Ms. Jessica Helm reports
LEADFX ANNOUNCES ADDITIONAL DETAILS REGARDING TRANSACTION WITH INCOR
Further to the announcement of May 12, 2017, LeadFX Inc. has provided additional details regarding its previously announced arm's-length transaction with InCoR Technologies Ltd. and InCoR Energy Materials Ltd., related to the transfer of lead-refining technologies to LeadFX for the initial development of a lead refinery at the company's Paroo Station mine. Except as described herein, the terms of the transaction remain unchanged from the previous announcement.
Terms of the transaction
As previously disclosed, pursuant to the terms of a definitive umbrella agreement, InCoR will undertake and pay for a definitive feasibility study (DFS) for the development of a lead refinery at the Paroo Station mine. Upon the successful completion of the DFS, LeadFX will have exclusive rights to use and sublicense InCoR's lead-refining technologies worldwide.
The agreement provides that LeadFX will issue two separate common share purchase warrants to InCoR to acquire (in the aggregate) up to 28.75 million common shares in the capital of LeadFX. The warrants will be exercisable, for no additional consideration, on and subject to the occurrence of the following triggering events:
- Eighty per cent of the warrants (23 million common shares) (stage 2 warrants) are to be exercisable only on completion of a successful DFS. The DFS will be deemed to be completed and successful if and only if it meets strict criteria, and delivers a superior economic outcome for LeadFX, including (i) a demonstrable Paroo Station life of mine of no less than 10 years and (ii) Paroo Station life-of-mine gross operating cash flows minus refinery capital expenditures of no less than $450-million (U.S.).
-
The remaining 20 per cent of the warrants (5.75 million common shares) (stage 3 warrants) are to be exercisable only upon receipt of definitive environmental approvals by LeadFX to construct a lead refinery at Paroo Station.
The aggregate number of common shares to be issued after giving effect to the exercise of the warrants represents approximately 75.2 per cent of the common shares currently issued and outstanding (on a non-diluted basis) prior to giving effect to the transaction. As of the date hereof, InCoR holds nil common shares in the company.
The percentages noted above are subject to change as the agreement also provides for certain adjustment and anti-dilution provisions in favour of InCoR in the event the company issues additional common shares (or obligations convertible into common shares). In particular, unless InCoR elects to participate in any issue by LeadFX of common shares or obligations convertible into common shares during the term of the stage 2 warrants, any such issuance shall result in a further warrant being issued to InCoR at no additional cost, at an effective exercise price of nil, such that InCoR can continue to maintain its pro rata ownership percentage in the company as described above. In the case of a convertible obligation, the additional warrant would only be exercisable by InCoR if and when such convertible obligation is exercised by the holder(s) thereof. Further details in respect of any additional dilution are provided below.
In respect of the stage 2 warrants and the stage 3 warrants, no such adjustment will be required for common share issuances in aggregate up to a maximum of $2.5-million (excluding any debt obligations convertible into common shares) occurring before the exercise of the stage 2 warrants, where InCoR is given the option (whether exercised or not) to participate on the same terms and conditions in such issuance.
In respect of the stage 3 warrant, no such adjustment will be required for common share issuances (including any debt obligations convertible into common shares) occurring after the exercise of the stage 2 warrants, where InCoR is given the option (whether exercised or not) to participate on the same terms and conditions in such issuance.
Assuming the full exercise of both the stage 2 warrants and the stage 3 warrants, and no additional issuances of common shares, InCoR would own approximately 42.9 per cent of the outstanding common shares, expressed on a non-diluted basis. The company's majority shareholder, Sentient Group of Global Resource Funds, would own approximately 48.6 per cent, and the minority shareholders would own approximately 8.5 per cent of the issued and outstanding common shares, respectively.
If, during the term of the stage 2 warrants, LeadFX either (i) effects an offering of common shares for gross proceeds in excess of $2.5-million; (ii) effects an offering of common shares for gross proceeds of less than $2.5-million but does not provide InCoR with a pro rata participation right; or (iii) issues securities convertible into common shares in which InCoR chooses not to participate in and which are ultimately converted into common shares, then the anti-dilution provisions described above will operate to ensure that, on full exercise of the warrants, InCoR continues to own approximately 42.9 per cent of the issued and outstanding common shares.
The attached table provides various dilution scenarios in the event that the adjustment provisions above in favour of InCoR are triggered through the issuance of common shares by LeadFX.
A B C D E F = D/E G = D/C H = D/A
Currently Number of Issued and Number of Issued and Dilution Dilution Dilution
issued and common shares outstanding common outstanding as a % of as a % of as a % of
outstanding issued or common shares common issued and issued and currently
common issuable shares to be shares outstanding outstanding issued and
shares pursuant to (prior to issued to (after common common outstanding
future giving InCor giving shares shares common
financings effect to the effect to (after (prior to shares
(that trigger transaction the trans- giving giving (prior to
adjustment and any action and effect to effect to giving
provisions adjustment) any adjust the trans- the trans- effect to
in favour of -ment) action and action and the trans-
InCoR any adjust any adjust action and
-ment) -ment) any adjust
-ment)
38,253,903 No additional 38,253,903 28,750,000 67,003,903 42.9% 75.2% 75.2%
offering. Only
the stage 2
warrants and the
stage 3 warrants
are issued.
38,253,903 10,000,000 48,253,903 28,750,000 84,519,476 42.9% 75.2% 94.8%
common shares + 7,515,573
= 36,265,573
38,253,903 20,000,000 58,253,903 28,750,000 102,035,049 42.9% 75.2% 114.4%
common shares + 15,031,146
= 43,781,146
38,253,903 30,000,000 68,253,903 28,750,000 119,550,622 42.9% 75.2% 134.1%
common shares + 22,546,719
= 51,296,719
38,253,903 40,000,000 78,253,903 28,750,000 137,066,195 42.9% 75.2% 153.7%
common shares + 30,062,292
= 58,812,292
Toronto Stock Exchange requirements
Pursuant to the TSX Company Manual, the transaction (including, pursuant to Section 607(e) of the manual, for the adjustment and anti-dilution provisions described above) will continue to require approval from the holders of more than 50 per cent of the common shares (other than those securities excluded as required by the TSX). Pursuant to Section 604(d) of the manual, the company has obtained approval from the TSX to obtain written consents to the transaction from holders of over 50 per cent of its common shares in lieu of convening a general meeting of securityholders and proposes to satisfy this requirement through a written resolution from Sentient. Closing of the transaction is conditional upon satisfaction of customary closing conditions and deliveries, including all required securityholder approvals and approval of the TSX and, in any event, will not occur on or before June 23, 2017, being a date five business days after the issuance of this press release.
About InCoR
Technologies Ltd.
InCoR Technologies is a subsidiary of InCoR Holdings PLC, a venture capital and holding company in the natural resource sector, with particular expertise in mining and mining technologies. Apart from the lead-refining technology, InCoR Technologies holds a proprietary technology for processing of nickel laterites -- the starved acid leaching technology or SALT. InCoR Energy Materials Ltd. will finance the Paroo Station DFS.
About LeadFX
Inc.
LeadFX is a Canadian-based mining company focused on the development of lead-silver projects located in stable jurisdictions. Its current portfolio includes a restart-ready lead operation in Western Australia, and exploration and development projects in Alaska and Utah, United States. The company continues to seek opportunities at its new properties in North America to underpin future cash flow and growth.
We seek Safe Harbor.
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