shares, options, and
warrants, together with any requisite minority approvals; receipt
of all necessary regulatory and court approvals; and the
satisfaction of certain other closing conditions customary for a
transaction of this nature.
The Agreement includes a non-solicitation
covenant on the part of Levon (subject to customary fiduciary-out
provisions). In the event of a superior proposal, Discovery has the
right to either match such superior proposal or receive a
termination fee in the amount of C$600,000.
Details of the Arrangement, including a summary
of the terms and conditions of the Arrangement Agreement, will be
disclosed in a management information circular of Levon, which will
be mailed to holders of Levon Shares, options, and warrants and
will also be available on SEDAR at www.sedar.com.
It is expected that a special meeting of holders
of Levon Shares, options, and warrants (the
“Meeting”) to approve the proposed Arrangement
will be held in July 2019 and, if approved at the Meeting, it is
expected that the Arrangement would close approximately one week
thereafter.
Levon is subject to Multilateral Instrument
61-101 Protection of Minority Security Holders in Special
Transactions (“MI 61-101”). MI 61-101 provides
that, in certain circumstances, where a “related party” (as defined
in MI 61-101) of an issuer is entitled to receive a “collateral
benefit” (as defined in MI 61-101) in connection with an
arrangement transaction such as the Arrangement, such transaction
may be considered a “business combination” for the purposes of MI
61-101 and subject to minority shareholder approval
requirements.
Levon has determined that Vic Chevillon, a
director and the Interim CEO of the Company will receive a
“collateral benefit” in connection with the Arrangement as he
beneficially owns or exercises control or direction over more than
1% of Levon Shares (calculated in accordance with MI 61-101).
Consequently, the Levon Shares beneficially owned, directly
or indirectly, by Mr. Chevillon will be excluded for the purposes
of determining if minority approval of the Arrangement is
obtained.
This announcement is for informational purposes
only and does not constitute an offer to purchase, a solicitation
of an offer to sell any shares or a solicitation of a proxy.
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.
About Discovery
Discovery is focused on discovering and
advancing high-grade polymetallic deposits in a recently assembled
land package of approximately 150,000 hectares over a large and
historic mining district in Coahuila State, Mexico. The portfolio
of three large-scale, drill-ready projects and several
earlier-stage prospects, all with shallow high-grade Ag-Zn-Pb
mineralization, is situated in a world-class carbonate replacement
deposit belt that stretches from southeast Arizona to central
Mexico. The land holdings contain numerous historical direct-ship
ore workings with several kilometers of underground development,
but there was no modern exploration or drill testing on the
properties prior to the work carried out by Discovery.
For further information please visit Discovery's website at
www.dsvmetals.com.
About Levon
Levon Resources is exploring one of the world’s
largest silver resources at its 100%-owned Cordero Project in
Chihuahua State, Mexico. The 37,000 hectare property covers
an entire porphyry district that hosts the announced resource and
numerous exploration targets for bulk tonnage diatreme-hosted,
porphyry-style, and carbonate replacement deposits.
For further information please visit Levon’s
website at www.levon.com.
For Further Information:
Discovery Metals Corp.(416) 613-9410info@dsvmetals.com
Levon Resources Ltd.(778) 379-0040ir@levon.com
References
[1] Independent Technical Report for the Puerto
Rico Carbonate Hosted Polymetallic Project, Coahuila, Mexico dated
June 12, 2017 and prepared for Ayubowan Capital Ltd., predecessor
to Discovery (NI 43-101 Technical Report).
[2] Channel samples were oriented perpendicular
to mineralization and channel samples were representative of
mineralization. For the Puerto Rico samples mentioned (95 total
samples taken from one historic mine), the widths ranged from 0.4
to 2.2m (average 1.3m) and grades ranged from 2% to 53% ZnEq. For
the Minerva samples mentioned (30 samples), widths ranged from 0.3
to 1.7m (average 0.9m) and grades ranged from 172 to 1,692 g/t
AgEq. For the Monclova samples mentioned (25 samples), widths
ranged from 0.3 to 1.5m (average 0.9m) and grades ranged from 205
to 2,532 g/t AgEq. All equivalent grades for Discovery’s values are
based on ($US) $15/oz Ag, $1.25/lb Zn, and $1.00/lb Pb.
[3] Cordero Project: NI 43-101 Technical Report:
Preliminary Economic Assessment Update, Chihuahua, Mexico, dated
March 1, 2018 and issued April 18, 2018, and prepared for Levon.
The Cordero Project Indicated and Inferred Mineral Resources use a
cutoff grade of 15 g/t AgEq, using metal prices (US$) of $20/oz Ag,
$1.20/lb Zn, $1.00 /lb Pb , and $1,250/oz Au.
The documents listed above are available on
SEDAR at www.sedar.com.
Qualified Persons
Gernot Wober, P.Geo, VP Exploration of Discovery
Metals Corp. and Vic Chevillon, AIPG, QPG, Interim CEO and VP
Exploration of Levon Resources Ltd., are each of their respective
company’s designated Qualified Persons for this news release within
the meaning of National Instrument 43-101 – Standards of Disclosure
for Mineral Projects (“NI 43-101”) and have reviewed and validated
that the information contained in this news release is
accurate.
Cautionary Note Regarding
Forward-Looking Statements: Certain disclosures in this
release constitute forward-looking statements, including: obtaining
Levon securityholder and final court approval of the Arrangement;
composition of the board of directors and management of Discovery
upon completion of the Arrangement; and timing and completion of
the Arrangement. In making the forward-looking statements in this
release, the parties have applied certain factors and assumptions
that are based on the parties' current beliefs as well as
assumptions made by and information currently available to the
parties. Although the parties consider these assumptions to be
reasonable based on information currently available to them, they
may prove to be incorrect, and the forward-looking statements in
this release are subject to numerous risks, uncertainties and other
factors that may cause future results to differ materially from
those expressed or implied in such forward-looking statements.
Readers are cautioned not to place undue reliance on
forward-looking statements. The parties do not intend, and
expressly disclaims any intention or obligation to, update or
revise any forward-looking statements whether as a result of new
information, future events or otherwise, except as required by
law.
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