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Otterburn closes sixth, seventh tranches of placement

2016-05-03 19:37 ET - News Release

Mr. Brian Lueck reports

OTTERBURN PROVIDES UPDATE ON FINANCING AND MEETING PRIVATE PLACEMENT

Otterburn Resources Corp. and K92 Mining International Ltd., further to news releases of July 28, 2015, Oct. 28, 2015, March 8, 2016, and March 11, 2016, have closed the sixth and seventh tranches of the interim financing pending closing of their previously announced reverse takeover.

To date, Otterburn has raised an aggregate of $1,270,126 through the sale of 3,628,931 subscription receipts at 35 cents each via the sixth and seventh tranche closings, and anticipates closing a final eighth tranche of the interim financing of $150,500 through the sale of 430,000 subscription receipts.

Otterburn issued 2,639,302 subscription receipts ($923,756) in the sixth tranche closing and 989,629 subscription receipts ($346,370) in the seventh tranche closing. Otterburn anticipates issuing 430,000 subscription receipts ($150,500) in a final eighth tranche closing expected to close on or about May 6, 2016.

Otterburn is undertaking the financing in conjunction with its proposed acquisition of K92 Mining International. Otterburn is raising private placement financing through the sale of subscription receipts at 35 cents per receipt. Otterburn has and will advance the net subscription proceeds realized from the sale of majority of the subscription receipts to K92 as loans for financing its operations in Papua New Guinea pending closing of the RTO.

Each subscription receipt entitles the holder to automatically receive either:

  • One unit of Otterburn following closing of the RTO, with each unit consisting of one common share of Otterburn and one common share purchase warrant exercisable at 50 cents for a period of 18 months from the date of issue;
  • Should the RTO fail to close by July 1, 2016, then either a return of the subscription proceeds or an interest in the loans made by Otterburn to K92.

Aggregate finders' fees of $10,412, 83,075 common shares and 112,825 finders' warrants have been paid in connection with the sixth and seventh tranche closings of the interim financing. Each finder's warrant is exercisable into one additional common share of Otterburn at a price of 50 cents for a period of 18 months after the closing of the company's RTO.

Upon the closing of eighth tranche of the interim financing, aggregate finders' fees of 30,100 common shares and 30,100 finders' warrants will be paid, having the same terms as the finders' warrants issued in connection with the sixth and seventh tranche closings.

The securities issued in relation to the sixth tranche closing are subject to a regulatory four-month hold period expiring Aug. 16, 2016. The securities issued in relation to the seventh tranche closing are subject to a regulatory four-month hold period expiring Aug. 30, 2016. The eighth tranche of the interim financing is expected to close on or about May 6, 2016, and the securities issued thereunder will include a hold period expiring four months and one day from the date of issue of the securities.

The private placement is in addition to the financing entered into by K92 with CRH Funding II Pte. Ltd., involving a $4.8-million (U.S.) gold prepayment investment and a $3.5-million equity investment as announced Feb. 4, 2016.

Information circular

The company's information circular dated April 15, 2016, was SEDAR filed on April 19, 2016. As a result of the increased private placement referred to above, assuming the completion of the eighth tranche of the interim financing and other developments, the company advises that certain information in the circular is hereby updated as follows:

  • All references to the company having raised $6,991,476 through the distribution of 19,973,976 subscription receipts under the private placement are replaced with $7,487,763 having been raised through the distribution of 21,393,605 subscription receipts;
  • All references to the aggregate finders' fees paid in connection with the private placement are revised to be $112,161, 592,703 resulting issuer shares and 741,815 compensation warrants;
  • The additional funds realized under the private placement will increase the resulting issuer's unallocated working capital;
  • The resulting issuer's fully diluted share capital is updated as shown in the attached table.

                            Number of resulting            Percentage of
                                  issuer shares            fully diluted                
OBN shares of the company
outstanding as of the date
of this information circular          4,459,778                     3.32%
Resulting issuer shares to 
be issued to K92 Holdings
shareholders                         49,126,666                    36.59%
Resulting issuer shares
issuable upon conversion of
the subscription receipts
issued under the private
placement (2)                        21,393,605                    15.93%
Resulting issuer shares
issuable to finders under 
the private placement                   592,703                     0.44%
Subtotal                             75,572,752                    56.28%
Resulting issuer shares
issuable upon exercise of
the PP warrants issuable upon
conversion of the subscription
receipts (2)                         21,393,605                    15.93%
Resulting issuer shares
issuable upon exercise of
resulting issuer warrants
issuable to CRH                      10,000,000                     7.44%
Resulting issuer shares
issuable upon exercise of
compensation warrants                   741,815                     0.55%
Subtotal                            107,708,172                    80.22%
Resulting issuer shares
issuable upon conversion of
resulting issuer preferred
shares issuable to CRH               19,007,324                    14.16%
Resulting issuer shares
issuable upon exercise of
stock options (maximum
available -- 10%)                     7,557,275                     5.63%
Total                               134,272,771                      100%
  

The number of resulting issuer shares subject to escrow will increase from 15,330,333, as contemplated in the circular, to 32,305,333, having included all of the payment shares to be issued to K92 Holdings shareholders who paid less than five cents for their K92 ordinary shares.

Appendix D -- amended articles of the company is revised to include the following Section 28.1(d)(12)(iii), reflective of other disclosure in the circular:

  • (iii) Provided the RTO has closed, if the number of common shares issuable upon conversion of all outstanding preferred shares would result in the conversion shareholders holding less than 15 per cent of all the issued and outstanding common shares in the company as of the date of closing the RTO, on a fully diluted basis (excluding common shares issuable upon the exercise of options granted to consultants, employees or directors of the company, but including common shares issuable pursuant to all other convertible securities), the company shall adjust the conversion terms hereunder so that the conversion shareholders shall, upon conversion of all outstanding preferred shares, be entitled to receive common shares in respect thereof that will be equal to 15 per cent of all of the issued and outstanding common shares in the capital of the company calculated on the aforesaid basis.

Completion of the company's acquisition of K92 is subject to a number of conditions, including, but not limited to, exchange acceptance and disinterested shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the filing statement or management information circular to be prepared in connection with the transaction, any information released or received with respect to the reverse takeover may not be accurate or complete, and should not be relied upon. Trading in the securities of Otterburn Resources should be considered highly speculative.

We seek Safe Harbor.

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