VANCOUVER, Jan. 13, 2016 /CNW/ - Kootenay Silver Inc.
(TSX-V: KTN) ("Kootenay") and Northair
Silver Corp. (TSX-V: INM)
("Northair") are pleased to
announce the execution of a Binding Letter Agreement (the
"Binding Letter Agreement") pursuant to which
Kootenay will acquire all of the issued and outstanding common
shares of Northair (the "Transaction"). The
combination of Kootenay and Northair will create a leading Mexican
silver exploration and development company and consolidator with a
portfolio of assets headlined by Kootenay's Promontorio and La
Negra projects and Northair's La Cigarra project, all of which are
based in Mexico. In addition, the
combined company will have exposure to a continuum of grass-roots
pipeline exploration projects, royalty interests and joint
ventures, plus a strong balance sheet providing the combined
company with a stable platform for future consolidation in the
sector.
Under the terms of the Binding Letter Agreement,
Northair shareholders will receive, for each common share of
Northair held, 0.35 common shares of Kootenay, plus 0.15 of a
warrant to purchase Kootenay common shares at an exercise price of
$0.55 for a period of five years from
closing (the "Warrants"). Kootenay will apply to list the
Warrants on the TSX Venture Exchange. Including the
Warrants(1), the total consideration represents an
implied value of $0.076 per Northair
common share and a premium of 58% to Northair's shareholders based
on both companies' trailing 20-day volume-weighted average price,
respectively, as of the close on January 12,
2016, and an implied value of $0.071 per Northair common share and a premium of
45% to Northair's shareholders based on both companies' closing
share prices, respectively, as of the same date. Upon completion of
the Transaction, Northair will become a wholly-owned subsidiary of
Kootenay, and former shareholders of Northair will hold
approximately 40% of the shares of Kootenay on an outstanding
shares basis.
Kootenay President and CEO James
McDonald commented: "The strategic acquisition of
Northair and its La Cigarra silver project is a milestone
development for both companies that immediately positions Kootenay
as a leading consolidator of emerging silver and precious metals
assets in Mexico. The transaction
provides Northair shareholders with an attractive premium on its
capital stock, while Kootenay will enjoy the benefits of a
substantially increased silver asset base and corporate balance
sheet, setting the stage for the future development of its assets,
additional potential revenue streams, and further consolidation in
the sector."
Andrea Zaradic, President, CEO
& Director of Northair, stated: "La Negra and La Cigarra
represent two of the highest profile new silver discoveries amongst
non-majors in Mexico. The
continued exploration successes at our flagship projects put the
combined company in a strong position, distinguishing us from our
peers. We are confident that our shareholders will benefit from the
value creation opportunities that will be realized through an
expanded and more diversified silver consolidation
company."
Kootenay and Northair will host a conference call and live
audio webcast on Thursday January 14,
2015 at 8:00 am Pacific Time
(11:00 am Eastern Time) to provide a
short overview on the significance of this Transaction.
Conference call and live audio webcast details are located at the
end of this release and on the Kootenay and Northair websites
at www.kootenaysilver.com and
www.northairsilver.com.
A copy of the investor presentation is currently available
at: Kootenay-Presentation and
Northair-Presentation
Transaction Highlights
- Consolidation of High Profile Silver Resources in
Mexico: A unique portfolio of
high-quality resource-development staged assets in Mexico headlined by Kootenay's Promontorio and
La Negra projects and Northair's La Cigarra project. Promontorio
has a NI 43-101 pit-constrained resource consisting of 92.0M oz
AgEq Measured and Indicated (44.5M tonnes at a grade of 64.3
g/t AgEq) plus an additional 24.3M oz AgEq categorized as Inferred
(14.6M tonnes at a grade of 52.0 g/t AgEq) (see Table 1). La
Cigarra has a pit-constrained NI 43-101 resource consisting of
51.5M oz Ag Measured and Indicated (18.5M tonnes at 86.3 g/t
Ag) plus an additional 11.5M oz Ag (4.5M tonnes at 80.0 g/t Ag)
categorized as Inferred resources (see Table 2).*
- Continued Exploration Potential and Resource Upside:
Promontorio/La Negra and La Cigarra have all demonstrated continued
exploration success since release of their NI 43-101 resource
statements. The combined company will continue its focus on
resource growth into 2016, with an exploration drilling program
planned at La Negra in H1/2016, leading to a maiden NI 43-101
resource estimate, plus plans to drill test high profile targets
identified during the 2015 air mag survey at La Cigarra (including
the RAM Zone) and to further evaluate regional prospectivity within
the 100% owned Promontorio Mineral Belt.
- Prospect Generator Portfolio: In addition to resource
development-stage assets, the combined company will maintain an
active portfolio of generative properties within Mexico and Canada. Kootenay currently has four joint
ventures partners in place and will continue to pursue further
monetization opportunities which will provide the combined company
with additional, non-dilutive asset exposure and
diversification.
- Platform for Further Consolidation: Northair and
Kootenay both believe that investors in today's market are
increasingly attracted by larger, more liquid exploration and
development companies. The combined company, with rationalized
G&A and a stronger balance sheet, will be positioned for growth
and mandated to pursue further consolidations within the depressed
junior silver sector.
Table 1: Resource Statement for the
Promontorio Deposit, Sonora State,
Mexico: SRK Consulting (U.S.) Inc., Effective Date
March 31, 2013*
Pit-Constrained
|
20
gpt
AgEq
Cut-Off
|
Tonnes
(000's)
|
Avg AgEq
(gpt)
|
Avg Ag
(gpt)
|
Avg Au
(gpt)
|
Avg Pb
(%)
|
Avg Zn
(%)
|
AgEq Oz
(000's)
|
Ag Oz
(000's)
|
Au Oz
000's)
|
Pb lbs
(000's)
|
Zn lbs
(000's)
|
Measured
|
10,289
|
74.79
|
32.69
|
0.40
|
0.46
|
0.55
|
24,741
|
10,814
|
134
|
105,328
|
123,715
|
Indicated
|
34,215
|
61.18
|
26.30
|
0.34
|
0.38
|
0.45
|
67,294
|
28,926
|
373
|
287,579
|
335,904
|
M+I
|
44,504
|
64.32
|
27.77
|
0.35
|
0.40
|
0.47
|
92,035
|
39,740
|
506
|
392,907
|
459,619
|
Inferred
|
14,564
|
51.95
|
24.95
|
0.28
|
0.28
|
0.31
|
24,326
|
11,683
|
132
|
89,430
|
98,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underground
Potential
|
45 gpt AgEq
Cut-Off
|
Tonnes
(000's)
|
Avg AgEq
(gpt)
|
Avg Ag
(gpt)
|
Avg Au
(gpt)
|
Avg Pb
(%)
|
Avg Zn
(%)
|
AgEq Oz
(000's)
|
Ag Oz
(000's)
|
Au Oz
(000's)
|
Pb lbs
(000's)
|
Zn lbs
(000's)
|
Measured
|
3
|
62.27
|
25.12
|
0.32
|
0.37
|
0.63
|
6
|
2
|
0
|
23
|
40
|
Indicated
|
212
|
56.88
|
22.86
|
0.28
|
0.40
|
0.55
|
387
|
156
|
2
|
1,889
|
2,551
|
M+I
|
215
|
56.96
|
22.89
|
0.28
|
0.40
|
0.55
|
393
|
158
|
2
|
1,913
|
2,591
|
Inferred
|
1,265
|
61.17
|
26.57
|
0.37
|
0.36
|
0.38
|
2,488
|
1,081
|
15
|
10,049
|
10,667
|
Notes: * Mineral Resources are not Mineral Reserves and
do not have demonstrated economic viability. There is no
certainty that all or any part of the Mineral Resources estimated
will be converted into Mineral Reserves.
1
|
Open pit resources
stated as contained within a potentially economically minable pit
shell;
|
2
|
Pit optimization is
based on assumed silver, gold, lead, and zinc prices of $31/oz,
$1650/oz, $0.96/lb, and $0.89/lb respectively, mill recoveries of
74%, 70%, 81% and 88% respectively, a 1.5% NSR, Estimated mining
costs of $1.20/t, and estimated processing and G&A cost of
$12.00/t; and an estimated POX cost of $2/tonne ($30/tonne of
pyrite concentrate)
|
3
|
Break-even cut-off
grades used were 20 gpt AgEq for open pit mill material and 45 gpt
AgEq for underground material;
|
4
|
Silver equivalency is
based on unit values calculated from the above metal prices, and
assumes 100% recovery of all metals; and
|
5
|
Mineral resource
tonnage and contained metal have been rounded to reflect the
accuracy of the estimate, and numbers may not add due to
rounding.
|
Table 2: Resource Statement for the La
Cigarra silver project located in Chihuahua State,
Mexico:
GeoVector Management Inc., Effective Date January 14, 2015*
Resource
Category
|
Tonnes
(000's)
|
Ag
(g/t)
|
Au
(g/t)
|
Pb
(%)
|
Zn
(%)
|
Ag
Oz (000's)
|
Au
Oz
(000's)
|
Pb
lbs
(000's)
|
Zn
lbs
(000's)
|
Measured
|
3,620
|
88.9
|
0.074
|
0.14
|
0.19
|
10,340
|
9
|
10,920
|
15,510
|
Indicated
|
14,930
|
85.7
|
0.068
|
0.13
|
0.18
|
41,130
|
33
|
42,950
|
59,260
|
M+I
|
18,540
|
86.3
|
0.069
|
0.13
|
0.18
|
51,470
|
41
|
53,870
|
74,770
|
Inferred
|
4,450
|
80.0
|
0.058
|
0.13
|
0.16
|
11,460
|
8
|
12,680
|
15,610
|
Note:* Mineral resources are reported in relation to a
conceptual pit shell at a 35 g/t silver cut-off grade and a
$22/oz silver price. All figures are
rounded to reflect the relative accuracy of the estimate and
numbers may not add up due to rounding. Mineral
Resources are not Mineral Reserves and do not have demonstrated
economic viability. There is no certainty that all or any part of
the Mineral Resources estimated will be converted into Mineral
Reserves.
The Promontorio and La Cigarra NI 43-101 reports, including the
assumptions therein, are filed on SEDAR at www.sedar.com, and
available at http://www.northairsilver.com and
http://www.kootenaysilver.com.
Management Team and Board of Directors
The senior executive team and the Board of Directors of the
combined company will draw from the extensive experience and
expertise of both companies. Mr. Ken
Berry will remain Chairman and Mr. James McDonald will remain as President &
Chief Executive Officer of the combined company. Upon closing of
the Transaction, Ms. Andrea Zaradic
and Mr. Tony Reda of Northair will
be appointed to the Kootenay board of directors.
Transaction Details
Pursuant to the Binding Letter Agreement, the proposed
Transaction will be effected by way of a court approved Plan of
Arrangement completed under the British Columbia Business
Corporations Act. Upon closing, each Northair common shareholder
will receive 0.35 common shares of Kootenay plus 0.15 of a Kootenay
Warrant. The proposed Transaction will require shareholder approval
from two-thirds of the votes cast by the holders of Northair common
shares at a shareholder meeting to be held to consider the proposed
Transaction.
The parties expect to execute a definitive agreement (the
"Definitive Agreement") on or before February 3, 2016. Upon completion of
the Transaction, the former shareholders of Northair will own
approximately 40% of the Kootenay shares on an outstanding shares
basis.
Northair's outstanding options and warrants will be adjusted in
accordance with their terms such that the number of Kootenay shares
received upon exercise and the exercise price will reflect the
consideration described above.
Northair's Board of Directors have determined that the proposed
Transaction is in the best interest of shareholders, having taken
into account advice from its financial advisor and the
recommendation of the special committee of the Board of Directors,
and have approved the Transaction. Northair's Board of
Directors recommend that their shareholders vote in favour of the
Transaction.
The proposed Transaction is expected to be completed in
April 2016 or such other date as the
parties may agree.
In addition to shareholder approval, the proposed Transaction
will be subject to applicable regulatory and court approvals and
the satisfaction of other customary conditions. The Definitive
Agreement will include customary provisions, including
fiduciary-out provisions, covenants not to solicit other
acquisition proposals and the right to match any superior proposal.
In addition, Northair may be required to pay a termination fee of
$500,000 if the transaction is
termination is termination as a result of Northair accepting a
superior proposal or completing an alternative proposal within
12months of termination of the Transaction.
Upon completion of the Transaction, Northair's shares will be
de-listed from the TSX Venture Exchange and it is expected that
Kootenay will apply to cause Northair to cease being a reporting
issuer under applicable Canadian securities laws.
Upon execution of the Definitive Agreement, the full details of
the proposed Transaction will be included in the management
information circular to be filed with regulatory authorities and
mailed to Northair shareholders in accordance with applicable
securities laws.
Advisors & Counsel
Axium Law Corporation is acting as legal counsel to
Kootenay.
Haywood Securities Inc. is acting as financial advisor to
Northair and its Board of Directors. Morton Law LLP is acting as
legal counsel to Northair. Haywood Securities Inc. has provided a
fairness opinion to Northair's Board of Directors that, as of the
date thereof and subject to the assumptions, limitations and
qualifications set out therein, the transaction is fair, from a
financial point of view, to the shareholders of Northair.
Conference Call and Webcast Information
Kootenay and Northair will host a joint conference call and
webcast on Thursday January 14,
2016 at 8:00 a.m. Pacific
Time for members of the investment community to discuss
the business combination. A copy of the investor presentation that
will be used during the conference call is currently available at:
Kootenay-Presentation and Northair-Presentation.
The conference call may be accessed by dialing 1-416-340-2218 /
1-800-355-4959 in Canada and
the United States. Callers outside
of North America may refer to:
https://www.confsolutions.ca/ILT?oss=1P29R8003554959
The conference call will be archived for later playback until
January 28, 2016 and may be accessed
by dialing 1-905-694-9451 / 1-800-408-3053 and entering the pass
code 7750990. Callers outside of North America may refer to:
https://www.confsolutions.ca/ILT?oss=4P29R8004083053
Audio Webcast:
A live webcast of the conference call can be accessed via the
following link: http://www.gowebcasting.com/7229 or via
http://www.kootenaysilver.com and http://www.northairsilver.com
An archived version of the webcast will be available via the
following link: http://www.gowebcasting.com/7229 and via
http://www.kootenaysilver.com and http://www.northairsilver.com
Qualified
Persons
The Kootenay technical information in this news release has been
prepared in accordance with the Canadian regulatory requirements
set out in NI 43-101 and reviewed on behalf Kootenay by
James McDonald, P.Geo, President,
CEO & Director for Kootenay, a Qualified Person.
The Northair disclosure of a scientific or technical nature
contained in this news release was reviewed by David Ernst, a professional geologist and
vice-president of exploration of Northair, who is a Qualified
Person in accordance with the requirements of NI 43-101.
About Kootenay
Kootenay Silver Inc. is an exploration company actively
engaged in the discovery and development of mineral projects in the
Sierra Madre Region of Mexico and
in British Columbia, Canada. The
Company's top priority is the advancement of precious metals
projects contained within its Promontorio Mineral Belt in
Sonora, Mexico. This includes its
La Negra high-grade silver discovery and its Promontorio Silver
Resource. Kootenay's core objective is to develop near term
discoveries and long-term sustainable growth. Management comprises
proven professionals with extensive international experience in all
aspects of mineral exploration, operations and venture capital
markets. Multiple, ongoing J/V partnerships in Mexico and Canada maximize potential for additional new
discoveries while maintaining minimal share dilution.
About Northair
Northair is focused on advancing its flagship La Cigarra
silver project located in the state of
Chihuahua, Mexico, 26 kilometres from the historic silver
mining city of Parral. The property boasts nearby power, good road
access, gentle topography, established infrastructure and currently
hosts a NI 43-101 Resource estimate of 51.47 million ounces of
silver in the Measured & Indicated categories grading 86.3 g/t
silver and 11.46 million ounces of silver in the Inferred category
grading 80 g/t silver. The mineralized system at La Cigarra has
been traced over 6.5 kilometres and is defined at surface as a
silver soil anomaly and by numerous historic mine workings. The La
Cigarra silver deposit is open along strike and at depth and is
approximately 25km north, and along strike of Grupo Mexico's
Santa Barbara mine and
Minera Frisco's San Francisco del Oro mine.
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.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
The information in this news release has been prepared as at
January 12, 2016. Certain statements
in this news release, referred to herein as "forward-looking
statements", constitute "forward-looking statements" under the
provisions of Canadian provincial securities laws. These statements
can be identified by the use of words such as "expected", "may",
"will" or similar terms.
Forward-looking statements are necessarily based upon a number
of factors and assumptions that, while considered reasonable by
Kootenay and Northair as of the date of such statements, are
inherently subject to significant business, economic and
competitive uncertainties and contingencies. Forward-looking
statements in this press release relate to, among other things:
anticipated benefits of the Transaction to Kootenay and Northair
and their respective shareholders; the pro rata shareholdings of
the current shareholders of Northair in Kootenay; the timing and
receipt of required shareholder, court, stock exchange and
regulatory approvals for the Transaction; the ability of Kootenay
and Northair to satisfy the other conditions to, and to complete,
the Transaction; the anticipated timing of the mailing of the
information circular regarding the Transaction; the closing of the
Transaction; analyst coverage, liquidity and access to capital
markets of Kootenay; length of the current market cycle and the
requirements for an issuer to survive the current market cycle and
future growth potential for Kootenay. There can be no assurance
that such statements will prove to be accurate, and actual results
and future events could differ materially from those anticipated in
such statements. Forward-looking statements reflect the
beliefs, opinions and projections on the date the statements are
made and are based upon a number of assumptions and estimates that,
while considered reasonable by the respective parties, are
inherently subject to significant business, economic, competitive,
political and social uncertainties and contingencies. Many
factors, both known and unknown, could cause actual results,
performance or achievements to be materially different from the
results, performance or achievements that are or may be expressed
or implied by such forward-looking statements and the parties have
made assumptions and estimates based on or related to many of these
factors. Such factors include, without limitation:
satisfaction or waiver of all applicable conditions to closing of
the Transaction including, without limitation, receipt of all
necessary securityholder, court, stock exchange and regulatory
approvals or consents and lack of material changes with respect to
the parties and their respective businesses; the synergies expected
from the Transaction not being realized; business integration
risks; fluctuations in general macro-economic conditions;
fluctuations in securities markets and the market price of
Kootenay's shares; fluctuations in the spot and forward price of
silver, base metals or certain other commodities; fluctuations in
the currency markets (such as the Canadian dollar versus the U.S.
dollar); changes in national and local government, legislation,
taxation, controls, regulations and political or economic
developments; risks and hazards associated with the business of
mineral exploration, development and mining (including
environmental hazards, industrial accidents, unusual or unexpected
formations, pressures, cave-ins and flooding); inability to obtain
adequate insurance to cover risks and hazards; and the presence of
laws and regulations that may impose restrictions on mining;
employee relations; relationships with and claims by local
communities and indigenous populations; availability and increasing
costs associated with mining inputs and labour; the speculative
nature of mineral exploration and development, including the risks
of obtaining necessary licenses, permits and approvals from
government authorities; title to properties; the failure to meet
the closing conditions thereunder and the failure by counterparties
to such agreements to comply with their obligations
thereunder. In addition, Northair may in certain
circumstances be required to pay a non-completion or other fee to
Kootenay, the result of which could have a material adverse effect
on Northair's financial position and results of operations and its
ability to fund growth prospects and current operations.
Readers should not place undue reliance on the forward-looking
statements and information contained in this news release
concerning these times. Many factors, known and unknown, could
cause actual results to be materially different from those
expressed or implied by such forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date made. Except as
otherwise required by law, Kootenay and Northair expressly
disclaims any obligation or undertaking to release publicly any
updates or revisions to any such statements to reflect any change
in Kootenay or Northair's expectations or any change in events,
conditions or circumstances on which any such statement is
based.
Cautionary Note to United States Investors Concerning
Estimates of Measured, Indicated and Inferred Mineral
Resources: This news release uses the terms "Measured and
Indicated Resources" and "Inferred Resources", which have a great
amount of uncertainty as to their existence, and great uncertainty
as to their economic feasibility. It cannot be assumed that all or
any part of a Measured and Indicated and/or Inferred Mineral
Resource will ever be upgraded to a higher category. Under Canadian
rules, estimates of Inferred Resources may not form the basis of
feasibility or other economic studies. Kootenay and Northair
advises U.S. investors that while this term is recognized and
required by Canadian regulations, the U.S. Securities and Exchange
Commission does not recognize it. U.S. investors are cautioned not
to assume that part or all of a Measured, Indicated and Inferred
resource exists, or is economically or legally minable.
SOURCE Kootenay Silver Inc.