VANCOUVER, Feb. 4, 2019 /CNW/ - Sun Metals Corp. ("Sun
Metals") (TSXV: SUNM) and Lorraine Copper Corp.
("Lorraine") (TSXV: LLC; OTCQB: LRCPF) are pleased to
announce that they have entered into an arrangement agreement
providing for the indirect merger of the companies (the
"Agreement"). Sun Metals is currently earning a 100%
interest in Lorraine's wholly-owned Stardust project in
northcentral British Columbia (the
"Stardust Project").
Summary of the Arrangement
Pursuant to the Agreement,
Sun Metals has agreed to acquire, through a wholly-owned
subsidiary, all of the issued and outstanding common shares of
Lorraine (collectively, the "Lorraine Shares") by way of a
statutory plan of arrangement under the Business Corporations
Act (British Columbia) (the
"Arrangement"). Pursuant to the terms of the
Arrangement, shareholders of Lorraine (the "Lorraine
Shareholders") will receive 0.54 (the "Exchange Ratio")
of a common share of Sun Metals (each whole share, a "Sun Metals
Share"), for every Lorraine
Share held.
The consideration values Lorraine at approximately $0.24 per Lorraine
Share, representing a premium of approximately 40% to the
price of Lorraine shares compared to the closing price on
February 1, 2019, and a premium of
approximately 38% based on the trailing 20-day volume-weighted
average price of each company as of the close of trading on
February 1, 2019. Lorraine
Shareholders will retain a meaningful stake in the combined entity
and exposure to the continued success of the combined company.
Benefits of the Arrangement
The proposed Arrangement
offers a number of benefits to the shareholders of both Sun Metals
and Lorraine, including the following:
- a simplified ownership structure and a larger public float
which should facilitate a broader base of institutional investors
and greater liquidity in the Sun Metals Shares;
- for Lorraine Shareholders:
-
- the elimination of the significant discount in the trading
price of the Lorraine Shares relative to the market value of Sun
Metals' interest in Stardust;
- access to greater liquidity as a result of Sun Metals'
significantly higher average daily trading volumes and broadened
shareholder base;
- direct ownership in Sun Metals thereby providing Lorraine
Shareholders with continued direct ownership in the Stardust
Project; and
- the proposed Arrangement is not expected to trigger a
taxable event for Lorraine as would have been the case had Sun
Metals vested the original earn-in on the Stardust Project.
- for shareholders of Sun Metals (the "Sun Metals
Shareholders"):
-
- the elimination of the overhang that could be created in the
Sun Metals Shares by Lorraine's significant ownership block had the
terms of the Stardust Project earn-in been completed;
- greater liquidity for all Sun Metals Shareholders from the
addition of the Lorraine Shareholders to its investor base;
- the avoidance of Sun Metals Share selling that would likely
occur if a taxable event were to be triggered for Lorraine
Shareholders; and
- the avoidance of creation of royalties on the Stardust
Project.
Management and Directors
Upon completion of the
Arrangement, there will be no change to the management or the Board
of Directors of Sun Metals. Steve
Robertson will continue to serve as the President and Chief
Executive Officer of Sun Metals and Donald
McInnes will continue in the role of Chairman. The other Sun
Metals Board of Director members will continue to be Dr.
Mark O'Dea, Sean Tetzlaff and Glen
Garratt, who is also the Vice President, Exploration of
Lorraine. Bill Morton, President and
Chief Executive Officer of Lorraine will continue to hold a
position on the Sun Metals' Technical Advisory Committee.
Advisors
PI Financial Corp. is acting as financial
advisor to the special committee of the Board of Directors of Sun
Metals in connection with the proposed Arrangement. Haywood
Securities Inc. has provided a fairness opinion to the Board of
Directors of Lorraine that the Arrangement is fair, from a
financial point of view.
Boards of Directors' Recommendations
The
special committee of the Board of Directors of Sun Metals, and the
special committee of the Board of Directors of Lorraine have
unanimously approved the proposed Arrangement.
Directors, management and certain key Lorraine Shareholders
representing over 22% of the issued and outstanding Lorraine Shares
have signed lockup agreements to vote their respective Lorraine
Shares in favour of the Arrangement.
Further Details
The Arrangement will be implemented
through a triangular amalgamation under the Business
Corporations Act (British
Columbia) in which Tsayta Resources Corporation, a
wholly-owned subsidiary of Sun Metals, will amalgamate
with Lorraine to become a wholly-owned subsidiary of Sun Metals and
Lorraine Shareholders will receive Sun Metals Shares based on the
Exchange Ratio.
Upon closing of the Arrangement: (i) all outstanding stock
options of Lorraine will be exchanged for options to purchase Sun
Metals Shares on the basis of the Exchange Ratio; and (ii) all
unexercised Lorraine Share purchase
warrants will be exchanged for warrants to purchase Sun Metals
Shares on the basis of the Exchange Ratio and will expire in
accordance with their current expiry dates.
The Agreement contains representations and warranties for the
benefit of each of Sun Metals and Lorraine, conditions relating to
shareholder, court and regulatory approvals, material adverse
changes and compliance with the Agreement as are in each case
customary in comparable transactions of this nature. The Agreement
further includes a covenant by Lorraine that states that if the
Lorraine special meeting materials have been mailed to
securityholders of Lorraine (the "Lorraine
Securityholders"), but the Arrangement has not closed, by
March 31, 2019, then Lorraine will
agree to extend the timeframe of the second amendment to the option
agreement between Tsayta Resources Corporation, a wholly-owned
subsidiary of Sun Metals, and Lorraine dated December 14, 2018 (the "Option Agreement")
for a period of not less than 60 days. For additional information
on the Option Agreement, see Sun Metals' news releases dated
June 14, 2018 and December 18, 2018.
Completion of the Arrangement is subject to a number of
conditions being satisfied or waived by one or both of Sun Metals
and Lorraine at or prior to closing of the Arrangement, including:
approval of the Lorraine Securityholders, together with any
requisite minority approvals; and receipt of all necessary
regulatory and court approvals and the satisfaction of certain
other closing conditions customary for a transaction of this
nature.
The Agreement includes a non-solicitation covenant on the part
of Lorraine (subject to customary fiduciary out provisions). In the
event of a superior proposal, Sun Metals has the right to either
match such superior proposal or receive a termination fee in the
amount of $250,000.
Details of the Arrangement, including a summary of the terms and
conditions of the Arrangement Agreement, will be disclosed in a
management information circular of Lorraine, which will be mailed
to Lorraine Securityholders and will also be available on SEDAR at
www.sedar.com.
It is expected that the special meeting of Lorraine
Securityholders (the "Meeting") to approve the proposed
Arrangement will be held in late March
2019 and, if approved at the Meeting, it is expected that
the Arrangement would close approximately a week thereafter.
Lorraine is subject to Multilateral Instrument 61-101
Protection of Minority Security
Holders in Special Transactions ("MI 61-101"). MI 61-101
provides that, in certain circumstances, where a "related party"
(as defined in MI 61-101) of an issuer is entitled to receive a
"collateral benefit" (as defined in MI 61-101) in connection with
an arrangement transaction such as the Arrangement, such
transaction may be considered a"business combination" for the
purposes of MI 61-101 and subject to minority shareholder approval
requirements.
Lorraine has determined that certain directors or executive
officers of the Company are receiving a "collateral benefit" in
connection with the Arrangement as each beneficially owns or
exercises control or direction over more than 1% of Lorraine Shares
(calculated in accordance with MI 61-101). Consequently, the
Lorraine Shares beneficially owned, directly or indirectly, these
certain directors or executive officers will be excluded for the
purposes of determining if minority approval of the Arrangement is
obtained.
This announcement is for informational purposes only and does
not constitute an offer to purchase, a solicitation of an offer to
sell any shares or a solicitation of a proxy.
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 release.
About Sun Metals
Sun Metals is advancing its flagship Stardust project located in
northcentral British Columbia,
Canada. Stardust is a polymetallic Carbonate Replacement
Deposit with a rich history. Pursuant to the Option Agreement with
Lorraine, Sun Metals has an option to earn a 100% interest in the
Stardust project. Sun Metals believes British Columbia is a reliable jurisdiction
with excellent exposure to capital markets, a deep pool of
exploration professionals, a wealth of supporting services, and
exceptional infrastructure with direct access to Pacific
markets.
For further information please visit Sun Metal's website at
www.SunMetals.ca.
About Lorraine
Lorraine is a Canadian mineral exploration company that is
acquiring and advancing copper, gold and molybdenum projects
at intermediate to advanced stages that hold significant resources.
Lorraine currently owns three properties all of which have
defined resources: Lorraine copper-gold (joint- ventured
with Teck Limited), OK copper-molybdenum and Stardust (under
option to Sun Metals).
For further information please visit Lorraine's website at
www.lorrainecopper.com.
Cautionary Note Regarding Forward-Looking
Statements: Certain disclosures in this release
constitute forward-looking statements, including: obtaining
Lorraine securityholder and final court approval of the
Arrangement; composition of the board of directors and management
of Sun Metals upon completion of the Arrangement; and timing and
completion of the Arrangement. In making the forward-looking
statements in this release, the parties have applied certain
factors and assumptions that are based on the parties' current
beliefs as well as assumptions made by and information currently
available to the parties. Although the parties consider these
assumptions to be reasonable based on information currently
available to them, they may prove to be incorrect, and the
forward-looking statements in this release are subject to numerous
risks, uncertainties and other factors that may cause future
results to differ materially from those expressed or implied in
such forward-looking statements. Readers are cautioned not to place
undue reliance on forward-looking statements. The parties do not
intend, and expressly disclaims any intention or obligation to,
update or revise any forward-looking statements whether as a result
of new information, future events or otherwise, except as required
by law.
SOURCE Sun Metals