Share Exchange Transaction Will Result in Existing Shareholders of Calico Owning Approximately 46% of Combined Company, Which Holds Large Nevada Gold Project (Sleeper Gold Project), Significant Cash and NYSE MKT Listing
VANCOUVER, BRITISH COLUMBIA–(Marketwired – March 14, 2016) – Calico Resources Corp. (TSX VENTURE:CKB) (“Calico” or the “Company”) and Paramount Gold Nevada Corp. (NYSE MKT:PZG) (“Paramount”) are pleased to announce that they have entered into an arrangement agreement dated March 14, 2016 (the “Arrangement Agreement”) pursuant to which Paramount has agreed to acquire all of the issued and outstanding common shares of Calico (“Calico Shares”) by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia) (the “Arrangement”).
Paul Parisotto, Calico’s President and CEO, said: “The board of directors of Calico believes that the proposed transaction will unlock the considerable value in our Grassy Mountain project for the benefit of our shareholders. Paramount has a strong cash position of approximately US$7.9 million (as at December 31, 2015), along with experienced technical and operational leadership able to take the project forward to production and the financial resources needed to complete the permitting process and a feasibility study, work which our Calico team has so ably advanced to this point. We also believe Paramount’s Sleeper Gold Project will represent an excellent economic opportunity in a better metal price environment. Calico shareholders will also benefit from Paramount’s listing on the NYSE MKT. In our view, the proposed combination is synergistic; the combined company will have a stronger asset base than Calico or Paramount separately, offering shareholders a better opportunity for capital appreciation while also reducing administrative costs.”
Particulars of the Transaction
Pursuant to the Arrangement Agreement, holders of Calico Shares (“Calico Shareholders”) will be entitled to receive 0.07 of a share of common stock of Paramount (“Paramount Shares”) in exchange for each Calico Share held (the “Exchange Ratio”), representing an implied offer price of CDN$0.112 per Calico Share and a premium of 49.2% (based on the Bank of Canada noon exchange rate of US$1.00 to CDN$1.3215 on the last trading day prior to the announcement of the Arrangement) and a premium of 45.5% based on the trailing 30-day volume weighted average trading price of Calico Shares on the TSX Venture Exchange and Paramount Shares on the NYSE MKT as of the date of the Arrangement Agreement. Based on the foregoing, the Arrangement represents total consideration to Calico Shareholders of CDN$11.5 million. All existing Calico stock options will be cancelled in connection with the Arrangement.
In connection with the Arrangement, approximately 7,171,209 Paramount Shares are expected to be issued to existing Calico Shareholders, which would result in existing Calico Shareholders owning approximately 46% of the combined company on a basic basis and approximately 43% on a fully-diluted basis (based on the Exchange Ratio, the number of issued and outstanding Calico Shares and Paramount Shares, and the number of outstanding options to acquire Paramount Shares as of the date of the Arrangement Agreement).
To be effective, the Arrangement will require approval by a majority of at least 66 2/3% of the votes cast by Calico Shareholders at a special meeting expected to take place in May 2016 (the “Calico Meeting”). Calico Shareholders representing approximately 37.8% of the issued and outstanding Calico Shares (including FCMI Parent Co. (approximately 19.6%), Seabridge Gold Inc. (approximately 13.5%) and the directors and officers of Calico (approximately 4.7%)) have entered into (or have agreed to enter into) voting and support agreements with Paramount in support of the Arrangement. The board of directors of Calico, on the recommendation of its independent special committee (the “Special Committee”) after having received advice from Canaccord Genuity Corp. (“Canaccord Genuity”), its financial advisor, has unanimously approved the Arrangement and will provide a written recommendation that Calico Shareholders vote in favour of the Arrangement which will be included in the management information circular to be mailed to Calico Shareholders in connection with the Arrangement.
In addition, to be effective, the Arrangement will also require approval of a majority of at least 50% of the votes cast by holders of Paramount Shares at a special meeting expected to take place in the second quarter of 2016. The board of directors of Paramount, on the recommendation of the Special Committee, has unanimously approved the Arrangement and will provide a written recommendation that Paramount shareholders vote in favour of the Arrangement which will be included in the proxy statement to be mailed to Paramount shareholders in connection with the Arrangement.
The Arrangement Agreement includes customary provisions, including with respect to non-solicitation of alternative transactions, a right granted to Paramount to match superior proposals for Calico and a provision entitling Calico to a fiduciary-out. In addition, Calico and Paramount have each agreed to pay a termination fee of US$300,000 to the other party upon the occurrence of certain events. In addition to shareholder and court approvals, the transaction is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature.
In connection with the Arrangement, Paramount will provide Calico with interim debt financing of up to US$800,000 (the “Interim Loan”), to be repaid 90 days following the termination of the Arrangement Agreement. The loan will be convertible into Calico Shares at a price of CDN$0.10 per share, subject to the approval of the TSX Venture Exchange, and will be secured by all of Calico’s assets. The proceeds of the Interim Loan will be used by Calico for general corporate purposes prior to the completion of the Arrangement.
Full details of the Arrangement will be included in a management information circular of Calico describing the matters to be considered at the Calico Meeting, respectively, which is expected to be mailed to Calico Shareholders April 2016 and will be made available on SEDAR under the issuer profile of Calico at www.sedar.com. It is anticipated that the transaction will close in the second quarter of 2016.
About Paramount Gold
Paramount is a U.S. based precious metals exploration company. Paramount owns a 100% interest in the Sleeper Gold Project located in Northern Nevada. The Sleeper Gold Project, which includes the former producing Sleeper mine, totals 2,322 unpatented mining claims (approximately 60 square miles or 15,500 hectares).
On December 10, 2015, Paramount filed on SEDAR a technical report prepared under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (entitled “Preliminary Economic Assessment: Sleeper Project, Humboldt County, Nevada”, prepared for Paramount by Metal Mining Consultants) relating to the PEA of the Sleeper Gold Project (the “Sleeper Gold PEA”). Sleeper Gold PEA has been made available on SEDAR under the issuer profile of Paramount at www.sedar.com, and should be referenced to determine key assumptions, parameters and methods used to determine the global mineralized material estimate below.
Highlights of the Sleeper Gold PEA include:
The Sleeper Gold PEA incorporates, among other things, (i) a global mineralized material estimate completed by SRK Consulting, (ii) results of new metallurgical tests completed over the previous two years by McClelland Laboratories, and (iii) updated pricing for gold (US$1250) and silver (US$16) to reflect the current metals market.
The Sleeper Gold PEA includes the following global mineralized material estimate:
|Measured and Indicated||42,685||0.37||511||3.25||4,458|
This Sleeper Gold PEA is preliminary in nature and should not be considered to be a pre-feasibility or feasibility study, as the economics and technical viability of the Sleeper Gold Project have not been demonstrated at this time. Furthermore, there is no certainty that the Sleeper Gold PEA will be realized.
For more information, please see the website of Paramount at www.paramountnevada.com.
About Calico Resources Corp.
Calico is a Canadian company engaged in the acquisition, exploration and development of mineral property interests. Calico is focused on advancing its 100%-owned Grassy Mountain Gold Project located in Malheur County, Oregon. For more information, please see the website of Calico at www.calicoresources.com.
The scientific and technical information contained in this news release has been reviewed and approved on behalf of Calico by Scott E. Wilson, CPG, an independent “Qualified Person” (as defined by National Instrument National Instrument 43-101 – Standards of Disclosure for Mineral Projects). For further information regarding the Sleeper Gold Project, refer to the Sleeper Gold PEA, which is available on SEDAR under Paramount’s issuer profile at www.sedar.com.
Advisors and Counsel
McCullough O’Connor Irwin LLP is the Canadian legal advisor to Calico. In connection with this transaction, the Calico Board of Directors formed a Special Committee comprised of the independent, uninterested directors to evaluate the transaction. Canaccord Geniuty has acted as the exclusive financial advisor to the Special Committee. Canaccord Genuity has provided an opinion to the Special Committee that, based upon and subject to the assumptions, limitations and qualifications in the opinion, the consideration being offered by Paramount is fair, from a financial point of view, to the Calico Shareholders. Bennett Jones LLP has acted as legal counsel to the Special Committee.
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 news release. No stock exchange, securities commission or other regulatory authority has approved or disapproved of the information contained herein.
On behalf of the Board,
Paul A. Parisotto, President & CEO
Cautionary Note to U.S. Investors Concerning Estimates of Indicated and Inferred Resources
This news release uses the terms “measured and indicated resources” and “inferred resources”. We advise U.S. investors that while these terms are defined in, and permitted by, Canadian regulations, these terms are not defined terms under SEC Industry Guide 7 and not normally permitted to be used in reports and registration statements filed with the SEC. “Inferred resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of a feasibility study or prefeasibility studies, except in rare cases. The SEC normally only permits issuers to report mineralization that does not constitute SEC Industry Guide 7 compliant “reserves”, as in-place tonnage and grade without reference to unit measures. U.S. investors are cautioned not to assume that any part or all of mineral deposits in this category will ever be converted into reserves. U.S. investors are cautioned not to assume that any part or all of an inferred resource exists or is economically or legally minable.
Cautionary Statement Regarding Forward-Looking Information
This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the anticipated benefits of the Arrangement to Calico and Calico Shareholders; the Exchange Ratio and value of the Paramount Shares being delivered as arrangement consideration; the market capitalization of the combined company following the completion of the Arrangement; the percentage ownership of existing Calico Shareholders in the combined company; the timing and receipt of the required shareholder, court, stock exchange and regulatory approvals for the Arrangement; the timing and ability of Paramount and Calico to satisfy the conditions precedent to completing the Arrangement; the anticipated timing for mailing the management information circular to the Calico Shareholders and the proxy statement to the Paramount Shareholders in respect of the matters to be considered by such shareholders at the Calico Meeting and Paramount Meeting, as the case may be, in respect of the Arrangement; the closing of the Arrangement; the Interim Financing; the timing and receipt of the required stock exchange and regulatory approvals for the Arrangement and Interim Financing; the length of the current market cycle and requirements for an issuer to survive in the current market cycle; future growth potential of Paramount and Calico and their respective business; and future mine development plans.
These forward-looking statements are based on reasonable assumptions and estimates of management of Calico at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Calico to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include: satisfaction or waiver of all applicable conditions to closing of the Arrangement (including receipt of all necessary shareholder, court, stock exchange and regulatory approvals or consents and the absence of material changes with respect to the parties and their respective businesses, all as more particularly set forth in the Arrangement Agreement); the synergies expected from the Arrangement not being realized; business integration risks; fluctuations in general macroeconomic conditions; fluctuations in securities markets and the market price of Paramount Shares and Calico Shares; fluctuations in spot and forward prices of gold, silver, base metals or certain other commodities; fluctuations in currency markets (such as the Canadian dollar to United States dollar exchange rate); change 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; 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 of 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); and title to properties. In addition, the failure of a party to comply with the terms of the Arrangement Agreement may result in that party being required to pay a non‐completion or other fee to the other party, the result of which could have a material adverse effect on the paying party’s financial position and results of operations and its ability to fund growth prospects and current operations. Although the forward-looking statements contained in this news release are based upon what management of Calico believes, or believed at the time, to be reasonable assumptions, Calico cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended.
Readers should not place undue reliance on the forward‐looking statements and information contained in this news release. Except as required by law, Calico assumes no obligation to update the forward‐looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.
Cash operating costs and cash operating costs per ounce of gold equivalent produced are non-IFRS measures. These measures are intended to assist readers in evaluating the total costs of producing gold from current operations. The most directly comparable measure prepared in accordance with IFRS is total production costs.