TSX-V: CNY
TORONTO, Dec. 22, 2014 /CNW Telbec/ - Cancana Resources
Corp. (TSXV: CNY) (the "Company" or "Cancana") is pleased to
announce that it has entered into a binding term sheet (the
"Agreement") with its joint venture partner, Ferrometals BV
("Ferrometals"), with respect to the transfer of mining tenements
formerly held by M.L.B. de Nogueira
– E.P.P. ("MLB") to Brazil Manganẽs Corporation Mineração
S.A. ("BMC") (formerly Rio Madeira Comércio
Importação e Exportação de Minérios Ltda.), the joint
venture between Cancana and Ferrometals. Cancana is also pleased to
announce that is has entered into a shareholders' agreement with
Ferrometals (the "BMC Shareholders' Agreement") in order to
regulate the relations between Cancana and Ferrometals as
shareholders of BMC. In addition, Cancana is pleased to announce a
proposed US$1.5 million financing
through the issuance by the Company of a US$1.5 million secured convertible debenture to
Ferrometals.
Disposition of MLB
Pursuant to the terms of the Agreement, which was entered into
between Cancana, Ferrometals and Sentient Global Resources Fund
III, L.P. and Sentient Global Resources Fund IV, L.P. (collectively
with Ferrometals, the "Sentient Group"), as soon as
practicable after the execution of the Agreement, and subject to
the receipt of required regulatory approvals (including the final
approval of the TSX Venture Exchange (the "TSXV")) and the
satisfaction of certain customary closing conditions, the Company
will transfer to BMC all of the shares in the capital of Cancana
Brasil Mineração Ltda. ("Cancana Brazil"), Cancana's
wholly-owned Brazilian subsidiary which currently owns mining
tenements formerly held by MLB (the "MLB Tenements"), in
exchange for shares of BMC. Pursuant to the Agreement, Ferrometals
and Cancana have agreed that the value of the MLB Tenements is
US$2.5 million. Cancana will be
issued shares of BMC as consideration for the transfer of the MLB
Tenements to BMC, which shall be completed by way of the transfer
of all of the shares of Cancana Brazil to BMC. Upon completion of
the transfer of the MLB Tenements and the issuance of such BMC
shares to Cancana, Cancana will own approximately 32.5% of the
issued and outstanding shares of BMC. Currently Cancana holds
approximately 23.87% of the shares of BMC and Ferrometals owns the
remaining 76.13% of BMC.
The sale of the MLB Tenements to BMC was originally contemplated
in the term sheet ("December 2013
Term Sheet") and revised binding term sheet
("February 2014 Term Sheet")
entered into between the Company and the Sentient Group as
previously announced in the press releases of the Company on
December 4, 2013 and February 25, 2014. As disclosed in the
Company's press release dated April 15,
2014, the Company deferred a vote of the shareholders of the
Company on the disposition of the MLB Tenements in order for the
Company to restructure how the MLB Tenements are held, to allow the
Company to complete the disposition of the MLB Tenements in the
most tax efficient manner. The restructuring of MLB has been
completed subject to receipt of final governmental approval in
Brazil and the Company expects to
be in a position to complete the transfer of the MLB Tenements
shortly.
Pursuant to the Agreement, the MLB Tenements will be transferred
to BMC for aggregate consideration of US$2.5
million, representing a reduction of US$3.5 million from the initial US$6 million value attributed to the MLB
Tenements contemplated in the December
2013 Term Sheet and the February
2014 Term Sheet and as disclosed in the management
information circular of the Company dated March 18, 2014 (the "Special Meeting
Information Circular"). As a result of this reduction in the
consideration to be paid to Cancana for the transfer of the MLB
Tenements, Cancana will own approximately 32.5% of BMC upon
completion of the sale, as opposed to the 50% ownership of BMC
previously disclosed in the December
2013 Term Sheet, the February
2014 Term Sheet and the Special Meeting Information
Circular.
Pursuant to the Agreement, Cancana also has a one-time option to
purchase from BMC, within six (6) months following the closing of
the transfer of the MLB Tenements to BMC, US$2,654,348 worth of shares of BMC, with such
shares to be issued at the same issue price as the last investment
of Ferrometals in the capital of BMC. Upon exercise of this option,
it is expected that Cancana will own approximately 39.47% of the
shares of BMC, with Ferrometals owning the remaining approximately
60.53% of the shares of BMC.
As both (i) the value of the MLB Tenements comprises less than
50% of the Company's current assets, and (ii) the transfer of the
shares of Cancana Brazil is subject to an exemption from the
minority shareholder approval requirement set out in Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions ("MI 61-101"), as disclosed below,
the Company is no longer required to seek the approval of its
shareholders for the transfer of the MLB Tenements to BMC.
Debenture Financing
Pursuant to the terms of the Agreement, Ferrometals will
purchase a secured convertible note, (the "Convertible
Note"), to be issued by Cancana for a purchase price of
US$1.5 million (approximately
C$1,744,350). The Convertible Note
will have a term of 3 years and will be non-interest bearing. The
principal shall be convertible at the option of Ferrometals, in
whole or in part, into common shares in the capital of the Company
("Common Shares") at a price of C$0.175 per Common Share at the option of
Ferrometals.
The Convertible Note and any Common Shares issuable upon
conversion of the Convertible Note will be subject to a four (4)
month and one (1) day statutory hold commencing from the date of
issuance.
Assuming the conversion of the Convertible Note in full,
Ferrometals will own approximately 53.3% of Cancana, calculated on
a partially diluted basis assuming the conversion of the
Convertible Note only. Of the proceeds from the sale of the
Convertible Note, US$192,000 will be
used to pay certain costs associated with the restructuring of the
ownership of the MLB Tenements and US$345,000 will be used to pay certain tax
expenses associated with the cost of the transfer of the shares of
Cancana Brazil to BMC. The balance of the net proceeds from the
sale of the Convertible Note shall be used by the Company for
general working capital purposes.
Anthony Julien, President &
CEO of Cancana, commented; "It has taken Cancana eight months to
complete the restructuring of the MLB Tenements and to receive the
required approvals from the Brazilian regulators and very shortly
we will be in a position to complete the vending in of the MLB
Tenements to the joint venture. During this time, BMC has operated
on the MLB Tenements and has conducted various exploration
activities as part of developing the mining operations for BMC. BMC
has required US$4.07M in working
capital since Cancana contributed its initial US$5M to the joint venture, and the BMC
Shareholders' Agreement gives Cancana 6 months to contribute to
this US$4.07M and maintain its pro
rata shareholding in the joint venture, as well as acknowledge
monies spent on behalf of BMC by Cancana's joint venture partner.
Lastly, the terms of the Convertible Note are favourable to the
shareholders of Cancana, and Cancana appreciates the ongoing
support from Ferrometals. I look forward to 2015, when we hope to
start making assay announcements from the drill program slated to
commence in April."
Pursuant to MI 61-101, the issuance of the Convertible Note and
the sale of the MLB Tenements by way of the transfer of the shares
of Cancana Brazil to BMC, are "related party transactions". The
Company was exempt from the requirements to obtain a formal
valuation or minority shareholder approval in connection with (i)
the issuance of the Convertible Note, and (ii) the sale of the MLB
Tenements by way of the transfer to BMC of all of the shares of
Cancana Brazil, in reliance on sections 5.5(a) and 5.7(a),
respectively, of MI 61-101, as neither the fair market value of the
securities received by such parties nor the proceeds for such
securities received by the Company exceeds 25% of the Company's
market capitalization as calculated in accordance with MI 61-101.
The material change report will be filed less than 21 days before
the closing of the issuance of the Convertible Note as the Company
requires the consideration it will receive in connection with this
financing immediately for working capital purposes.
The completion of (i) the sale of the MLB Tenements by way of
the sale by Cancana to BMC of all of the shares of Cancana Brazil,
and (ii) the issuance of the Convertible Note, remain subject to
receipt by Cancana of all required regulatory approvals, including
without limitation the final acceptance by the TSX Venture Exchange
(the "TSXV") of requisite regulatory filings and the
final approval of the TSXV
BMC Shareholders' Agreement
In connection with the Agreement, Cancana is also pleased to
announce that is has entered into the BMC Shareholders' Agreement
in order to regulate the relations between Cancana and Ferrometals
as shareholders of BMC. The material terms of the BMC Shareholders'
Agreement were previously disclosed by the Company in the Special
Meeting Information Circular and a copy of the BMC Shareholders'
Agreement will be filed under the Company's issuer profile on
www.sedar.com.
Certain material terms of the BMC Shareholders' Agreement which
were previously disclosed in the Special Meeting Information
Circular have been amended and revised through negotiations with
Ferrometals. These changes include but are not limited to the
following:
- Pursuant to the BMC Shareholders' Agreement, any expenditure
incurred on behalf of BMC by either Cancana or Ferrometals shall be
recognized as a loan to BMC, and shall be compensated as between
Cancana and Ferrometals on the basis of their respective
shareholdings in BMC. This compensation shall be effected on a
quarterly basis by way of a cash payment between Cancana and
Ferrometals;
- The drag-along right which Cancana has granted to Ferrometals
is effective immediately upon execution of the BMC Shareholders'
Agreement, as opposed to becoming effective beginning 2 years after
execution of the BMC Shareholders' Agreement; and
- Each of Cancana and Ferrometals agree that it shall not, during
the four-year period following the date of the BMC Shareholders'
Agreement, in any way carry on business (directly or indirectly) in
a manner substantially similar to or in competition with the
business of the joint venture (except in so far as such activity
relates to one certain property located in the State of Rondonia,
Brazil).
About Cancana
Cancana is a Brazilian exploration and production company with a
focus on manganese production in Rondonia, Brazil. The Company has entered into a joint
venture with Ferrometals which acquired an interest in BMC, a
producing Manganese mine that has been in operation for the past 8
years. BMC produces manganese ore and is located adjacent to, and
mainly contiguous with, Cancana's existing Manganese claims and
operations. All available resource reports and information on the
Company's properties are located on the Company website
www.cancanacorp.com.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this press release. This press release contains forward-looking
information under Canadian securities legislation. Forward-looking
information includes, but is not limited to, statements with
respect to completion of the restructuring of the MLB Tenements,
the completion of the transfer of the shares of Cancana Brazil and
the issuance of the Convertible Note; the development potential and
timetable of the BMC joint venture project; costs of future
activities; capital and operating expenditures; success of
exploration activities; mining or processing issues; currency
exchange rates; government regulation of mining operations; and
environmental risks. Generally, forward-looking statements can be
identified by the use of forward-looking terminology such as
"plans", "expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or
"does not anticipate", or "believes", or variations of such words
and phrases or statements that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be
achieved". Forward-looking statements are based on the opinions and
estimates of management as of the date such statements are made.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of Cancana to be
materially different from those expressed or implied by such
forward-looking statements, including but not limited to those
risks described in the annual information form of Cancana and in
its public documents filed on SEDAR from time to time. Although
management of Cancana has attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward-looking statements, there may be other factors
that cause results not to be as anticipated, estimated or intended.
There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements. Cancana does not undertake to update any
forward-looking statements, except in accordance with applicable
securities laws.
Issued on behalf of the Board of Directors of Cancana Resources
Corp.
"Senator J. Trevor Eyton"
Senator J. Trevor Eyton, Chairman
of the Board
SOURCE Cancana Resources Corp.