Gran Colombia Gold Completes $275,000,0000 Private Placement, Frontino Acquisition and Reverse Takeover of Tapestry Resource Cor
23 August 2010 - 10:30PM
PR Newswire (Canada)
TORONTO, Aug. 23 /CNW/ -- TORONTO, Aug. 23 /CNW/ - Gran Colombia
Gold Corp. (TSXV: GCM, formerly TPR) (the "Company") is pleased to
announce the completion of the reverse takeover transaction (the
"Transaction") previously announced in the press release of
Tapestry Resource Corp. ("Tapestry") dated June 30, 2010. Pursuant
to the Transaction, Tapestry acquired all of the issued and
outstanding securities of Gran Colombia Gold, S.A. ("Gran
Colombia") in exchange for the issuance of securities of Tapestry,
by way of a three-cornered amalgamation and changed its name to
Gran Colombia Gold Corp. The TSX Venture Exchange (the "Exchange")
has granted final approval of the Transaction. Trading in the
common shares (the "Common Shares") and warrants (the "Warrants")
of the Company on the Exchange is anticipated to commence under its
new name at market open on August 24, 2010. The Common Shares will
trade under the symbol "GCM" and the Warrants will trade under the
symbol "GCM.WT". Private Placement Prior to the completion of the
Transaction, Gran Colombia completed a private placement of
subscription receipts (the "Subscription Receipts") of Gran
Colombia (the "Private Placement"). Pursuant to the Private
Placement, Gran Colombia issued 687,500,000 Subscription Receipts
for gross proceeds to Gran Colombia of $275,000,000. Each
Subscription Receipt was automatically exchanged, without payment
of any additional consideration and with no further action on the
part of the holder thereof, for one unit of Gran Colombia (each a
"Unit"). Each Unit consisted of one common share of Gran Colombia
and one half of one common share purchase warrant of Gran Colombia.
GMP Securities L.P. (the "Agent") acted as agent in respect of the
Private Placement on a "best efforts" basis. For the Agent's
services in connection with the Private Placement, Gran Colombia
paid the Agent a cash commission equal to 6.0% of the gross
proceeds of the Private Placement and granted to the Agent
compensation options entitling the Agent to subscribe for
41,250,000 Units at $0.40 per Unit for a period for two years.
Frontino Acquisition On August 17, 2010, Gran Colombia loaned
COP372,500,000,000 (comprising COP365,000,000,000 advanced on
August 17, 2010 and COP7,500,000,000 relating to half of the
COP15,000,000,000 deposit already paid, together the "Principal
Amount", such amount being approximately US$200 million) from the
proceeds of the Private Placement to Zandor Capital, S.A. ("JVCo"),
a wholly-owned Panamanian subsidiary of Medoro Resources Ltd.
("Medoro") under a convertible promissory note (the "Convertible
Note"). JVCo used these funds to complete, on August 18, 2010, the
acquisition of all of the assets (the "Frontino Acquisition") of
Frontino Gold Mines Ltd. ("Frontino"). On August 19, 2010, the
Principal Amount was converted into such number of shares of JVCo
that resulted in Gran Colombia holding a 95% interest in JVCo with
Medoro retaining a 5% interest in JVCo. Concurrent with the
conversion of the Convertible Note, Gran Colombia, Medoro and JVCo
entered into an Exploration, Development and Mine Operating
Agreement and Shareholders' Venture Agreement (the "Joint Venture
Agreement") setting out the parties' rights and obligations with
respect to their ownership in the shares in the capital of JVCo.
The Joint Venture Agreement includes, among other provisions, the
back-in right pursuant to which Medoro has the right to increase to
a 50% interest in JVCo within one year. Pursuant to the terms of
the Frontino Acquisition agreement, the liquidator responsible for
the sale of the Frontino assets is required to use the proceeds
from the disposition of the Frontino assets to fund unpaid and
accrued pension liabilities estimated to amount to approximately
US$200 million. This is expected to be accomplished through the
assignment of these pension obligations to the Colombian Social
Security Institute (the "ISS"), a governmental entity responsible
for the administration and payment of the pension obligations. As
of the date of the closing of the Frontino Acquisition, the ISS had
not completed the necessary calculations required in order to
formally accept the assignment of the pension obligations.
Consequently, JVCo has agreed with the Frontino liquidation
advisory board that if, within twelve months from closing the
Frontino Acquisition, the ISS does not accept the assignment of the
pension obligations, JVCo will arrange for a private firm to accept
these obligations. If required to do so, assigning the pension
obligations could result in the payment of additional fees to the
private provider, which fees have not yet been calculated but which
have been estimated to cost up to US$35 million. While the amount
required to fund the pension obligations (being approximately
US$200 million) will be held in escrow until the obligations are
assigned to the ISS or a private provider, if a private provider is
required JVCo would have the obligation to pay the additional fees
of up to US$35 million. As of the date hereof, Gran Colombia has no
reason to believe that the ISS will not assume the pension
obligations and therefore anticipates that a private provider will
not be engaged, thereby eliminating the need to pay any additional
fees. Accordingly, the Company believes the risk that additional
fees will have to be paid is remote. The Frontino assets are
located approximately 220 kilometres northeast of Medellin. For
additional information see the filing statement of Tapestry dated
August 12, 2010 in respect of the Transaction (the "Filing
Statement") and the technical report in respect of the Frontino
Project authored by Scott E. Wilson and Stewart D. Redwood dated
June 9, 2010. Other Acquisitions The Company has also entered into
agreements to acquire interests in the following other mining
projects: (1) the El Zancudo Project, located in the Titiribi
mining district in Antioquia, Colombia; (2) the Concepción Project,
located in the municipalities of Concepción, San Vicente, El Penol
and Barbosa in the Antioquia Department of Colombia; (3) the
Mazamorras Project, which is located in the department of Narino;
and (4) the Carla Gran Colombia Project, located in Segovia and
Remedios municipalities of Antioquia. For additional information
see the Filing Statement, the technical report on the El Zancudo
Project prepared by Stewart D. Redwood dated April 6, 2010, the
technical report on the Concepción Project prepared by Stewart D.
Redwood dated May 31, 2010, the technical report on the Mazamorras
Project prepared by SRK Exploration Services Limited dated May 2010
and the technical report on the Carla Gran Colombia Project dated
prepared by SRK Exploration Services Limited dated June 18, 2010.
Reverse Takeover Upon the closing of the Transaction, the
securities issued pursuant to the Private Placement were exchanged
for Common Shares and Warrants on a one-for-one basis. Each such
whole Warrant entitles the holder to purchase one additional Common
Share at an exercise price of $0.65 per share for a period of five
years. Pursuant to the terms of the amalgamation agreement
governing the amalgamation and the terms of the agency agreement
dated July 27, 2010 entered into among the Agent, Tapestry and Gran
Colombia in connection with the Private Placement, each holder of
Common Shares following the completion of the Transaction who was a
Gran Colombia shareholder prior to the completion of the Private
Placement is restricted from selling, transferring or otherwise
disposing of a 25% tranche of such Common Shares until each of the
dates that is 30, 60, 90 and 120 days from the date the Common
Shares are listed and posted for trading on the Exchange. Pursuant
to the requirements of the Exchange, 25,876,660 Common Shares will
be subject to a value security escrow agreement, with 25% of such
Common Shares being released from escrow every six months following
receipt of final Exchange approval of the Transaction. An
additional 1,737,500 Common Shares will be subject to a four month
Exchange hold period commencing on the date of the Transaction.
Another 11,083,340 Common Shares will be subject to an Exchange
hold period of one year, with 20% of such Common Shares to be
released immediately and an additional 20% every three months
thereafter. Gran Colombia's Directors and Senior Management
Following the closing of the Transaction, the following individuals
will serve as directors of the Company: Serafino Iacono, Miguel de
la Campa, Maria Consuelo Araujo, José Francisco Arata, Jorge Neher,
Ronald Pantin, Robert Hines, Stephen Wilkinson and Ricardo Lozano.
The Company's senior management will be comprised of Serafino
Iacono (Executive Co-Chairman), Miguel de la Campa (Executive
Co-Chairman), Mario Consuelo Araujo (Chief Executive Officer),
Michael Davies (Chief Financial Officer), José Oro (Chief Operating
Officer) and Peter Volk (General Counsel and Secretary). Directors,
officers and consultants of the Company as well as certain
charities have been granted options to acquire 40,500,000 Common
Shares at an exercise price of $0.40. Additional Information In
connection with the Transaction, the board of directors of the
Company approved the termination of the Company's engagement with
Watson Dauphinee & Masuch and approved the appointment of KPMG
LLP as its auditor. The board of directors also approved the
financial year end as December 31. Additional details regarding the
Transaction, including with respect to the business and properties
of the Company, are contained in the Filing Statement, copies of
which are available under the Company's profile on SEDAR at
www.sedar.com. About Gran Colombia Gold Corp. Gran Colombia Gold
Corp. is a Canadian-based exploration, development and mining
company focused on acquiring gold properties of merit to bring to
production, with primary emphasis on Colombia. The Company owns
interests in five exploration and mining projects, including a 95%
interest in the Frontino gold mine, currently producing
approximately 55,000 ounces of gold annually. These properties,
located in the Antioquia and Narino departments of Colombia, are
mostly contiguous and are all part of the same geological system.
Forward Looking Information This news release contains
forward-looking information with respect to: (i) the commencement
of trading of the Company's common shares and warrants on the
Exchange; (ii) the payment of additional fees by the Company in
connection with the administration of the pension liabilities; and
(iii) changes to the Company's auditor and financial year end.
Although the Company believes that the assumptions and factors used
in preparing the forward-looking information in this news release
are reasonable, undue reliance should not be placed on such
forward-looking information. No assurance can be given that such
results or events will occur in the disclosed time frames or at
all. 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 news release %SEDAR: 00003116E Peter Volk, General
Counsel & Secretary, (416) 360-4653 x223
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