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Bonterra Resources Inc (2)
Symbol BTR
Shares Issued 233,985,579
Close 2018-07-20 C$ 0.38
Market Cap C$ 88,914,520
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Bonterra Resources, Metanor firm up merger

2018-07-23 07:47 ET - News Release

Also News Release (C-MTO) Metanor Resources Inc (2)

Mr. Nav Dhaliwal of Bonterra reports

BONTERRA AND METANOR ENTER INTO DEFINITIVE AGREEMENT

Bonterra Resources Inc. and Metanor Resources Inc., further to their news release dated June 18, 2018, have entered into a definitive arrangement agreement dated July 20, 2018, to combine Bonterra and Metanor to create an exciting new advanced Canadian gold exploration and development company focused on becoming the leader in the building out and future mining development of the Urban Barry Quebec gold camp.

The transaction contemplates that Bonterra will acquire all of the issued and outstanding common shares of Metanor for 73 cents in equity consideration, at an exchange ratio of 1.6039 Bonterra shares for each Metanor share by way of plan of arrangement under the Canada Business Corporations Act (CBCA). The purchase price represents a 40-per-cent premium to the 30-day VWAP (volume-weighted average price) of Metanor's common shares on the TSX Venture Exchange on June 15, 2018 (the last unaffected trading price prior to the announcement of the transaction), and a premium of 30 per cent to the closing price as of such date. Upon completion of the transaction, existing Bonterra and Metanor shareholders will own approximately 58 per cent and 42 per cent of combined company, respectively.

Immediately prior to the completion of the Metanor acquisition, Bonterra will spin out its Larder Lake assets and liabilities in Ontario, Canada, and $7-million in cash in order to create a new exploration company (Spinco), by way of plan of arrangement under the Business Corporations Act (British Columbia).

Metanor has called a special meeting of its shareholders and optionholders to approve the transaction on Sept. 18, 2018. Bonterra has called a special meeting of its shareholders and optionholders on the same date to approve the spinout. Further information regarding the transaction and the spinout will be contained in the management information circulars to be sent to securityholders in connection with the Metanor meeting and Bonterra meeting.

The board of directors of Metanor, following consultation with its legal advisers and receipt of a favourable fairness opinion by Red Cloud Klondike Strike Inc., has approved the transaction. The directors of Metanor will recommend that Metanor securityholders vote in favour of the transaction in the information circular to be mailed to Metanor securityholders in respect of the Metanor meeting.

The board of directors of Bonterra, following consultation with its financial and legal advisers and receipt of a favourable fairness opinion by PI Financial Corp., has approved the transaction and the spinout. The directors of Bonterra will recommend that Bonterra securityholders vote in favour of the spinout in the information circular to be mailed to Bonterra securityholders in respect of the Bonterra meeting.

Highlights of the transaction:

  • Creation of an exciting precious metals growth exploration, development and production company located in one of the best mining jurisdictions in the world.
  • The combined entity will have one of the largest contiguous land packages located in the highly prospective Urban Barry gold camp.
  • Control of three advanced high-grade gold deposits (Gladiator, Bachelor, Barry) and significant regional priority targets with resource upside potential.
  • One-hundred-per-cent control and operator of the only permitted gold mill in the region, that provides an expandable centralized production facility, surrounded by greater than 15 known gold deposits within a 100 km radius.
  • Derisking of the Gladiator project: Bonterra's delivery of its updated National Instrument 43-101 resource for the Gladiator gold deposit remains on schedule for the second half of 2018. Metanor's mill infrastructure provides Bonterra the opportunity to significantly reduce the capital requirements and compress the timelines to advance the Gladiator project to potential production.
  • Maintains strong balance sheet: The pro forma company will have approximately $32-million in cash on hand, after the spinout, to further advance the Gladiator project to production, and increase production at Bachelor and Barry.
  • The creation of Spinco, a well-capitalized exploration company, to unlock the value of Bonterra's Larder Lake gold asset, and allow for a focused exploration effort and advancement of these assets.

Benefits to Bonterra:

  • Provides Bonterra with a clear and cost-effective pathway to bring its Gladiator deposit into production;
  • Addition of the Bachelor mine and the Barry deposit and associated exploration potential to its existing resource portfolio;
  • Consolidates the entire southern portion of the Urban Barry camp, when combined with the recently executed option agreement with Beaufield Resources, and places Bonterra as one of the largest landholders in the region;
  • Access to and control of an expandable mill/processing facility, centrally located in the Urban Barry camp, further derisking the Gladiator gold deposit;
  • Adds tremendous exploration potential to Bonterra's portfolio with several high-priority regional targets to explore;
  • Addition of strong technical team and increased knowledge base of this rich camp.

Benefits to Metanor:

  • Immediate and significant premium of approximately 40 per cent based on the 30-day volume-weighted average price (VWAP) on the TSX Venture Exchange on June 15, 2018 (the last unaffected trading day prior to announcement of the transaction);
  • Superior financial strength and flexibility to simultaneously increase production and exploration programs while leveraging and enhancing existing infrastructures;
  • Exposure to potential long-life asset to supplement current production;
  • Increased trading liquidity, enhanced value proposition and capital markets profile;
  • Increased exposure to institutional, corporate and retail investors.

Transaction summary and timing

Pursuant to the arrangement agreement, the transaction will take place by way of a plan of arrangement under the CBCA whereby Bonterra will acquire all of the issued and outstanding common shares of Metanor. Optionholders of Metanor will receive replacement Bonterra options, entitling them to receive on exercise common shares of Bonterra, subject to an adjustment to reflect the transaction. Holders of outstanding warrants of Metanor will have their warrants adjusted to reflect the transaction and will not be receiving replacement warrants. The transaction is subject to the approval of 66-2/3rds per cent of Metanor shareholders and optionholders in attendance and voting at the Metanor meeting. Shareholders and optionholders of Metanor will be voting on the approval of the transaction only and will not be voting on the spinout.

Pursuant to the arrangement agreement, the spinout will take place by way of a plan of arrangement under the BCBCA whereby Bonterra will assign its Larder Lake property and $7-million in cash to Spinco. Each holder of Bonterra common shares will receive one Spinco common share for each seven Bonterra shares held. The spinout will take place immediately prior to the transaction and as a result shareholders of Metanor will not be entitled to receive any interest in Spinco. The spinout is subject to the approval of 66-2/3rds per cent of Bonterra shareholders and optionholders in attendance and voting at the Bonterra meeting. Shareholders and optionholders of Bonterra will be voting on the approval of the spinout only and will not be voting on the transaction.

In addition to the securityholder approvals referred to above, pursuant to the terms of the arrangement agreement, the completion of the transaction is conditional upon a number of items, including, without limitation: (a) each party shall have performed and complied in all material respects with all of the covenants and obligations thereof required to be performed by them prior to the completion of the transaction; (b) the representations and warranties of each party set out in the arrangement agreement being true and accurate, in all material respects; (c) the receipt of all regulatory and other required approvals, including approval of the TSX Venture Exchange; (d) other normal conditions precedent, including the absence of a material adverse effect in Bonterra or Metanor; (e) all material third party consents shall have been obtained; (f) holders of no more than 5 per cent of the outstanding shares of Bonterra and no more than 5 per cent of the outstanding shares of Metanor shall have exercised their rights of dissent in respect of the transaction; and (g) the execution, delivery and continued enforceability of required support agreements.

The arrangement agreement contains customary deal support provisions, including a reciprocal break fee of $3.75-million, payable if the transaction is not completed in certain circumstances. In addition, the arrangement agreement includes mutual customary non-solicitation covenants together with customary exemptions to permit each party's board of directors to exercise its fiduciary duties, as well as a right to match any superior proposal that may arise.

Full details of the transaction and the spinout will be included in the management information circulars to be filed with the regulatory authorities and mailed to Metanor's and Bonterra's securityholders in accordance with applicable securities laws. All securityholders are urged to read the information circulars once they become available as they will contain additional important information about the transaction and the spinout.

The transaction is expected to be completed by the end of September, 2018, or such later date as the parties may agree.

Advisers and counsel

Sprott Capital Partners and PI Financial Corp. acted as financial advisers to Bonterra and Miller Thomson LLP acted as Bonterra's legal adviser.

Irwin Lowy LLP acted as Metanor's legal adviser.

About Bonterra Resources Inc.

Bonterra is financed with $65-million raised since 2017. It also enjoys a strong shareholder base.

Disclosure of historical mineral resource estimates

The Larder Lake project contains a historic estimate. In Aug. 15, 2011, P&E Mining Consultants prepared for Kerr Mines a resource estimate as reported in a technical report titled "43-101 Technical Report and Updated Resource Estimates on the Larder Lake Property, Larder Lake, Ontario, for Bear Lake Gold Ltd." Bonterra considers the historical estimate to be relevant and reliable given that it was prepared under National Instrument 43-101 standards. Bonterra considers this resource estimate to be historical; it has not independently verified it. A qualified person of Bonterra has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves, and Bonterra is not treating the historical estimate as current mineral resources.

                                   BEAR LAKE DEPOSIT AND CHEMINIS DEPOSIT          
          
Classification                         Tonnes                         Grade              Contained ounces
                                                                   (Au g/t)                          (Au)

Indicated                             335,000                          4.07                        43,800
Inferred                            5,141,000                          5.55                       917,000
          
(1) Mineral resources which are not mineral reserves do not have demonstrated economic viability. The 
estimate of mineral resources may be materially affected by environmental, permitting, legal, title, 
taxation, socio-political, marketing or other relevant issues.
(2) The quantity and grade of reported inferred resources in this estimation are uncertain in nature and 
there has been insufficient exploration to define these inferred resources as an indicated or measured 
mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated 
or measured mineral resource category.

Dale Ginn, PGeo, has approved the technical information contained in this release. Mr. Ginn is a director and vice-president of exploration of Bonterra and is a qualified person as defined by National Instrument 43-101.

About Metanor Resources Inc.

Metanor is an emerging gold producer having its main assets, the Bachelor mine and the Barry project, in addition to over 15,000 hectares of exploration property, located in the mining-friendly jurisdiction of Quebec in the heart of the Urban Barry camp.

Pascal Hamelin, PEng, president of Metanor, is the qualified person of Metanor as defined under National Instrument 43-101 and has reviewed and approved the technical information relating to Metanor contained in this news release.

We seek Safe Harbor.

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