TSX Venture Exchange Symbol: PGR Shares Issued: 53,649,254
VANCOUVER, July 31, 2012 /CNW/ - Paragon Minerals Corporation
("Paragon") is pleased to announce that it has entered into a
definitive agreement (the "Arrangement Agreement") with Canadian
Zinc Corporation ("Canadian Zinc") whereby Canadian Zinc will
acquire all of the outstanding common shares of Paragon in exchange
for common shares of Canadian Zinc by way of a statutory plan of
arrangement (the "Arrangement"). The Arrangement is subject
to approval by the Paragon shareholders, regulatory and court
approvals, and other customary closing conditions. Pursuant to the
Arrangement Agreement: -- Paragon shareholders will receive, in
exchange for each Paragon share held, 0.136 shares of Canadian Zinc
(the "Exchange Ratio"). The consideration represents a total of
CDN$0.061 per Paragon share, based on the volume weighted average
price of Canadian Zinc shares on the TSX for the 30 trading days
ended July 20, 2012 and a premium of 52% to the volume weighted
average price of Paragon shares on the TSX-Venture for the same
period. -- In addition, all outstanding options and warrants to
purchase Paragon common shares will be exchanged for replacement
options and warrants to purchase Canadian Zinc common shares and
will be exercisable to purchase that number of Canadian Zinc common
shares at an exercise price each determined by reference to the
Exchange Ratio. On signing of the Arrangement Agreement, Canadian
Zinc has also agreed to immediately purchase, in a non-brokered
private placement financing, 7,000,000 Paragon common shares at a
price of $0.07 per share for a total consideration of $490,000 (the
"Private Placement"). The closing of the Private Placement will be
as soon as practicable after acceptance by the TSX Venture Exchange
and receipt of other required regulatory approvals for the Private
Placement. John Kearney, Canadian Zinc's Chairman and CEO
commented, "The merger is consistent with Canadian Zinc's strategy
of building a growth focused base metal producer in North America
and represents an excellent value opportunity for shareholders of
both companies. We believe that the addition of Paragon's
advanced exploration assets like the South Tally Pond VMS project
in central Newfoundland is a major step towards achieving our
strategy of creating a strong intermediate base metal company with
an attractive growth profile focused on enhancing shareholder
value". Michael Vande Guchte, President and CEO of Paragon,
commented, "Canadian Zinc is a well-funded Canadian exploration and
development company that is in the process of putting its high
grade Prairie Creek silver-lead-zinc deposit into production. Given
the prevailing market conditions, it is the Board and management's
view that Paragon shareholders will benefit from Canadian Zinc's
financial strength and development expertise in unlocking
shareholder value in Paragon's base metal assets. The transaction
provides Paragon shareholders with the opportunity to participate
in the future potential of a near-term producer with a portfolio of
production, development and exploration assets". Canadian Zinc's
100%-owned Prairie Creek Mine is a silver-lead-zinc development
project located in the Northwest Territories, 500 km west of
Yellowknife. The Prairie Creek deposit has the potential to
be a significant zinc-lead-silver producer, based on NI
43-101Mineral Resource estimates which include: -- Measured &
Indicated Resource:5.43 million tonnes grading 10.8% zinc, 10.2%
lead, 160 g/t silver, and 0.31% copper. -- Inferred Resource: 6.24
million tonnes grading 14.5% zinc, 11.5% lead, 229 g/t silver and
0.57% copper using a 8% zinc equivalent cut-off. A portion of the
Mineral Resources was converted to a Mineral Reserve Estimate of
5.2 million tonnes grading 9.4% zinc, 9.5% lead and 151 g/t
silver. A prefeasibility study completed by SNC Lavalin for
Canadian Zinc in June, 2012 indicates a pre-tax net present value
("NPV") of $253 million using an 8% discount, with an internal rate
of return ("IRR") of 40.4% and payback period of 3 years based on
long-term metal price projections of $1.00/lb zinc, $1.00/lb lead,
$26.00/oz silver (see Canadian Zinc press release dated June 27,
2012). The Prairie Creek deposit remains open for expansion.
Please note that mineral resources that are not mineral reserves do
not have demonstrated economic viability. Paragon's key asset, the
100%-owned South Tally Pond VMS project is located in a proven
mining district in central Newfoundland, immediately southwest of
Teck Resources Limited's Duck Pond Cu-Zn mine and mill
complex. In January 2012, Paragon announced an initial
NI43-101 Mineral Resource Estimate on the South Tally Pond
Lemarchant VMS deposit (see Paragon press release dated
January 23, 2012 and related technical report entitled "NI
43-101 Technical Report and Mineral Resource Estimate on the
Lemarchant Deposit, South Tally Pond VMS Project, Central
Newfoundland, Canada" and dated effective March 2, 2012). The
resource estimate includes: -- Indicated Resource: 1.24 million
tonnes grading 5.38% zinc, 1.19% lead, 0.58% copper, 1.01 g/t gold
and 59.17 g/t silverusing a 7.5% zinc equivalent grade cut-off --
Inferred Resource: 1.34 million tonnes at 3.70% zinc, 0.86% lead,
0.41% copper, 1.00 g/t gold and 50.41 g/t silverusing a 7.5% zinc
equivalent grade cut-off The Lemarchant Deposit remains open along
strike and to depth, and there are numerous, other untested
priority VMS targets on the property. Transaction Benefits --
Implements Canadian Zinc's strategy of building a base metal
producer with a combined portfolio of operating mines and pipeline
of high-potential growth projects in mining friendly jurisdictions.
-- Further asset diversification in a proven mining area. --
Financial strength to review potential for consolidating resources
in central Newfoundland. -- Establish a pipeline of zinc deposits
for the time when it is believed the zinc price will see
significant upside improvement. Highlights for Paragon Shareholders
-- Opportunity to participate in the future potential of a
growth-oriented base metal company. -- Exposure to an exceptional
portfolio of near producing, development, and exploration base
metal assets. -- A platform through which to participate in future
sector consolidation. -- Increased trading liquidity through
ownership of Canadian Zinc shares. Transaction Overview The
proposed transaction will be carried out by way of a court-approved
plan of arrangement whereby Canadian Zinc will acquire all of the
issued and outstanding common shares of Paragon. Paragon will
become a wholly owned subsidiary of Canadian Zinc. Paragon
shareholders will be entitled to receive, in exchange for each
Paragon share held, 0.136 shares of Canadian Zinc. The proposed
transaction is subject to certain customary conditions including
the approval of not less than 66-2/3% of the votes cast at a
special meeting of Paragon security holders that is expected to be
held in September 2012. Approval will also be required from
the majority of votes cast by "disinterested" shareholders pursuant
to Multilateral Instrument 61-101 Protection of Minority Security
Holders in Special Transactions. Pursuant to the terms of the
Arrangement Agreement, the proposed transaction is also subject to
applicable regulatory approvals and the satisfaction of certain
closing conditions customary for transactions of this nature. The
Arrangement Agreement also provides for, among other things,
customary board support and non-solicitation covenants from Paragon
(subject to customary "fiduciary out" provisions that entitle
Paragon to consider and accept a superior proposal). The
Arrangement Agreement also provides for the payment of a break fee
of C$150,000 to Canadian Zinc on the occurrence of certain
termination events. After giving effect to the Arrangement,
Canadian Zinc and Paragon shareholders will own approximately 95.5%
and 4.5%, respectively, of the Canadian Zinc issued and outstanding
common shares. The Paragon Board of Directors have determined that
the proposed transaction is in the best interest of Paragon, is
fair to the Paragon shareholders, and intend to recommend in the
Information Circular that Paragon shareholders vote in favour of
the proposed transaction. The Paragon Board of Directors'
determinations are based on the recommendations of a special
committee of independent Paragon directors; Roman Friedrich &
Company Ltd., Paragon's financial advisor; and Evans & Evans
Inc, the fairness opinion provider to the special committee.
Evans & Evans have provided an opinion to the effect that the
consideration to be received by Paragon shareholders is fair from a
financial point of view. Paragon's directors and senior management
representing, in aggregate, approximately 2.7% of Paragon's issued
and outstanding shares, have entered into customary voting support
agreements pursuant to which, among other things, they have agreed
to vote their Paragon shares in favour of the proposed transaction.
If it is approved by shareholders of Paragon, the proposed
transaction is expected to be completed in September 2012 and is
subject to certain customary conditions, including receipt of all
necessary court, TSX, TSX-Venture and shareholder approvals. The
terms and conditions for the proposed transaction will be
summarized in the Paragon Management Information Circular to be
mailed to Paragon shareholders in August 2012. Copies of the
Arrangement Agreement, the Management Information Circular, and
certain related documents and agreements will be filed with
Canadian securities regulators and will be available at the SEDAR
website at www.sedar.com under Canadian Zinc and Paragon profiles,
as applicable. Advisors Roman Friedrich & Company is acting as
financial advisor to Paragon and its board of directors and a
success fee is payable upon closing of the transaction to Roman
Friedrich & Company in respect to the Arrangement
Agreement. Evans & Evans Inc is acting as fairness
opinion provider to the special committee of the board of directors
of Paragon. Paragon's legal counsel is Davis LLP. Canadian
Zinc's legal counsel is DuMoulin Black LLP. About Canadian Zinc
Corporation Canadian Zinc Corporation is a Toronto-listed junior
exploration and development company trading under the symbol CZN on
the Toronto Stock Exchange, under "CZICF" on the Over the Counter
OTCOB in the US, and under the symbol "SAS" on the Frankfurt
Exchange. The company's main project is the Prairie Creek
Zinc, Silver, Lead Mine in the Northwest Territories, Canada with
Measured and Indicated Resources of 5.43 million tonnes grading
10.8% zinc, 10.2% lead, 0.31% copper and 160 g/t silver and
Inferred resources of 6.24 million tonnes grading 14.5% zinc, 11.5%
lead, 0.57% copper and 229 g/t silver. A portion of the Mineral
Resources was converted to a Mineral Reserve Estimate of 5.2
million tonnes grading 9.4% zinc, 9.5% lead and 151 g/t silver. For
further information on Canadian Zinc visit the website at
www.canadianzinc.com About Paragon Minerals Corporation Paragon
Minerals Corporation is a Canadian-based mineral exploration
company focused on gold and base-metal exploration in Newfoundland
and northwest Ontario. Paragon's flagship project is the
100%-owned South Tally Pond VMS project where it is advancing a
significant precious metal rich massive sulphide deposit located in
producing base metal mining district in central Newfoundland.
Paragon is also exploring a portfolio of gold properties through
partner and company-funded exploration programs. PARAGON MINERALS
CORPORATION "Michael J. Vande Guchte"
_______________________________ President & CEO Qualified
Person: This news release has been prepared under the supervision
of Michael J. Vande Guchte, P.Geo., who serves as the qualified
person under National Instrument 43-101 for Paragon Minerals
Corporation. Forward-looking Statements: This news release contains
certain statements that may be deemed "forward-looking
statements". All statements in this release, other than
statements of historical fact, that address events or developments
that Paragon expects to occur, are forward looking
statements. Forward-looking statements are statements that
are not historical facts and are generally, but not always,
identified by the words "expects", "plans", "anticipates",
"believes", "intends", "estimates", "projects", "potential" and
similar expressions, or that events or conditions "will", "would",
"may", "could" or "should" occur. Forward-looking statements
in this document include statements regarding current and future
exploration programs, activities and results, resource and reserve
estimates and other projections based on such estimates, and
statements regarding approvals for, and completion of, the proposed
plan of arrangement. Although Paragon believes the
expectations expressed in such forward-looking statements are based
on reasonable assumptions, such statements are not guarantees of
future performance and actual results may differ materially from
those in forward-looking statements. Factors that could cause
the actual results to differ materially from those in
forward-looking statements include market prices, exploitation and
exploration success, continued availability of capital and
financing, inability to obtain required regulator, shareholder or
governmental approvals and general economic, market or business
conditions. Investors are cautioned that any such statements
are not guarantees of future performance and actual results or
developments may differ materially from those projected in the
forward-looking statements. Forward-looking statements are based on
the beliefs, estimates and opinions of Paragon's management on the
date the statements are made. Except as required by securities
laws, Paragon undertakes no obligation to update these
forward-looking statements in the event that management's beliefs,
estimates or opinions, or other factors, should change. These
statements are based on a number of assumptions, including, among
others, assumptions regarding general business and economic
conditions, the timing of the receipt of regulatory, shareholder
and governmental approvals for the transactions described herein,
the ability of Paragon and other relevant parties to satisfy stock
exchange and other regulatory requirements in a timely manner, the
availability of financing for Paragon's proposed transactions and
exploration and development programs on reasonable terms and the
ability of third-party service providers to deliver services in a
timely manner. The foregoing list of assumptions is not
exhaustive. Events or circumstances could cause results to
differ materially. Information concerning Estimates of Indicated
and Inferred Resources: This news release uses the terms "indicated
resources" and "inferred resources". Paragon advises
investors that although these terms are recognized and required by
Canadian regulations (under National Instrument 43-101 Standards of
Disclosure for Mineral Projects), the U.S. Securities and Exchange
Commission does not recognize them. Investors are cautioned not to
assume that any part or all of the mineral deposits in these
categories will ever be converted into reserves. In addition,
"inferred resources" have a great amount of uncertainty as to their
existence, and 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 feasibility or
pre-feasibility studies, or economic studies except for Preliminary
Assessment as defined under 43-101. Investors are cautioned
not to assume that part or all of an inferred resource exists, or
is economically or legally mineable. "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 release."
Paragon Minerals Corp. CONTACT: For more information, please visit
the company website or contactMichael Vande Guchte at (604)
629-2353.
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