Mr. Steve Hanson reports
IFR ENTERS OPTION AGREEMENT FOR 100% OF TONALLI ENERGIA; UPON EXERCISE GRUPO IDESA TO BECOME MAJOR INVESTOR IN IFR
International Frontier Resources Corp. has entered into a share option agreement with its joint venture partner, Grupo IDESA SA de CV, pursuant to which International Frontier's wholly owned Mexican subsidiary, Petro Frontera SAPI de CV, was granted the option to purchase all of the outstanding shares in the joint venture company Tonalli Energia SAPI de CV held by IDESA. Through Frontera, International Frontier holds 50 per cent of the outstanding Tonalli shares, with IDESA holding the remaining 50 per cent. Tonalli holds the licence contract for onshore oil and gas development Block 24, the Tecolutla block, located in the state of Veracruz, Mexico.
Highlights of the agreement include:
The option agreement aligns International Frontier's and IDESA's long-term strategy of building an energy leader in Mexico.
- Upon exercise of the option, IDESA will have the right to nominate two directors to International Frontier's board of directors with a continuing right while a major shareholder of International Frontier to nominate 25 per cent of the board seats.
- IDESA will subscribe for a minimum $1-million of International Frontier shares pursuant to the future private placement.
"The signing of this option agreement is a major milestone and solidifies IFR's relationship with IDESA," stated International Frontier president and chief executive officer Steve Hanson. "This next step in our established partnership firmly aligns IFR's and IDESA's interests in the Mexican upstream business and significantly broadens IFR's access to investors and capital markets in Mexico."
"IDESA is very proud to strengthen its relationship with IFR, we remain focused on delivering shareholder value from a more diverse business portfolio, as well as a broader access to capital markets to continue pursing our growth strategy in Mexico," stated Patricio Gutierrez, Grupo IDESA chairman of the board. "The option agreement confirms IDESA's historical commitment to our country's energy sector and will certainly leverage our expertise in the upstream business."
Terms of the option agreement
Under the terms of the option agreement, International Frontier's wholly owned subsidiary has the right to acquire the outstanding shares of Tonalli held by IDESA prior to the expiry date of Sept. 25, 2020, upon payment of the exercise price in the amount of 70 million common shares in the capital of International Frontier, less the number of International Frontier shares issued to IDESA (up to $1-million) pursuant to the future private placement.
The exercise of the option is subject to certain customary closing conditions, as well as the approval of the TSX Venture Exchange and the National Hydrocarbons Commission of Mexico. There can be no assurance that the option will be exercised as proposed or at all.
Other terms of the option agreement include: a capital contribution equalization provision in the event that the option is not exercised and International Frontier has made greater capital contributions to Tonalli than IDESA during the term of the option; a covenant that for 18 months following the exercise and closing of the option, IDESA will not make a dividend or distribution of International Frontier shares to IDESA shareholders, or, in the event of a change in control of IDESA during such 18-month period, transfer or sell any International Frontier shares for a period of 18 months from the date of such IDESA change of control; a covenant that if the option is exercised, on any issuance of International Frontier shares other than pursuant to outstanding convertible securities, options or warrants, IDESA will be granted pre-emptive rights for two years following closing to subscribe for International Frontier shares based on IDESA's pro rata ownership of International Frontier shares at the date of such issuance; and a covenant that during the term of the option and only prior to its exercise, International Frontier shall not participate in, or own securities of, any Mexican oil and gas opportunities or businesses other than through Tonalli.
The future private placement
As set out in the option agreement, IDESA has agreed to subscribe for International Frontier shares in the aggregate amount of a minimum of $1-million pursuant to a future private placement of International Frontier shares to be completed by International Frontier before March 25, 2019. Further information regarding the future private placement, including the offering size and issuance price of the future private placement, will be disclosed by International Frontier in due course.
About Grupo IDESA
Grupo IDESA is one of the largest petrochemical groups in Mexico. For over 60 years, IDESA has produced and distributed different goods and services that provide products which are part of our daily lives. IDESA is integrated by three business segments -- petrochemicals, distribution and logistics -- with strong national presence and international reach.
About International Frontier Resources
International Frontier Resources is a Canadian publicly traded company with a demonstrated record of advancing oil and gas projects. Through its Mexican subsidiary, Petro Frontera SAPI de CV, and strategic joint ventures, International Frontier Resources is advancing the development of petroleum and natural gas assets in Mexico. International Frontier Resources also has projects in Canada and the United States, including the Northwest Territories and Montana.
We seek Safe Harbor.
© 2019 Canjex Publishing Ltd. All rights reserved.