Solitario Exploration & Royalty Corp. (NYSE MKT:XPL;
TSX:SLR) ("Solitario") and Zazu Metals Corporation
(TSXV:ZAZ) ("Zazu") are pleased to announce that they have
entered into a definitive arrangement agreement (the
"Arrangement Agreement") pursuant to which Solitario has
agreed to acquire all of the issued and outstanding common shares
of Zazu (the "Zazu Shares") by way of a statutory plan of
arrangement (the "Arrangement") under the Canada Business
Corporations Act.
Highlights of the Combined Company
- Creation of a leading zinc focused
explorer and developer during a time of encouraging supply and
demand fundamentals
- Significant joint venture interests in
two large, high-grade zinc development projects with world-class
partners:
- Solitario’s Bongará project in Northern
Peru is a high-grade development asset held jointly with Compañía
Minera Milpo ("Milpo"), one of the largest zinc producers in
Peru
- Zazu’s Lik project represents a
large-tonnage, high-grade and potentially open-pittable development
project in Alaska in partnership with Teck Resources Limited
("Teck")
- Additional portfolio of high quality
exploration properties and royalties in the Americas
- Well-financed, with approximately
US$16.5 million in cash and cash equivalents
- Experienced management team with a
track-record of creating value for shareholders by moving assets
through feasibility and permitting
- Enhanced capital markets profile and
trading liquidity in combination with strong shareholder
support
Chris Herald, Chief Executive Officer of Solitario, stated: “We
are very pleased to announce this exciting opportunity that will
create value for both Solitario and Zazu shareholders. Since the
sale of the Mt. Hamilton project in 2015, Solitario has remained
extremely disciplined in its evaluation of growth initiatives while
preserving a robust balance sheet and tight capital structure. We
are confident that we have both the technical and financial
capabilities to significantly increase the value of Zazu’s Lik
project by moving the asset through feasibility and permitting. We
look forward to working with Zazu’s world-class joint venture
partner Teck to pursue a development path beneficial to all
parties.”
Gil Atzmon, Founder, Chairman and Chief Executive Officer of
Zazu, stated: “This combination represents a unique opportunity to
create a leading zinc development company with two high quality
assets in the Americas. Zazu shareholders will benefit from
increased diversification and access to capital, while importantly
maintaining a focus on high-grade resources. We see significant
potential in Solitario’s asset base and believe the combined
company will be well positioned to take advantage of increased
interest in zinc.”
Particulars of the Transaction
Under the terms of the Arrangement Agreement, holders of Zazu
Shares ("Zazu Shareholders") will receive, on closing,
0.3572 of a common share of Solitario (the "Exchange Ratio")
in exchange for each Zazu Share held. Based on the trailing 20-day
volume weighted average price ("VWAP20") of Solitario on the
NYSE MKT as of the close on April 26, 2017, the Exchange Ratio
implies an offer price of C$0.41 per Zazu Share1, representing a
premium of 41% over the VWAP20 of Zazu on the TSX Venture Exchange
as of the same date. Following the completion of the Arrangement,
former Zazu Shareholders are expected to hold approximately 34% of
the issued and outstanding shares of the combined company.
The Arrangement will be carried out by way of a court-approved
plan of arrangement and will require the approval of at least 66
2/3 percent of the votes cast by Zazu Shareholders at a special
meeting expected to take place in June 2017 (the "Zazu
Meeting"). Zazu directors, officers and certain significant
shareholders representing a total of approximately 47% of the
issued and outstanding Zazu Shares have entered into voting and
support agreements with Solitario agreeing to vote in favour of the
Arrangement. The board of directors of Zazu has unanimously
approved the Arrangement and will recommend that Zazu Shareholders
vote in favour of the Arrangement. Full details of the Arrangement
will be included in a management information circular of Zazu
describing the matters to be considered at the Zazu Meeting, which
is expected to be mailed to the Zazu Shareholders in May 2017 and
made available on SEDAR under Zazu’s issuer profile at
www.sedar.com.
The Arrangement will also require the approval of a majority of
the votes cast by holders ("Solitario Shareholders") of
issued and outstanding common shares of Solitario ("Solitario
Shares") at a meeting of Solitario Shareholders expected to
take place in June 2017 (the "Solitario Meeting"). Solitario
directors, officers and certain significant shareholders
representing approximately 7% of the issued and outstanding
Solitario Shares have entered into voting and support agreements
with Solitario agreeing to vote in favour of the Arrangement. The
board of directors of Solitario has unanimously approved the
Arrangement and will recommend that Solitario Shareholders vote in
favour of the Arrangement. Full details of the Arrangement will be
included in a definitive proxy statement of Solitario describing
the matters to be considered at the Solitario Meeting, which is
expected to be mailed to the Solitario Shareholders in May 2017.
Solitario’s proxy statement, when it becomes available, and any
other documents filed by Solitario with the SEC, may be obtained
free of charge at the SEC’s website at www.sec.gov. The proxy
statement will also be made available on SEDAR under Solitario’s
issuer profile at www.sedar.com.
The Arrangement Agreement includes customary provisions,
including with respect to non-solicitation, a right granted to
Solitario to match superior proposals and fiduciary-out provisions,
as well as representations, covenants and conditions which are
customary for transactions of this nature. In addition, Zazu and
Solitario have each agreed to pay a termination fee in the amount
of US$0.75 million to the other party upon the occurrence of
certain termination events.
The Arrangement is subject to applicable regulatory approvals
and the satisfaction of certain other closing conditions.
Upon completion of the Arrangement, Zazu will be entitled to
nominate two directors to be appointed to the board of directors of
Solitario.
Convertible Debenture Financing
Concurrent with the signing of the Arrangement Agreement,
Solitario will provide Zazu interim debt financing through a
secured convertible debenture issued by Zazu in the principal
amount of US$1.5 million (the "Debenture"). The Debenture is
secured by way of a general security and pledge agreement and bears
interest at a rate of 5% per annum. If the Arrangement Agreement is
terminated prior to the effective date of the Arrangement, all
principal amounts outstanding and any interest payable thereon will
become payable two years following the issuance of the Debenture.
In certain circumstances, the Debenture is convertible at the
option of Solitario into Zazu Shares at a price of US$0.22 per Zazu
Share. Completion of the convertible debenture financing is not
contingent on completion of the Arrangement.
Advisors and Legal Counsel
Maxit Capital LP is acting as financial advisor to Solitario.
Additionally, Mackie Research Capital Corp. ("Mackie") has
provided an oral opinion to the board of directors of Solitario
that, based upon and subject to certain assumptions, limitations
and qualifications in the opinion, the consideration being offered
by Solitario in respect of the Arrangement is fair, from a
financial point of view, to Solitario and the Solitario
Shareholders. Solitario expects to receive a written opinion from
Mackie prior to the mailing of the proxy statement to Solitario
Shareholders. Solitario’s Canadian legal counsel is Fogler,
Rubinoff LLP, and its US legal counsel is Polsinelli PC.
Haywood Securities is acting as financial advisor to Zazu.
Additionally, Evans & Evans Inc. ("Evans & Evans")
has provided an oral opinion to the board of directors of Zazu
that, based upon and subject to certain assumptions, limitations
and qualifications in the opinion, the consideration being offered
by Solitario in respect of the Arrangement is fair, from a
financial point of view, to Zazu and the Zazu Shareholders. Zazu
expects to receive a written opinion from Evans & Evans prior
to the mailing of the management information circular to Zazu
Shareholders. McCullough O’Connor Irwin LLP is acting as legal
counsel to Zazu.
About Solitario
Solitario is an exploration and royalty company traded on the
NYSE MKT ("XPL") and on the Toronto Stock Exchange ("SLR"). The
company has three exploration properties in Peru, and one royalty
in each of Peru, Brazil, the United States and Mexico.
Solitario’s core asset is a 39% interest in the advanced,
high-grade, Bongará zinc project located in northern Peru. The
project has a significant mineral resource and SRK Consulting has
been retained to complete a preliminary economic assessment on the
project by mid-2017. Solitario is fully carried to production by
its joint venture partner Milpo, one of the largest zinc producers
in Peru. Solitario also holds an 85% interest in the Chambara
exploration project in Peru (Milpo holds the remaining 15%) and a
9.5% equity interest in Vendetta Mining.
Solitario is well financed and has approximately US$16.5 million
in cash and cash equivalents. Additional information about
Solitario is available online at www.solitarioxr.com
About Zazu
Zazu is a Canadian-based exploration company traded on the TSX
Venture Exchange ("ZAZ"). Zazu has a 50% operating interest in the
Lik zinc-lead-silver deposit in Northwest Alaska, which is large
tonnage, high grade and potentially open pittable. Zazu completed a
positive PEA in 2014 and has the exclusive right to obtain 80% of
the property by meeting certain spending commitments by 2018.
Additional information about Zazu including a company presentation
is available at www.zazumetals.com
Cautionary Language
Completion of the Arrangement is subject to a number of
conditions, including NYSE MKT, Toronto Stock Exchange and TSX
Venture Exchange acceptance, and approval of the Solitario
Shareholders and the Zazu Shareholders. The Arrangement cannot
close until the required shareholder approvals are obtained. There
can be no assurance that the Arrangement will be completed as
proposed or at all.
Investors are cautioned that, except as disclosed in the proxy
statement or management information circular to be prepared by each
of Solitario and Zazu, respectively, in connection with the
Arrangement, any information released or received with respect to
the Arrangement may not be accurate or complete and should not be
relied upon.
None of the NYSE MKT, the Toronto Stock Exchange nor the TSX
Venture Exchange have passed upon the merits of the proposed
Arrangement and have neither approved nor disapproved the contents
of this press release. None of the NYSE MKT, the Toronto Stock
Exchange, the TSX Venture Exchange nor their regulation service
providers accepts responsibility for the adequacy or accuracy of
this release.
Forward-looking Statements
Statements contained in this news release, which are not
historical facts, are forward-looking statements that involve risk,
uncertainties and other factors that could cause actual results to
differ materially from those expressed or implied by such
forward-looking statements. 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. All forward-looking statements included in this news
release are based on information available to Solitario and Zazu as
of the date hereof. Forward-looking statements are subject to known
and unknown risks, uncertainties and other factors that could cause
actual results of Solitario and Zazu, as applicable, to differ
materially from the conclusion, forecast or projection stated in
such forward-looking statements. These risks, uncertainties and
other factors include, but are not limited to factors referenced in
each of Solitario's and Zazu's other continuous disclosure filings,
which are available at www.sedar.com. Readers should not place
undue reliance on these forward-looking statements. Neither
Solitario nor Zazu assume any obligation to update any
forward-looking statements, except as required by applicable
securities laws.
Additional Information About Solitario and Where to Find
It
This communication may be deemed to be a solicitation of proxies
of Solitario Shareholders in connection with the proposed
Arrangement. In connection with the issuance of Solitario Shares to
effect the Arrangement, Solitario intends to file a proxy statement
and relevant documents with the SEC with respect to the Solitario
Meeting to be held in connection with the proposed Arrangement. The
definitive proxy statement will be mailed to Solitario Shareholders
in advance of the Solitario Meeting. Investors and security holders
of Solitario are urged to read the proxy statement and any other
relevant documents filed with the SEC when they become available
because they will contain important information about Solitario and
the proposed Arrangement. Solitario’s proxy statement, when it
becomes available, and any other documents filed by Solitario with
the SEC, may be obtained free of charge at the SEC’s website at
www.sec.gov. In addition, investors and security holders may obtain
free copies of the documents filed with the SEC by Solitario by
sending a written request to Solitario Exploration & Royalty
Corp. Attn: Corporate Secretary, 4251 Kipling St. Suite 390, Wheat
Ridge, CO 80033, (303) 534-1030. Investors and security holders are
urged to read the proxy statement and the other relevant materials
when they become available before making any voting or investment
decision with respect to the proposed Arrangement.
Participants in the Solitario Solicitation
Solitario and its directors and executive officers may, under
SEC rules, be deemed to be participants in the solicitation of
proxies from Solitario Shareholders in connection with the proposed
Arrangement. Information about the directors and executive
officers, including their interests in the transaction, will be
included in Solitario’s proxy statement relating to the proposed
Arrangement when it becomes available.
1 Implied offer price per Zazu Share assumes a CAD:USD exchange
rate of 1.3615.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005862/en/
Solitario Exploration & Royalty Corp.Debbie Mino-Austin,
800-229-6827Director, Investor RelationsorChristopher E. Herald,
303-534-1030President & CEOorZazu Metals CorporationMatthew
Ford, 210-858-7512PresidentorGil Atzmon, 604-878-9298Founder,
Chairman & CEO
Solitario Resources (TSX:SLR)
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