TORONTO, Feb. 24, 2020 /CNW/ - Excellon Resources
Inc. (TSX:EXN, EXN.WT, OTC:EXLLF and FRA:E4X1) ("Excellon" or the
"Company") and Otis Gold Corp. (TSX-V:OOO, OTC:OGLDF, FRA:4OG)
("Otis Gold") are pleased to announce that they have entered
into a definitive agreement (the "Agreement") today whereby
Excellon will acquire all the issued and outstanding shares of Otis
Gold pursuant to a plan of arrangement under the Business
Corporations Act (British
Columbia) (the "Transaction").
The combined company will be a well-financed precious metals
producer with established silver production in Mexico and an attractive gold development
project in the United States. The
Transaction is an initial step in Excellon becoming a larger
multi-asset precious metals company.
Transaction Highlights
- Enhanced portfolio of projects for the new precious metals
bull market: Combines Platosa's high-grade silver production
with high return and low risk Kilgore development project, creating a
pipeline for growth.
- Significant exploration upside: Active exploration on
four key mineral trends including the CRD and Fresnillo epithermal silver trends in
Mexico, the re-emerging
Idaho gold region, and the
historic Freiberg district in Saxony, all known for multi-million
ounce precious metal discoveries.
- Geographic diversification: Diverse, well-established
mining jurisdictions across two continents, reducing single asset
risk.
- Enhanced capital market profile: The combined company
will be well financed with US$10
million in cash and available funds and is expected to have
a market capitalization of approximately C$124 million and will be listed on the Toronto
Stock Exchange ("TSX") in Canada.
Excellon also intends to apply for a listing on the NYSE American
LLC ("NYSE American") in the United
States.
- Proven board and management: Integrates board and
management that can discover, permit, finance, develop and operate
mining assets to industry leading standards, with proven experience
in North America.
- Unanimous board approval and shareholder support: The
Board of Directors of both companies have unanimously recommended
support for the Transaction. Additionally, 25% of Otis Gold and 20%
(including Eric Sprott) of Excellon
shareholders have entered into voting support agreements.
Excellon President & CEO Brendan
Cahill stated: "The acquisition of Otis Gold represents an
exceptional opportunity to further Excellon's vision of creating
wealth. We believe that we are at the dawn of a new bull market in
precious metals. The Kilgore
deposit multiplies our resource base and increases our precious
metal exposure from approximately fifty percent to over ninety
percent. Kilgore represents a
low-cost, high-IRR development opportunity that complements and
enhances our existing growth pipeline of production and
exploration. With Kilgore, we will
maintain our focus on exploration, the lifeblood of our industry.
We have an immediate plan to grow the existing Kilgore resource and define the larger,
multi-million ounce opportunity."
Otis Gold President & CEO
Craig Lindsay stated: "We are
excited to partner with an experienced producer to aggressively
move the Kilgore Project forward. We believe that Kilgore is on the cusp of significant growth,
and we strongly feel that Excellon's technical and management team
are well-positioned to both re-imagine and fast-track the project's
development. Additionally, Excellon's existing production in
Mexico, its suite of exciting
exploration projects in Mexico and
Germany, coupled with our US gold
exposure, creates a very balanced and compelling investment
thesis."
Benefits to Excellon Shareholders
- Adds two significantly undervalued gold assets: the Kilgore
Project hosting an Indicated resource of 825,000 oz Au @ 0.58 g/t
and an Inferred resource of 136,000 oz Au @ 0.45 g/t, and the
Oakley Project hosting an Inferred resource of 163,000 oz Au @ 0.51
g/t;
- Amplifies exposure to precious metals in the early stages of a
bull market by increasing measured and indicated resources by 450%
and precious metal exposure from 50% to over 90%;
- Enhances growth profile with the addition of Kilgore, an advanced-stage gold development
asset, with PEA highlights including a post-tax NPV5% of
US$185M and an IRR of 54% (@
US$1,500 Au), with initial capital of
US$81 million;
- Affords significant exploration upside to expand the existing
Kilgore resource, follow-up on
high-grade results including 85.4 m
of 2.50 g/t Au in 16OKR-338 near surface and 30.5 m of 5.37 g/t Au in 16OKR-315;
- Diversifies asset base into the favourable mining jurisdiction
of Idaho and positions Excellon
for further growth in the United
States;
- Increases capital markets presence, trading liquidity and
shareholder base through the proposed listing of the combined
company on the NYSE American exchange; and
- Provides re-rating potential in-line with larger precious metal
peers.
Benefits to Otis Gold Shareholders
- Delivers immediate and significant premiums of 47% and 55%
based on the spot and 20-day VWAP of Otis Gold shares on the
TSX-V;
- Accesses a proven team with the ability to discover, permit,
finance, develop and operate to industry leading standards;
- Diversifies existing "single asset development" risk through
exposure to Excellon's producing asset and additional exploration
properties;
- Provides continued exposure to the Kilgore Project and the
anticipated benefits of the transaction through the ownership of
Excellon shares;
- Positions the combined company for a rising precious metal
price environment through ownership of a larger combined entity
with existing silver production and a robust gold development
pipeline in top jurisdictions;
- Increases trading liquidity significantly through receiving
Excellon shares and through the proposed listing of the combined
company on the NYSE American exchange; and
- Provides re-rating potential in-line with larger precious metal
peers.
Transaction Particulars
Under the terms of the Transaction, Excellon will acquire all
outstanding shares of Otis at a share exchange ratio of 0.23
Excellon shares for each Otis share (the "Exchange Ratio"). Each
Otis warrant will become exercisable for Excellon common shares, as
adjusted in accordance with the Exchange Ratio. Each Otis option
outstanding will be exchanged for an Excellon option to acquire
Excellon common shares as adjusted in accordance with the Exchange
Ratio. Based on the Exchange Ratio, upon completion of the
Transaction, existing Excellon shareholders will own 74% and former
Otis shareholders will own 26% of the combined company.
Upon completion of the Transaction, Excellon as the combined
company will have approximately 154 million common shares
issued and outstanding prior to the Proposed Consolidation (as
defined below).
The Transaction is expected to be structured as a plan of
arrangement under the Business Corporations Act
(British Columbia) and, in
addition to other customary closing conditions, is subject to
regulatory, stock exchange and court approvals or orders. The
Transaction will require the approval of (A) (i) two-thirds of the
votes cast by Otis Gold shareholders at a shareholder meeting and
(ii) if required, a simple majority of the votes cast by Otis Gold
shareholders at a shareholder meeting, excluding the votes held by
certain persons as required by Multilateral Instrument 61-101
Protection of Minority Securityholders in Special
Transactions, and (B) a simple majority of the votes cast by
Excellon shareholders at a shareholder meeting. The Proposed
Consolidation requires the approval of two-thirds of the votes cast
by Excellon shareholders at a shareholder meeting.
Officers, directors and certain shareholders of Otis Gold, who
collectively hold 25% of Otis Gold's issued common shares, have
entered into voting support agreements in favour of the
Transaction. Officers, directors and certain shareholders of
Excellon, who collectively hold 20% of Excellon's issued common
shares, have entered into voting support agreements in favour of
the Transaction.
The special meetings of Otis Gold and Excellon are expected to
be held in April 2020. It is expected
that a joint information circular of Excellon and Otis Gold
detailing the terms and conditions of the Transaction and setting
out the resolutions to be approved at the respective meetings of
Otis Gold and Excellon shareholders will be filed with regulatory
authorities and mailed to the shareholders of both companies in
March 2020 in accordance with
applicable securities laws.
The Agreement includes customary deal-protection provisions,
including non-solicitation of alternative transactions and a
reciprocal break fee of C$1 million
payable by either party, under certain circumstances.
Combined Company Asset Portfolio
On completion of the Transaction, Excellon will continue to own
and operate the high-grade, silver-lead-zinc Platosa Mine in
Mexico, offering immediate and
significant leverage to silver prices. Platosa is located within a
14,000-ha land package with significant opportunity to grow
resources near existing mine infrastructure and identify new
deposits regionally.
Excellon will also own 100% of the development stage
Kilgore gold project located in
Idaho, United States. The Kilgore project is caldera-related epithermal
gold deposit with current Indicated Resource of 44.6 million tonnes
at 0.58 g/t Au for 825,000 ounces Au and an Inferred Resource of
9.4 million tonnes at 0.45 g/t Au for 136,000 ounces Au. The
property includes historical mine workings dating back to the early
1900s with further drilling in the 1980s that revealed the
potential for mineralization well outside of the existing resource
area, with limited follow up to date. Kilgore displays similar characteristics to
Kinross Gold's Round Mountain Mine,
which has produced over 14 million ounces of gold to date.
In 2019, Otis Gold completed a preliminary economic assessment
that supports the potential for a low capital intensity, low
operating cost, open-pit, heap-leach mining operation, which
projects an initial capital cost of US$81
million, producing 112,500 ounces of gold per year over a
4.9 year mine life and generating highly attractive economics at
US$1,300 gold, including a post-tax
US$110 million NPV5% and
34% IRR. At US$1,500 gold, the
project delivers a projected post-tax US$185
million NPV5% and 53% IRR (see Otis Gold press
release dated August 27, 2019).
Multiple opportunities exist to enhance the project, including
significant exploration potential.
The Kilgore project is scalable
in size and throughput and is open for expansion to the north,
south and west. Opportunities for step-out drilling exist around
the current area of mineralization. Immediately to the north of the
deposit 16OKR-338 intersected 85.4 metres of 2.50
g/t Au near surface in the volcanic sequence, an area
of the deposit that requires follow up along strike. Additionally,
drilling has identified mineralization in the Aspen formation, a permeable sedimentary unit
lying below the volcanic package that has seen minimal drilling
with multiple holes ending in mineralization. Drill results from
the Aspen formation include:
- 56.4 m of 2.05 g/t Au in
15OKR 304;
- 59.5 m of 3.79 g/t Au in
15OKR-305;
- 50.3 m of 4.24 g/t Au in
15OKR-308;
- 94.5 m of 4.21 g/t Au in
15OKR-309; and
- 30.5 m of 5.37 g/t Au in
16OKR-315.
Drilling at the Kilgore Project in 2020 will be performed under
a Plan of Operations approved by the U.S. Forest Service. Results from this work will be
incorporated into an updated resource estimate. Modelling is
underway to improve understanding of the controls on high-grade
mineralization, which represents the feeders of the mineralizing
system, and to further define the receptive volcanic and
sedimentary rock units that make up the bulk of the current
resource. These units are open beyond the current resource. These
assessments are designed to create new targets for expansion in
2020.
Excellon will also own a portfolio of precious metals
exploration projects in the United
States, Mexico and
Germany including the Evolución
Project in Zacatecas, the
Oakley gold project in
Idaho and the Silver City Project
in Saxony, Germany.
Board & Management
Excellon will be managed by a combination of individuals from
the two companies to ensure continuity with the core assets and
current work programs. The proposed Board will comprise seven
individuals including André Fortier, Laurie
Curtis, Andrew Farncomb and
Brendan Cahill from Excellon,
Roger Norwich and Craig Lindsay from Otis Gold and Mike Timmins (CEO and Director of Trillium
Mining Corp. and former VP Corporate Development of Agnico Eagle
Mines Limited). Mr. Timmins led Agnico's C$5
million strategic investment in Otis Gold in 2017 to further
the Kilgore Project.
Key members of the continuing management team will be
Brendan Cahill, President & CEO,
Anna Ladd-Kruger CFO & VP Corporate Development, Ben Pullinger, Senior Vice President Geology,
Alan Roberts, VP Exploration (US)
and Craig Ford, VP Corporate
Responsibility.
NYSE American Listing Application and Share
Consolidation
In connection with the Transaction, Excellon is seeking to make
an application to list the common shares of the combined company on
the NYSE American. A listing on the NYSE American is expected to
materially increase Excellon's exposure to a larger and more
diverse group of institutional and retail investors which the board
and management believe will improve trading liquidity and expand
Excellon's shareholder base.
To meet the minimum share price requirements of listing on the
NYSE America (US$2.00), Excellon will
propose a consolidation of its issued and outstanding common
shares, if necessary, on the basis of between one (1)
post-consolidated common share for every five (5) to ten (10)
pre-consolidated common shares (the "Proposed Consolidation"). A
separate announcement will be made by Excellon in due course. The
listing of Excellon's common shares on the NYSE American will be
subject to the approval of the NYSE American and the satisfaction
of all applicable listing and regulatory requirements.
Sprott Lending Bridge Facility to Excellon
Excellon has signed a non-binding term sheet in respect of a
US$6-million bridge-loan credit
facility (the "Facility") with Sprott Private Resource Lending II
(Collector), LP ("Sprott Lending"). Proceeds of the Facility
will be used for, among other things, general working capital
purposes relating to Excellon's projects and ongoing corporate
development opportunities.
The Facility bears interest at 10% per annum, compounded and
payable monthly, and due and payable in full on or before
August 28, 2020. In consideration for
the Facility, Excellon will issue partner alignment shares
("Alignment Shares") to Sprott Lending with a value of US$180,000 (3% of the principal amount of the
Facility), with the number of Excellon Shares issuable to be based
on a 10% discount to the 5-day volume weighted average trading
price of the Excellon Shares on the TSX immediately prior to the
closing date of the Facility, which is expected to be on or about
February 28, 2020 subject to mutually
satisfactory documentation and other customary conditions
precedent. The Alignment Shares will be subject to a hold period of
four months and one day from the date of issuance under applicable
securities laws.
Bridge Loan to Otis
Excellon has agreed to advance Otis Gold a bridge loan in the
principal amount of up to C$500,000
("Loan") in two tranches of $250,000.
The proceeds of the Loan are to be used by Otis Gold to provide
general working capital during the period from the execution of the
Definitive Agreement until closing of the Transaction. The Loan
shall bear interest at a rate of 10% per annum and shall be
repayable in cash or shares, at Excellon's option, with the
conversion price per Otis Gold share being equal to the 5-day
volume weighted average trading price of the Otis Gold common
shares on the TSX Venture Exchange prior to the date of conversion,
subject to a minimum price of $0.125.
Advisors and Counsel
PI Financial Corp. ("PI Financial") is acting as financial
advisor and Bennett Jones LLP is acting as legal counsel to
Excellon. DuMoulin Black LLP is acting as legal counsel to Otis
Gold. Cormark Securities Inc. ("Cormark") is acting as financial
advisor to the special committee of the Board of Directors of Otis
Gold (the "Special Committee").
Board of Directors Recommendation
PI Financial has provided a fairness opinion to the Board of
Directors of Excellon that, subject to the assumptions, limitations
and qualifications set out in such fairness opinion, the
consideration to be paid by Excellon pursuant to the Transaction is
fair, from a financial point of view, to Excellon shareholders.
Cormark has provided an opinion to the Special Committee of the
Board of Directors of Otis Gold stating that, based upon and
subject to the assumptions, limitations and qualifications set
forth therein, the consideration offered to Otis Gold shareholders
pursuant to the Transaction is fair, from a financial point of
view, to Otis Gold shareholders.
Conference Call and Webcast
Excellon and Otis Gold will host a joint conference call and
webcast on February 24, 2020 at
10:00 AM EDT, to discuss the
Transaction. Those interested in participating in the conference
call should dial in use the following numbers:
North American Toll Free: 1-800-319-4610
Toronto Toll: +1-416-915-3239 (valid internationally)
Webcast link:
http://services.choruscall.ca/links/excellon20200224.html
The webcast will be archived on both the Excellon and Otis Gold
websites until the Transaction closes.
Qualified Persons
Mr. Ben Pullinger, P. Geo.,
Senior Vice President Geology has acted as the Qualified Person for
Excellon, as defined in NI 43-101, with respect to the disclosure
of the scientific and technical information in this press
release.
Mr. Alan Roberts, MSc, CPG, Vice
President of Exploration of Otis Gold, has acted as the Qualified
Person, as defined in NI 43-101, with respect to the disclosure of
the scientific and technical information in this press release.
About Excellon
Excellon's 100%-owned Platosa Mine has been Mexico's highest-grade silver mine since
production commenced in 2005. The Company is focused on optimizing
Platosa's cost and production profile, discovering further
high-grade silver and carbonate replacement deposit mineralization
on the 14,000-hectare Platosa Project and epithermal silver
mineralization on the 100%-owned 45,000-hectare Evolución Property,
and capitalizing on current market conditions by acquiring
undervalued projects. The Company also holds an option on the 164
km2 Silver City Project in Saxony, Germany, a high-grade epithermal silver
district with 750 years of mining history and no modern
exploration.
Additional details on Excellon's properties are available at
www.excellonresources.com.
About Otis Gold
Otis Gold is a resource company focused on the acquisition,
exploration, and development of precious metal deposits in
Idaho, USA. Otis is currently
developing its flagship property, the Kilgore Project, located in
Clark County, Idaho and the Oakley
Project, located in Cassia County,
Idaho.
Additional details on Otis Gold's properties are available at
www.otisgold.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Canadian securities laws. Such statements in this
press release include, without limitation, statements regarding the
timing of the completion of the Transaction, synergies of the
Transaction; the anticipated benefits of the Transaction to
shareholders of Excellon and Otis Gold; the third-party approvals
required to complete the Transaction; the conditions required to be
satisfied to complete the Transaction; the ability of the companies
to complete the Transaction on terms announced; the future results
of operations of the combined company following the completion of
the Transaction, the timing of the companies to hold their
respective shareholders' meetings; the expected timing to finalize
and mail the joint management information circular; the Proposed
Consolidation and listing on the NYSE American; the intentions,
plans and future actions of the companies participating in the
transactions described herein; the board and management of the
combined company; timing to list the common shares of Excellon on
the NYSE American, performance and achievements of the combined
company, including potential property acquisitions, the timing,
content, cost and results of proposed work programs, the continued
availability of the Loan, the discovery and delineation of mineral
deposits/resources/reserves, geological interpretations, proposed
production rates, potential mineral recovery processes and rates,
business and financing plans, business and market trends and future
operating revenues. Although the companies believe that such
statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Forward-looking statements
are typically identified by words such as: believe, expect,
anticipate, intend, estimate, postulate and similar expressions, or
are those, which, by their nature, refer to future events. The
companies caution investors that any forward-looking statements are
not guarantees of future results or performance, and that actual
results may differ materially from those in forward looking
statements as a result of various factors, including, but not
limited to, the inability to satisfy the conditions required to
complete the Transaction; the companies not being able to obtain
third-party approvals; the Agreement being terminated; variations
in the nature, quality and quantity of any mineral deposits that
may be located, significant downward variations in the market price
of any minerals produced, the inability to obtain any
necessary permits, consents or authorizations required for its
activities, to produce minerals from its properties successfully or
profitably, to continue its projected growth, to raise the
necessary capital or to be fully able to implement its business
strategies. The companies do not undertake, and assumes no
obligation, to update or revise any such forward-looking statements
or forward-looking information contained herein to reflect new
events or circumstances, except as may be required by law.
The public disclosure filings of Excellon and Otis Gold may
be accessed via www.sedar.com and readers are urged to review these
materials, including the technical reports filed with respect to
the mineral properties of the combined companies, and particularly
the September 7, 2018 NI 43-101
technical report prepared by SRK Consulting (Canada) Inc. with respect to the Platosa
Property.
This press release is not and is not to be construed in any
way as, an offer to buy or sell securities in the United States. The distribution of the
Excellon Shares in connection with the transactions described
herein will not be registered under the United States Securities
Act of 1933 (the "U.S. Securities Act") and the Excellon Shares may
not be offered or sold in the United
States absent registration or an applicable exemption from
the registration requirements of the U.S. Securities Act and
applicable state securities laws. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy
the Excellon Shares, nor shall there be any offer or sale of the
Excellon Shares in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
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 press release.
SOURCE Excellon Resources Inc.
