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VANCOUVER, BC, Nov. 30, 2020 /CNW/ - Serengeti Resources Inc.
(TSX-V: SIR) ("Serengeti") and Sun Metals Corp. (TSX-V:
SUNM) ("Sun Metals") are pleased to announce that they have
entered into a definitive arrangement agreement dated November 29, 2020 (the "Agreement")
pursuant to which Serengeti will acquire all of the issued and
outstanding shares of Sun Metals (the "Transaction") on the
basis of 0.43 common shares of Serengeti (on a pre-Consolidation
(as defined below) basis) for each share of Sun Metals held, by way
of a plan of arrangement under the Business Corporations Act
(British Columbia) (the
"Arrangement"). The Transaction will consolidate the
contiguous copper-gold exploration and development assets of
Kwanika and Stardust, both of which will benefit from operational
synergies as the projects advance with a combined development
strategy, along with a robust portfolio of British Columbia copper-gold assets, well
positioned to take advantage of a strengthening copper market. Upon
completion of the Transaction, it is expected that the shareholders
of Sun Metals will hold approximately 40% of Serengeti's issued and
outstanding shares (prior to the concurrent financing), and
Mark O'Dea will assume the role of
Executive Chairman of Serengeti.
Transaction Highlights
- Consolidation of the contiguous Kwanika (67% Serengeti owned)
and Stardust (100% Sun Metals owned) copper-gold resource projects
in north-central British Columbia,
creating synergistic co-development opportunities.
- Additional regional consolidation of the advanced exploration
Lorraine (100% Sun Metals owned) and neighbouring Top Cat
(Serengeti option to earn 100%) copper-gold projects.
- Further grassroots exploration opportunities, particularly the
3.5 km district-scale copper-gold target on Serengeti's 100% owned
20,750 ha East Niv property.
- Strong leadership team, with the combined company to be led by
Mark O'Dea as Executive Chairman and
David Moore as Interim CEO, upon
closing of the Transaction.
- Increased corporate and asset scale in a strengthening copper
price environment to broaden investor appeal.
- Well-capitalized with concurrent $8.0
million bought deal of subscription receipts.
David W. Moore, President, CEO
and Director of Serengeti, commented: "Against the backdrop of a
resurgent copper market, this Transaction consolidates the
ownership of a robust copper-gold portfolio, with near-term
development synergy at Kwanika-Stardust and several high priority
exploration targets."
Mark O'Dea, current Director of
Sun Metals and proposed Executive Chairman of the combined company,
concluded: "This unique corporate combination creates an exciting,
diversified copper-gold developer with a large pipeline of
projects, in one of Canada's most
prolific porphyry mining camps. We are bringing together
exploration, development and operational synergies at multiple
projects along with ongoing resource expansion opportunities and
new discovery potential. I am delighted to be part of this
exciting new opportunity both as an executive and meaningful
shareholder. I believe the proposed board and management team
has the expertise and experience to deliver value into a rising
copper market that is hungry for new investment opportunities."
Transaction Details
Pursuant to the terms of the Agreement, Serengeti will acquire
all of the issued and outstanding common shares of Sun Metals on
the basis of 0.43 common shares of Serengeti (on a
pre-Consolidation basis) for each share of Sun Metals held (the
"Exchange Ratio"). Warrants and options of Sun Metals will
be adjusted or exchanged to become warrants and options,
respectively, of Serengeti based on the Exchange Ratio. It is
anticipated that these securities will be adjusted or exchanged on
a post-Consolidation basis. The Transaction was negotiated at arm's
length.
Sun Metals shall be entitled to nominate three directors,
including Mark O'Dea as Executive
Chairman, to join a newly constituted six-member board of directors
of Serengeti, which shall include three nominees of Serengeti.
David Moore will remain as Interim
CEO of Serengeti, until such time as a full time CEO is
appointed.
Immediately prior to the closing of the Transaction, it is
anticipated that Serengeti will consolidate its common shares on a
two for one basis (the "Consolidation"), subject to the
receipt of all necessary approvals.
The Arrangement will be carried out by way of a court-approved
plan of arrangement under the Business Corporations Act
(British Columbia) and is subject
to a number of conditions being satisfied or waived by one or both
of Serengeti and Sun Metals at or prior to closing of the
Arrangement, including approval of Sun Metals securityholders,
together with any requisite minority approvals, approval of
Serengeti shareholders, completion of the Consolidation, amendment
of the Serengeti stock option plan, and receipt of all necessary
regulatory and court approvals and the satisfaction of certain
other closing conditions customary for a transaction of this
nature, including completion of the Offering (as hereinafter
defined). The Transaction is also subject to a simple
majority of the votes cast by Serengeti shareholders.
It is expected that the special meeting of Sun Metals
securityholders and the special meeting of Serengeti shareholders
to approve the proposed Arrangement will be held in mid-February 2021 and, if approved at those
meetings and all other conditions have been met, it is expected
that the Arrangement would close shortly thereafter.
The Agreement includes customary provisions, including
non-solicitation, right-to-match and fiduciary out provisions, as
well as certain representations, covenants and conditions that are
customary for a transaction of this nature. A termination fee of
$750,000 may be payable by either
party in the case of certain terminating events.
Further information regarding the Transaction will be contained
in management information circulars to be prepared by Sun Metals
and Serengeti and mailed to securityholders of Sun Metals and
shareholders of Serengeti, in connection with special meetings of
securityholders and shareholders to be held by each company,
respectively, to consider the Arrangement and related matters. All
securityholders of Sun Metals and shareholders of Serengeti are
urged to read the information circular once available, as it will
contain important additional information concerning the
Transaction.
Sun Metals 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.
Sun Metals has determined that certain directors or executive
officers of Sun Metals are receiving a "collateral benefit" in
connection with the Arrangement as each beneficially owns or
exercises control or direction over more than 1% of Sun Metals
common shares (calculated in accordance with MI 61-101).
Consequently, the Sun Metals common shares beneficially owned,
directly or indirectly, these certain directors or executive
officers 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.
Concurrent Financing
Concurrent with announcement of the Transaction, Sun Metals has
entered into an agreement with a syndicate of underwriters co-led
by PI Financial Corp. and Haywood Securities Inc. (collectively,
the "Underwriters") in connection with a bought deal private
placement financing (the "Offering") of an aggregate of
64,000,000 subscription receipts (the "Subscription
Receipts") at a price of $0.125
per Subscription Receipt (the "Issue Price") for gross
proceeds of $8,000,000.
In addition, Sun Metals has granted the Underwriters an option
to purchase up to an additional 9,600,000 Subscription Receipts at
the Issue Price, for additional gross proceeds of up to
$1,200,000, exercisable in whole or
in part at any time up to 48 hours prior to the closing date of the
Offering.
The Subscription Receipts will be issued pursuant to a
subscription receipt agreement (the "Subscription Receipt
Agreement") to be entered into by Sun Metals, the Underwriters,
and a licensed Canadian trust company as subscription receipt agent
to be agreed upon. Pursuant to the Subscription Receipt Agreement,
the gross proceeds of the Offering (less 50% of the Underwriters'
cash commission and all of the Underwriters' expenses) (the
"Escrowed Funds") will be held in escrow pending
satisfaction of certain conditions, including, amongst others, (a)
the satisfaction or waiver of each of the conditions precedent to
the Transaction; and (b) the receipt of all required shareholder
and regulatory approvals in connection with the Transaction and the
Offering, including the condition approval of the TSX Venture
Exchange (the "Escrow Release Conditions"). If the Escrow
Release Conditions have not been satisfied on or prior to
March 31, 2020, the holders of
Subscription Receipts will be returned a cash amount equal to the
Issue Price of the Subscription Receipts and any interest that has
been earned on the Escrowed Funds.
Upon the satisfaction of the Escrow Release Conditions, each
Subscription Receipt will automatically convert into one unit of
Sun Metals (each a "Unit") which shall be exchanged or
adjusted into securities of Serengeti at the Exchange Ratio upon
completion of the Transaction, on a post-Consolidation basis. Each
Unit will consist of one common share of Sun Metals (each a
"Common Share") and one-half of one common share purchase
warrant (each a "Warrant"). Each Warrant will be exercisable
to acquire one common share of Sun Metals (each a "Warrant
Share") for a period of 24 months from the closing of the
Offering, at an exercise price of $0.18, as adjusted by the Exchange Ratio, subject
to acceleration in the event that the volume weighted average
trading price of the common shares of Sun Metals on the TSX Venture
Exchange is equal to or greater than $0.30 (on an exchanged or adjusted basis pursuant
to the Arrangement) for 20 consecutive trading days.
Proceeds from the issue and sale of the Subscription Receipts
will be used by Sun Metals and Serengeti to advance their
collective portfolio of copper-gold exploration and development
assets in British Columbia, and
for general working capital purposes.
The Subscription Receipts to be issued under the Offering will
be offered by way of a private placement in all the provinces of
Canada and in the United States on a private placement basis
pursuant to exemptions from the registration requirements of the
United States Securities Act of 1933, as amended. The Subscription
Receipts and the Common Shares, Warrants and Warrant Shares
underlying the Subscription Receipts, will be subject to a
statutory four-month hold period in accordance with Canadian
securities legislation, or until such securities are exchange or
adjusted pursuant to the Arrangement.
Board Recommendations and Voting Support
The Arrangement has been unanimously approved by the board of
directors of both Serengeti and Sun Metals. Both boards of
directors recommend that their respective shareholders and
securityholders vote in favour of the Transaction.
All of the directors and officers of Sun Metals, holding in
aggregate 14.03% of the issued and outstanding common shares of Sun
Metals and 15.24% of the outstanding common shares, options and
warrants of Sun Metals, have entered into customary voting support
agreements agreeing to vote in favour of the Transaction. All of
the directors and officers and several large shareholders of
Serengeti, holding in aggregate 27.45% of the issued and
outstanding common shares of Serengeti, have similarly entered into
customary voting support agreements agreeing to vote in favour of
the Transaction.
Haywood Securities Inc. has provided a fairness opinion to the
board of directors of Serengeti that, as of the date hereof, and
based upon and subject to the assumptions, limitations and
qualifications stated therein, the consideration to be paid by the
Serengeti to the shareholders of Sun Metals under the Arrangement
is fair, from a financial point of view, to Serengeti.
PI Financial Corp. has provided a fairness opinion to the board
of directors of Sun Metals that, as of the date hereof, and based
upon and subject to the assumption, limitations and qualifications
stated therein, the consideration to be received by the
shareholders of Sun Metals under the Arrangement is fair, from a
financial point of view, to the shareholders of Sun Metals.
Advisors and Counsel
Haywood Securities Inc. is acting as financial advisor and
Fasken Martineau DuMoulin LLP is acting as legal counsel to
Serengeti.
PI Financial Corp. is acting as financial advisor and
Cassels Brock & Blackwell LLP is
acting as legal counsel to Sun Metals.
Qualified Persons
Technical aspects of this news release have been reviewed,
verified and approved on behalf of Serengeti by Quinn Harper, P.Geo., Chief Geologist of
Serengeti, and on behalf of Sun Metals by Ian Neill, P.Geo., Vice President Exploration of
Sun Metals, both of whom are qualified persons as defined by
National Instrument 43-101 – Standards of Disclosure for Minerals
Projects.
About Serengeti
Serengeti is a mineral exploration company managed by an
experienced team of professionals with a solid track record of
exploration success. The Company is currently advancing its
majority-owned, advanced Kwanika copper-gold project and exploring
its extensive portfolio of properties in north-central British Columbia. Additional information can
be found on the Company's website at
www.serengetiresources.com.
About Sun Metals
Sun Metals is advancing its 100% owned flagship, high-grade
Stardust Project located in north-central British Columbia, Canada. Stardust is a
high-grade polymetallic Carbonate Replacement Deposit with a rich
history. Sun Metals also owns the Lorraine copper-gold
project, and the OK copper-molybdenum project.
On Behalf of the Board of Directors of Serengeti Resources
Inc.
"David W. Moore"
President, CEO &
Director
On Behalf of the Board of Directors of Sun Metals
Corp.
"Steve Robertson"
President, CEO &
Director
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.
Cautionary Statement Regarding Forward Looking
Information
All statements, trend analysis and other information contained
in this press release about anticipated future events or results
constitute forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as
"seek", "anticipate", "believe", "plan", "estimate", "expect" and
"intend" and statements that an event or result "may", "will",
"should", "could" or "might" occur or be achieved and other similar
expressions. All statements, other than statements of historical
fact, included herein, including, without limitation, statements
regarding anticipated benefits of the Transaction, the closing of
the Transaction, the Offering, the Kwanika and Stardust (the
"Projects"), including anticipated operational synergies between
the properties, are forward-looking statements. Although Serengeti
and Sun Metals (the "Companies") believe that the expectations
reflected in such forward-looking statements and/or information are
reasonable, undue reliance should not be placed on forward-looking
statements since the Companies can give no assurance that such
expectations will prove to be correct. These statements involve
known and unknown risks, uncertainties and other factors that may
cause actual results or events to differ materially from those
anticipated in such forward-looking statements, including the
risks, uncertainties and other factors identified in the Companies'
periodic filings with Canadian securities regulators, and
assumptions made with regard to: the Companies' ability to complete
the proposed Transaction; the Companies' ability to secure the
necessary shareholder, securityholder, legal and regulatory
approvals required to complete the Transaction; the ability to
complete the Offering; the estimated costs associated with the
advancement of the Projects; and the Companies' ability to achieve
the synergies expected as a result of the Transaction.
Forward-looking statements are subject to business and economic
risks and uncertainties and other factors that could cause actual
results of operations to differ materially from those contained in
the forward-looking statements. Important factors that could cause
actual results to differ materially from the Companies'
expectations include risks associated with the business of
Serengeti and Sun Metals; risks related to the satisfaction or
waiver of certain conditions to the closing of the Transaction;
non-completion of the Transaction; risks related to reliance on
technical information provided by Serengeti and Sun Metals; risks
related to exploration and potential development of the Projects;
business and economic conditions in the mining industry generally;
fluctuations in commodity prices and currency exchange rates;
uncertainties relating to interpretation of drill results and the
geology, continuity and grade of mineral deposits; the need for
cooperation of government agencies and native groups in the
exploration and development of properties and the issuance of
required permits; the need to obtain additional financing to
develop properties and uncertainty as to the availability and terms
of future financing; the possibility of delay in exploration or
development programs and uncertainty of meeting anticipated program
milestones; uncertainty as to timely availability of permits and
other governmental approvals; and other risk factors as detailed
from time to time and additional risks identified in Serengeti and
Sun Metals's filings with Canadian securities regulators on SEDAR
in Canada (available at
www.sedar.com). Forward-looking statements are based on estimates
and opinions of management at the date the statements are made.
Neither Serengeti nor Sun Metals undertakes any obligation to
update forward-looking statements except as required by applicable
securities laws. Investors should not place undue reliance on
forward-looking statements.
SOURCE Sun Metals
