INCLUDES US$16
MILLION IN WORK AND CASH PAYMENTS, CDN$2.0 MILLION EQUITY INVESTMENT and a CARRIED
TO PRODUCTION INTEREST
VANCOUVER, Feb. 16, 2016 /CNW/ - Kootenay Silver
Inc. (TSX.V: KTN) ("Kootenay") and Pan American Silver Corp. (TSX:
PAA, NASDAQ: PAAS) ("Pan American") are pleased to announce
that Pan American, Pan American's wholly owned subsidiary Compania
Minera Dolores S.A. de C.V. ("Dolores"), Kootenay, and Kootenay's wholly
owned subsidiary Minera JM, S.A. de C.V. ("Minera") have
entered into the following agreements:
- an option agreement pursuant to which Minera will grant
Dolores an option (the
"Option") to earn a seventy-five (75%) interest in Minera's
Promontorio Mineral Belt silver properties (including the
Promontorio and La Negra deposits) in consideration for:
- cash payments totalling US$8,050,000 from Dolores to Minera (the "Cash Payment")
to be made by Dolores over a four
(4) year earn-in period following the execution of the Option
Agreement (the "Option Period"); and
- Dolores committing
US$8,000,000 of exploration and
development expenditures on Minera's properties in the Promontorio
Mineral Belt during the Option Period (the "Exploration
Payment"); and
- a subscription agreement pursuant to which Pan American will
invest CDN$2,000,000 in Kootenay by
subscribing for 9,090,909 Kootenay shares at CDN$0.22 per Kootenay share (the
"Investment").
Furthermore, concurrently with the closing of the Investment,
the parties anticipate entering into a property purchase option
agreement pursuant to which Dolores will provide Minera with the option to
acquire up to two of its exploration properties in Mexico in return for a 2.5% net smelter return
royalty on each of the acquired properties (the "Exploration
Grant" and together with the Option and the Investment, the
"PAS Transactions").
Kootenay President and CEO James
McDonald stated: "We are very excited to join forces to
aggressively develop our Promontorio Mineral Belt assets with Pan
American, one of the world's esteemed mining companies and
operators of seven silver mines in Mexico, Argentina, Peru and Bolivia. Bringing approximately US$16 million in cash payments and exploration
investments and a carried interest to commercial production, along
with a CDN$2 million direct
investment in Kootenay, the PAS Transactions underscore Pan
American's confidence in the potential viability of La Negra and
the Promontorio Mineral Belt. The PAS Transactions serve as
catalyst and a strong complement to our new consolidation plan with
Northair Silver, providing the amalgamation with greater financial
strength and flexibility to focus on the advancement of the La
Cigarra silver asset and to pursue further potential consolidation
and growth opportunities in the sector."
Michael Steinmann, Pan American
President and CEO stated: "Kootenay has done an excellent job
exploring their large land package in the Promontorio Mineral belt,
located just 190 km NW of our Alamo Dorado mine. La Negra is
an exciting, high grade, potentially open pitable deposit, and
Promontorio is a large, lower grade silver resource, which will
likely require higher metal prices or better grades to move
forward. Kootenay has already defined mineral resources at
Promontorio and both deposits retain excellent exploration
potential. This is an ideal entry point for Pan
American into a highly prospective mineral belt located in a
preferred jurisdiction, which will allow us to add value by
utilizing our proven expertise in exploration and project
development."
Northair Silver Corp. (TSX.V: INM) ("Northair")
President and CEO Andrea Zaradic
commented: "The option agreement and investment in Kootenay are
major developments that fit seamlessly within Northair's and
Kootenay's new consolidated platform. For shareholders of
Northair and Kootenay, it provides the consolidated company with
the added leverage of a healthier treasury, removes project finance
uncertainty and considerable technical risk. Equally exciting, it
is an agreement that represents a pathway to commercial silver
production, supported by a world leading silver producer.
This will put us in a position of strength and augment our
ability to further consolidate silver assets in the
future."
Kootenay and Northair recently announced a business combination
to create a leading Mexican consolidator (see press releases dated
January 13 and February 8, 2016). The Kootenay- Northair
transaction is proceeding on the same terms as previously
announced, with the additional benefits stemming from the PAS
Transactions.
Terms of the PAS
Transactions
To exercise the Option, Dolores
is obligated to spend at least US$1,000,000 of the Exploration Payment in the
first (1st) year of the Option Period and at least
US$2,000,000 of the Exploration
Payment on other exploration and development targets in the
Promontorio Mineral Belt other than La Negra and
Promontorio.
Additional details of the timing of the Cash Payment during the
Option Period are as follows:
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a)
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US$250,000 payment at
the date of the Option grant;
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b)
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US$150,000 payment at
the first anniversary of the Option grant;
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c)
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US$250,000 payment at
the second anniversary of the Option grant;
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d)
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US$400,000 payment at
the third anniversary of the Option grant; and
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e)
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US$7,000,000
payment (at Pan American's discretion to pay in cash or Pan
American shares or a combination thereof) at the fourth anniversary
of the Option grant.
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Upon exercise of the Option, the parties will enter into a joint
venture pursuant to which Kootenay will retain a twenty-five
percent (25%) carried interest to production. Pan American
will have a preferred capital recovery period after the
commencement of production, under which Kootenay will receive forty
percent (40%) of distributions on its twenty-five percent (25%)
retained interest in the joint venture until Pan American fully
recovers its invested capital, which will include construction and
development capital, plus any additional expenditures incurred
after the date on which Dolores
exercises the Option.
Pursuant to the Exploration Grant, Dolores will present a property package of
four (4) early stage exploration projects to Minera from which
Minera will have four (4) months to evaluate and select up to two
(2) properties ("the "Selected Properties"). Upon
Minera making such selection, Dolores will transfer the Selected Properties
to Minera, with Dolores retaining
a 2.5% NSR on each of the Selected Properties.
Upon completion of the Investment, but prior to the completion
of Kootenay's acquisition of Northair announced on February 8, 2016, Pan American will hold
approximately 10.3% of Kootenay's issued and outstanding shares
(calculated on non-diluted basis). Pan American will have the
right to maintain its pro rata ownership interest in
Kootenay, so long as Pan American continues to hold at least five
percent (5%) of Kootenay's shares on an issued and outstanding
basis. Pan American has agreed not to sell its Kootenay
shares until the earlier of the date which is two (2) years from
the grant of the Option and the date on which the Option is
terminated.
The PAS Transactions are arm's length transactions.
Kootenay intends to proceed with the PAS Transactions without
obtaining shareholder approval. The closing of the PAS
Transactions will not take place for at least two (2) weeks from
the date of this announcement. The PAS Transactions are not
material transactions to Pan American and, as such, no shareholder
approval will be required from Pan American's shareholders.
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 VP
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 Pan American Silver
Pan American Silver's mission is to be the world's
pre-eminent silver producer, with a reputation for excellence in
discovery, engineering, innovation and sustainable development. The
Company has seven operating mines in Mexico, Peru,
Argentina and Bolivia. Pan American also owns several
development projects in Mexico,
USA, Peru and Argentina.
About Northair
Northair is focused on advancing its flagship La Cigarra
silver project located in the state of
Chihuahua, Mexico, 26 kilometers 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 kilometers 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 TSX
Exchange or its Regulation Services Provider (as that term is
defined in the policies of the TSX Venture Exchange or the TSX
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
February 16, 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 "intend to", "to be", "expected", "plans to", "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 Pan American 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: the
timing and expected closing date of the PAS Transactions; the
timing and receipt of required stock exchange and regulatory
approvals for the PAS Transactions; the ability of Kootenay and Pan
American to satisfy the other conditions to, and to complete, the
PAS Transactions; Minera exercising the Option, length of the
current market cycle and the requirements for an issuer to survive
the current market cycle and future growth potential for Kootenay;
the ability of Kootenay and Minera to maintain their rights and
title to the Promontorio and La Negra deposits during the term of
the Option; the ability of Dolores
to maintain its rights and title to the Selected Properties; and
Minera's properties in the Promontorio Mineral Belt reaching
production. 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 PAS Transactions including, without limitation, receipt of all
necessary 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 PAS
Transactions not being realized; 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. 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, Northair, and
Pan American expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any such statements to
reflect any change in Kootenay's, Northair's, or Pan American'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, Northair,
and Pan American 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.