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Mich firms up Pecoy deal, arranges $21M financing

2022-06-27 11:21 ET - News Release

Mr. David Suda reports


Mich Resources Ltd. has entered into updated definitive agreements with Pembrook Copper Corp., Minera Andina de Exploraciones SAA (MinAndex) and Carlos Mauricio Carlessi Vargas, pursuant to which a total of 142.7 million preconsolidation (as defined herein) common shares of the company plus approximately $4.5-million (U.S.) in cash will be issued to the vendors to acquire and consolidate 100 per cent of the Pecoy copper project, a large-scale copper porphyry project located on trend with numerous prolific copper deposits in southern Peru. Concurrent with completion of the transaction, it is anticipated that the company will complete a one-for-five share consolidation and change its name to Miko Copper Corp.

The transaction will result in the company holding 100 per cent of Pecoy, which is host to an inferred mineral resource estimate of 865 million tonnes at a grade of 0.34 per cent copper, 0.012 per cent molybdenum, 1.33 grams per tonne silver and 0.05 gram per tonne gold (as more fully described in the attached table). The company will additionally hold the highly prospective Tororume claims, located to the north of Pecoy, which is currently under option to a major Canadian mining company, with anticipated expenditures by the major of $2.9-million in 2022.

David Suda, chief executive officer and director of the company, stated: "We are grateful to our partners in Peru and Canada who have worked tirelessly with us to finalize the terms of a multiparty transaction and financing to consolidate 100-per-cent ownership of the Pecoy copper project. Pecoy boasts a large-scale existing mineral resource within a prolific mining region in southern Peru, with abundant upside potential to continue expanding resources alongside exciting exploration at our Tororume claims to the north, which are under option with a major Canadian mining company. We are excited to welcome two new strategic investors into the story, including our option partner at Tororume, through our concurrently announced financing and look forward to working diligently towards closing of the transaction in due course."

Pecoy copper project

Pecoy is an advanced copper exploration project located 177 kilometres northwest of Arequipa within the Cretaceous copper porphyry belt of Peru, host to the Zafranal copper porphyry property (Teck Resources Ltd. and Mitsubishi Materials Corp.) located approximately 100 kilometres to the southeast of Pecoy.

Pecoy is located within the Peruvian coastal desert region, which grades into the Atacama desert farther south in Chile. Topography within the project area ranges from 700 metres at the Rio Ocona to slightly more than 4,000 metres at the highest ridges. Within the area of mineralization, the relief ranges from 1,650 metres to 2,200 metres. There is no infrastructure in the immediate project area, but water is available from the Rio Ocona delta approximately eight kilometres to the west, and power is available from the national grid 100 kilometres from site. The site also has excellent road access to a number of nearby seaports for shipping of concentrates.

The combined Pecoy project area consists of approximately 13,300 hectares. Exploration on the property dates back to 2009 and consists of 48,500 metres of diamond drilling in 121 drill holes completed by previous operators, including Pembrook. The project database includes 1,222 downhole surveys and 23,210 assays. The average drill spacing is about 118 metres in the main mineralized zone on the Pembrook side of the property and 80 m on the MinAndex side. The project database also includes quality control data, including blanks, standards and duplicates.

The Pecoy project to be acquired by the company comprises all rights and title to Pecoy currently held by the vendors. Additionally, MinAndex is the owner of certain lands adjoining Pecoy, which will be optioned to the company concurrent with the closing of the transaction and others that will be subject to an agreement of purchase and sale in favour of the company.

Tororume copper project

In addition to the principal Pecoy project being acquired, the company will also hold ownership of the Tororume copper project, located to the north of Pecoy, which is currently under option to the major with anticipated expenditures of $2.9-million in 2022. Under the terms of the option agreement dated May 28, 2021, the major has a five-year option to acquire a 50-per-cent interest in Torion Mining SAC (a wholly owned subsidiary of Pembrook) by spending $5-million, of which $2-million is committed and must be spent in the first two years. Pembrook is operator during the first option period. Upon completion of the earn-in during the first option period, a joint venture will be formed and the major will have the right to acquire an additional 26-per-cent interest (for 76-per-cent ownership in total) by spending $25-million in the first five years of the joint venture.

Transaction details

The transaction will constitute a reverse takeover of Mich when completed. The company will seek approval for the listing of the company's shares on the TSX Venture Exchange and concurrent voluntary delisting of the company's shares from the Canadian Securities Exchange. The transaction is subject to a number of conditions, including, but not limited to: (i) the approval of all regulatory bodies having jurisdiction in connection with the transaction (including exchange approval); (ii) completion of the offering (as defined herein); and (iii) approval of the shareholders of Pembrook and, if required, the company's shareholders.

As part of the transaction, a total of 4.15 million preconsolidation common shares of Mich will be cancelled.

Trading of the common shares of the company will remain halted until closing of the transaction, which is currently targeted for Q3 2022.

Equity financing

Concurrently, the company has entered into an agreement with Haywood Securities Inc., on behalf of a syndicate of agents, pursuant to which the agents have agreed to sell, on a commercially reasonable effort private placement basis, up to 84 million subscription receipts at a price of 25 cents per subscription receipt on a preconsolidation basis for gross proceeds to the company of up to $21-million. As part of the offering, the major and another senior Canadian mining company have agreed to participate in the offering in an amount totalling $9-million, subject to certain conditions that the company expects will be satisfied upon closing of the transaction.

The company has additionally granted the agents an overallotment option exercisable, in whole or in part, at the sole discretion of the agents, to purchase up to an additional number of subscription receipts equal to 15 per cent of the subscription receipts sold pursuant to the offering at the issue price for a period of up to 48 hours prior to the closing of the offering. The net proceeds of the offering are anticipated to be used to finance the cash portion of the consideration, repay certain indebtedness of the vendors, for exploration and development work at Pecoy, and for general working capital purposes.

The subscription receipts will be issued pursuant to a subscription receipt agreement to be entered into by the company, Haywood, on behalf of the agents, and a licensed Canadian trust company as subscription receipt agent to be agreed upon. Pursuant to the subscription receipt agreement, the gross proceeds from the offering (less 50 per cent of the agents' cash commission, other than commissions payable on orders by the strategic investors, and all of the agents' expenses) will be held in escrow pending satisfaction of certain conditions, including, among others: (a) the satisfaction or waiver of each of the conditions precedent to the transaction; and (b) the receipt of all required regulatory approvals in connection with the transactions and the offering, including the conditional approval of the exchange.

Upon the satisfaction of the escrow release conditions, each of the subscription receipts will automatically convert into one common share of the company. If the escrow release conditions have not been satisfied on or prior to the date that is 90 days after the closing date of the offering, the escrow agent shall return the escrowed funds, including any interest earned thereon, to the holders of subscription receipts on a pro rata basis.

Closing of the offering is expected to occur on or about July 19, 2022, and is subject to certain customary conditions, including, but not limited to, the receipt of all necessary regulatory approvals and acceptance of the exchange.

The subscription receipts to be issued under the offering will be offered by way of private placement in all of the provinces of Canada and in the United States on a private placement basis pursuant to exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended.

Following completion of the offering and the transaction, the vendors will hold approximately 52.5 per cent and the strategic investors will hold approximately 13.2 per cent of the shares of the company on an outstanding basis.

Minvisory Corp. advised Mich with respect to the strategic investors.

Qualified person

Dr. David Stone, PEng, chief operating officer of the company, is a qualified person as defined in National Instrument 43-101 and has reviewed and approved the technical content in this news release.

About Mich Resources Ltd.

The company is a British Columbia public company with a registered office at 25th floor, 700 West Georgia St., Vancouver, B.C., V7Y 1C3. The company's common shares are currently listed on the Canadian Securities Exchange under the trading symbol MICH and is a reporting issuer in each of British Columbia and Ontario. The company is principally engaged in the acquisition and exploration of mineral properties.

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