Combination of Kootenay and Northair to
Create a Leading Mexican Silver Consolidator
VANCOUVER, Feb. 8, 2016 /CNW/ - Kootenay Silver Inc.
(TSX-V: KTN) ("Kootenay") and Northair Silver Corp. (TSX-V: INM)
("Northair") are pleased to announce that the companies have
entered into a definitive arrangement agreement (the
"Agreement") pursuant to which Kootenay has agreed to
acquire all of the issued and outstanding common shares of Northair
(the "Transaction"). The Agreement replaces the
binding letter agreement previously announced on January 13, 2016. Pursuant to the Agreement,
Northair shareholders will receive, for each common share of
Northair held, 0.35 common shares of Kootenay, plus 0.15 of a
tradable warrant to purchase Kootenay common shares at an exercise
price of $0.55 for a period of five
years from closing. 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.
The Transaction will be implemented by way of plan of
arrangement (the "Arrangement") under the Business
Corporations Act (British
Columbia). The Arrangement will require approval of at least
two-thirds of the votes cast by Northair shareholders and
option-holders voting together as a single class at a special
meeting of Northair. Lock-up agreements in support of the
Transaction have been signed by holders representing approximately
12.1% of the Northair securities entitled to vote to approve the
Transaction.
Information regarding the Arrangement will be contained in an
information circular to be prepared, filed and mailed in due course
to Northair shareholders and option-holders in connection with the
special meeting of Northair shareholders and option-holders to be
held to consider the Arrangement, expected to occur on April 14, 2016. All shareholders and
option-holders are urged to read the information circular once it
becomes available as it will contain additional important
information concerning the Arrangement.
Kootenay President and CEO James
McDonald commented: "We are very pleased and excited to
move forward with this milestone transaction with Northair. This is
a well-planned consolidation that has the potential to provide both
companies and their shareholders with far reaching benefits well
into the future. Combining the Promontorio, La Negra and La Cigarra
projects will immediately position Kootenay as one of Mexico's preeminent, asset based, silver
development companies. Moreover, the support of a newly invigorated
treasury and growth plan will allow us to prioritize the expedited
development of both the La Negra and La Cigarra projects, as we
continue to advance our generative project portfolio and pursue
further strategic opportunities in the sector."
Andrea Zaradic, President, CEO
& Director of Northair, stated: "We could not be more
pleased to complete our definitive agreement with Kootenay. Through
the consolidation, we will clearly be dealing from a position of
strength. By combining our established assets, that includes two of
the highest profile recent silver discoveries in Mexico, we will stand out from our peer group
as a recognized leader in the Mexican silver sector. As the
consolidation moves forward, we believe this transaction will
substantially benefit both Northair and its security-holders.
First, it will enable our shareholders to obtain an attractive
premium on their shares. Secondly, it will allow them to continue
to participate in the La Cigarra silver project within a larger,
and more diversified company. Equally important to future
development, we will be backed by an exploration and mining team
with a proven track record of building high valued mining
companies."
Benefits of the Transaction
- The combination of Kootenay and Northair will create a
leading Mexican silver exploration and development company and
consolidator.
- 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 have the potential to 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.
Summary of Proposed Transaction
Under the terms of the Agreement, on closing each Northair
common shareholder will receive 0.35 common shares of Kootenay,
plus 0.15 of a Kootenay Warrant to purchase Kootenay common shares
at an exercise price of $0.55 for a
period of five years from closing. 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 will be adjusted in accordance
with the Arrangement, and Northair's warrants will be adjusted in
accordance with their terms, such that the number of Kootenay
shares and warrants received upon exercise and the exercise price
will reflect the consideration described above.
The Arrangement will require approval from at least two-thirds
of the votes cast by the shareholders and option-holders of
Northair voting together as a single class on such resolution at a
special meeting expected to take place in Vancouver, B.C. on April 14, 2016.
The Arrangement is subject to applicable security-holder, court
and stock exchange approvals and the satisfaction of certain other
closing conditions customary in transactions of this nature.
The Arrangement includes 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 terminated as a result of Northair accepting a
superior proposal or completing an alternative proposal within 12
months of termination of the Transaction.
Northair's Board of Directors have determined that the
Arrangement is in the best interest of shareholders and
option-holders, 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 Arrangement.
Northair's Board of Directors recommend that their
shareholders and option-holders vote in favour of the
Arrangement.
Full details of the Arrangement will be included in the
management information circular to be filed with regulatory
authorities and mailed to Northair shareholders and option-holders
in accordance with applicable securities laws. Northair
expects to mail the Information Circular in mid-March, 2016.
The proposed Transaction is expected to be completed in
April 2016 or such other date as the
parties may agree.
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.
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 Redaof Northair will be appointed to the Kootenay
board of directors.
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 and optionholders of
Northair.
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.
This news release does not constitute an offer to sell or a
solicitation of an offer of securities in the United States.
The securities issuable in the transaction have not been and will
not be registered under the United States Securities Act of
1933, as amended (the "U.S. Securities Act") or any state
securities laws and may not be offered within the United States or to U.S. Persons unless
exemptions from such registration requirements are
available.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
The information in this news release has been prepared as at
February 7 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 securityholders; the pro rata shareholdings of
the current shareholders of Northair in Kootenay; the timing and
receipt of required securityholder, 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.