Fancamp Exploration Ltd. (“
Fancamp”) (TSXV: FNC)
and KWG Resources Inc. (“
KWG”) (CSE: KWG, KWG.A;
FSE: KW61) are pleased to announce that they have entered into a
binding agreement dated July 20, 2022 with respect to a proposed
transaction (the “
Proposed Transaction”) involving
the sale by Fancamp to KWG of all of the right, title and interests
beneficially owned by Fancamp in and to the “Koper Lake-McFaulds”
mineral properties, comprised of four (4) mining claims (the
“
Mining Claims”) located within the “Ring of Fire”
in the Province of Ontario.
The consideration payable by KWG to Fancamp for
the purchase of the Mining Claims and the Fancamp Closing Payment
(as defined below) will consist of: (a) the issuance by KWG to
Fancamp (or otherwise as Fancamp may direct to be held in trust for
Fancamp) of a secured convertible promissory note (the
“Secured Convertible Promissory Note”) in the
principal amount of C$34.5 million (the “Principal
Amount”), having the principal terms set out below; (b)
the issuance by KWG to Fancamp of such number of warrants (the
“Consideration Warrants”) to purchase multiple
voting shares of KWG (“MVS”) equal to one-half
(1/2) of the Principal Amount divided by the ten (10) day
volume-weighted average trading price of the MVS and the
subordinate voting shares of KWG ending on the trading day
immediately prior to the date of the binding agreement (such
volume-weighted average trading price, the “Base Conversion
Price”); and (c) the grant by KWG to Fancamp of a 2.0% net
smelter return royalty (one-quarter of which may be purchased by
KWG at any time for C$5 million and the next one-quarter of which
will be subject to a right of first refusal in favour of KWG) on
any direct or indirect interest in the Mining Claims held by KWG on
and after the closing date (the “Royalty”).
The Proposed Transaction is subject to a thirty
(30) day right of first refusal (the “ROFR”) in
favour of Bold Ventures Inc. (“Bold”) in
connection with a joint venture agreement dated effective as of
October 18, 2018 between Bold and Fancamp (the
“JVA”).
Subject to any regulatory approvals or filings
and subject to the ROFR, the Proposed Transaction is expected to
close during the third quarter of 2022, or on such other date and
time as is mutually agreed to between KWG and Fancamp, acting
reasonably.
Rajesh Sharma, President and Chief Executive
Officer of Fancamp, said, “The Proposed Transaction simplifies some
of the existing joint venture arrangements and will enable KWG to
be the clear leader in the advancement and development of the
Mining Claims and, in due course, to help finance this initiative.
The proposed consideration package allows Fancamp to monetize its
investment into KWG with marketable securities while providing KWG
with an immediate cash injection that will permit KWG to advance
various initiatives relating to the Mining Claims and to assist
with their working capital needs.”
Frank Smeenk, Chief Executive Officer of KWG,
said: “We are very gratified to have Fancamp join us in investing
in the ferrochrome and stainless-steel vision of the Ring of Fire’s
enormous potential. Rajesh Sharma is a most accomplished mining
executive with deep and long experience in the base metal mining
and steel industry. We look forward to working with him and Fancamp
should the Bold Ventures right of first refusal not be exercised.
This transaction will facilitate fast tracking the development of
this historic chromite discovery.”
Details of the Proposed
Transaction
- On the closing date, Fancamp will
make a one-time payment to KWG of C$1,500,000 (the “Fancamp
Closing Payment”), the proceeds of which will be used by
KWG for the advancement and development of the Mining Claims and
for other general working capital purposes.
- The Secured Convertible Promissory
Note will bear interest at a rate of six percent (6%) per annum and
will mature on the date which is the four (4) year anniversary of
the closing date, subject to extension in accordance with the terms
of the Secured Convertible Promissory Note (the “Maturity
Date”). The interest payments under the Secured
Convertible Promissory Note will be payable in cash or, at the
option of KWG, in MVS at an issue price equal to the five (5) day
volume-weighted average trading price ending on the trading day
immediately prior to: (a) the day the accrued interest becomes
payable; (b) the Maturity Date; or (c) such other applicable date
referenced in the binding agreement relating to the Proposed
Transaction.
- The Secured Convertible Promissory
Note shall be convertible, in whole or in part, at the option of
Fancamp, at any time following the closing date, up to and
including the maturity date, into fully-paid MVS at a conversion
price equal to a premium to the Base Conversion Price if converted
anytime on or before the two year anniversary of the closing date,
and at the Base Conversion Price if converted anytime thereafter
(up to, and including, the Maturity Date), in each case, subject to
adjustment in accordance with the terms of the Secured Convertible
Promissory Note.
- The Secured Convertible Promissory
Note will be secured by a security interest over all of the assets
of KWG and its subsidiaries (including all of its tangible and
intangible personal property and all present and after-acquired
personal property of KWG), subject to certain encumbrances (the
“KWG Encumbrances”), and excluding KWG’s existing
beneficial interests in the Mining Claims and certain other assets
(the “KWG Assets Collateral”).
- On or after the closing date, upon
the delivery by KWG to Fancamp of certain documentation as set out
in the Secured Convertible Promissory Note, the KWG Assets
Collateral may be substituted for a security interest comprising
all of the existing and hereinafter acquired interests of KWG in
the Mining Claims (including the interests in the Mining Claims to
be acquired by KWG pursuant to the Proposed Transaction). Upon the
delivery by KWG of security over all of its interests in the Mining
Claims in favour of Fancamp in a form acceptable to Fancamp,
Fancamp will release its security interest over the KWG Assets
Collateral.
- The security for
the indebtedness represented by the Secured Convertible Promissory
Note will be senior and first ranking to all other indebtedness of
KWG and its subsidiaries, but subject to the KWG Encumbrances.
- The Secured
Convertible Promissory Note will be subject to certain other
customary terms and conditions, including negative covenants which
will provide, among other things, that KWG will be precluded from
selling, transferring or taking any other actions vis-à-vis the
Mining Claims or the KWG Assets Collateral unless the cash proceeds
from any such transaction are irrevocably directed to and in favour
of Fancamp in satisfaction of all of the outstanding indebtedness
under the Secured Convertible Promissory Note (with any remaining
cash proceeds thereon, if any, to be for the benefit of KWG).
- The
Consideration Warrants (which will be evidenced by a warrants
certificate (the “Warrants Certificate”) issued by
KWG on the closing date in favour of Fancamp) will entitle Fancamp
to receive one (1) MVS of Fancamp for each warrant exercised.
- The expiry date
of the Consideration Warrants will be the fifth (5th) year
anniversary of the closing date (the “Expiry
Date”).
- The
Consideration Warrants will have an exercise price equal to a
premium to the Base Conversion Price if converted anytime on or
before the two (2)-year anniversary of the closing date, and at the
Base Conversion Price if converted anytime thereafter (up to, and
including, the Expiry Date), in each case, subject to adjustment in
accordance with the terms of the Warrants Certificate;
- On any
announcement of a business combination, take-over bid or other
change of control involving KWG as the target, Fancamp will have
the right to convert the Secured Convertible Promissory Note at the
Base Conversion Price and/or to exercise the Consideration Warrants
at the Base Conversion Price, in each case, in whole or in part, at
the option of Fancamp, prior to completion of the change of control
event.
- A royalty
agreement will be entered into on the closing date in favour of
Fancamp with respect to the Royalty.
- At any time
while there is any amount outstanding under the Secured Convertible
Promissory Note or while Fancamp holds at least five percent (5%)
of the outstanding MVS (calculated on a non-diluted basis), Fancamp
will have the right to nominate one member to the board of
directors of KWG, and KWG shall use all commercially reasonable
efforts to facilitate such director nominee’s election to the board
of directors of KWG.
Additional information with respect to the Koper
Lake-McFaulds mineral properties can be found under Fancamp’s and
KWG’s respective SEDAR profiles at www.sedar.com.
For further information, please contact:
(a) on behalf of
Fancamp:
Rajesh SharmaPresident and Chief Executive Officer+1 (604) 434
8829info@fancamp.ca |
Debra ChapmanChief Financial Officer+1 (604) 434
8829info@fancamp.ca |
(b) on behalf of KWG:
Bruce HodgmanVice-President416-642-3575
info@kwgresources.com
Neither the TSXV nor its Regulation Services
Provider (as that term is defined in policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this news
release.
Neither the Canadian Securities Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the CSE) accepts responsibility for the adequacy or
accuracy of this news release.
About Fancamp Exploration
Ltd.
Fancamp is a growing Canadian mineral
exploration corporation dedicated to its value-added strategy of
advancing its priority mineral properties through exploration and
innovative development. Fancamp owns numerous mineral resource
properties in Quebec, Ontario and New Brunswick, including
chromium, strategic rare-earth metals, gold, zinc, titanium and
more. Fancamp’s chromium properties in the highly sought-after Ring
of Fire in Northern Ontario are strategically located. Its rare
earth element properties in Quebec are a special focus. Fancamp has
investments in an existing iron ore operation in the
Quebec-Labrador Trough, in addition to an investment in a zinc mine
planned to be restarted in Nova Scotia. Fancamp is developing
energy reduction technology with its advanced Titanium extraction
strategy. Fancamp is managed by a focused leadership team with
decades of mining, exploration and complementary technology
experience.
About KWG Resources Inc.
KWG is the Operator of the Black Horse chromite
project (part of the “Koper Lake-McFaulds” properties) after
acquiring a vested 50% interest through Bold Ventures Inc. which is
carried for 10% (20% of KWG’s current equity in the JV) by KWG
funding all exploration expenditures. KWG holds a 15% vested
interest in the McFaulds copper/zinc project and a vested 30%
interest in the Big Daddy chromite project. KWG also owns 100% of
CCC which staked mining claims between Aroland, Ontario (near
Nakina) and the Ring of Fire. CCC has conducted a surveying and
soil testing program to assess the prospects for the engineering
and construction of a railroad along that route between the Ring of
Fire and Aroland, Ontario. CCC engaged Cormorant Utilities and
Rail-Veyor Technologies for Engineering Proposals for the
construction of a transportation and utility corridor within the
route and has received those proposals. KWG has also acquired
intellectual property interests, including a method for the direct
reduction of chromite to metalized iron and chrome using natural
gas. KWG subsidiary Muketi Metallurgical LP has acquired two
chromite-refining patents in Canada and one in each of the USA,
South Africa and Kazakhstan, and is prosecuting an application in
Turkey.
Forward-Looking Statements
This news release contains certain
“forward-looking statements” or “forward-looking information”
(collectively referred to herein as “forward-looking statements”)
within the meaning of applicable securities legislation. Such
forward-looking statements include, without limitation, forecasts,
estimates, expectations and objectives for future operations that
are subject to a number of assumptions, risks and uncertainties,
many of which are beyond the control of Fancamp or KWG.
Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words
“expects”, “plans”, “anticipates”, “believes”, “intends”,
“estimates”, “projects”, “potential” and similar expressions, or
are events or conditions that “will”, “would”, “may”, “could” or
“should” occur or be achieved. Examples of forward-looking
statements include, among others, the closing of the Proposed
Transaction and future expectations with respect to the advancement
and development of the Mining Claims by KWG.
Although Fancamp and KWG believe that the
material factors, expectations and assumptions informing such
forward-looking statements are reasonable based on information
available to them on the date such statements were made, no
assurances can be given as to future results of such
statements.
Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
actual events to differ materially from those anticipated in such
forward-looking statements. These risks include, among others: (a)
the risk that the closing conditions for completion of the Proposed
Transaction are not satisfied or waived; (b) risks relating to
general economic, market and business conditions; and (c)
unforeseen delays in the timelines for any of the transactions or
events described in this press release.
Readers are cautioned that the foregoing list of
factors is not exhaustive. Statements including forward-looking
statements are made as of the date they are given and, except as
required by applicable securities laws, Fancamp and KWG disclaim
any intention or obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements
contained in this news release are expressly qualified by this
cautionary statement.
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