Mr. Vincent Metcalfe of Nomad reports
NOMAD ROYALTY COMPANY TO ACQUIRE CORAL GOLD, MARKING THE START OF ITS SECTOR CONSOLIDATION STRATEGY
Nomad Royalty Company Ltd. and Coral Gold Resources Ltd. have entered into a definitive arrangement agreement, under which Nomad intends to acquire all of the outstanding common shares of Coral pursuant to a statutory plan of arrangement pursuant to the Business Corporations Act (British Columbia) for total value of approximately $45.8-million. All amounts in this news release are expressed in U.S. dollars unless otherwise indicated.
- Acquisition of a premier, uncapped sliding-scale 1.00-per-cent-to-2.25-per-cent net smelter return (NSR) royalty on Nevada Gold Mines' Robertson property located in Nevada, which forms part of the greater Cortez & Pipeline mining complex. Based on the current gold spot price of over $1,940 (U.S.) per ounce, the applicable NSR (net smelter return) royalty rate is currently 2.00 per cent;
- Premier gold mining operator in the world on the Tier 1 Cortez & Pipeline mine complex;
The Robertson development project contains a historical inferred mineral resource estimate (MRE) in excess of 2.7 million ounces Au in total oxide and sulphide materials (191.7 million tonnes grading 0.0143 ounce per ton Au), using a 0.0147 oz/ton Au cut-off, based on the National Instrument 43-101 preliminary economic assessment dated Jan. 15, 2012, as prepared for Coral by Beacon Hill Consultants (1988) Ltd. in conjunction with Knight Piesold Ltd., SRK Consulting (U.S.) Inc. and Kaehne Consulting Ltd., a copy of which is available on Coral's profile on SEDAR;
- Exploration upside from a key asset property with drilling currently under way that is located within close proximity of the Cortez mill;
Strong balance sheet that currently has in excess of $11.5-million (Canadian) in cash;
- Downside protection through minimum non-refundable advance royalty payments totalling $500,000 per year for 10 years commencing in 2025.
The above-mentioned resource estimate on the Robertson property is historical in nature. Nomad and Coral are of the view that the resources disclosed in the technical report are relevant and reliable but should not be relied on as a current resources estimate. No qualified person of Nomad or Coral has done sufficient work to classify the above-mentioned estimate as current mineral resources.
"When we created Nomad, we set the objective to become a catalyst for sector consolidation. Today's announcement marks the first step of our consolidation strategy and follows our desire to become the best global acquisition-driven precious metals royalty company in the sector. This acquisition will further diversify our global portfolio as we keep executing on our aggressive growth plan," said Vincent Metcalfe, Nomad's chief executive officer.
"This acquisition is very strategic for Nomad as it allows us to access a royalty on a top tier mining complex, operated by one of the largest gold operator in the world and located in Nevada, a leading mining jurisdiction. We are also very pleased to welcome new shareholders of Nomad as we continue our growth trajectory," said Joseph de la Plante, Nomad's chief investment officer.
Pursuant to the transaction, Coral shareholders will be entitled to receive, for each Coral share held, consideration consisting of five Canadian cents in cash and 0.80 of a unit of Nomad, as described below. The consideration payable to Coral shareholders by Nomad represents total value of approximately $1.21 per Coral share, based on the closing price of $1.37 of Nomad common shares on the Toronto Stock Exchange on Aug. 21, 2020, and including the six-Canadian-cent estimated value per Coral share of the one-half common share purchase warrant included in each unit. Based on Nomad's and Coral's Aug. 21, 2020, closing prices on the TSX and TSX Venture Exchange, respectively, the transaction represents a premium of approximately 45 per cent to Coral shareholders.
Each unit will consist of one Nomad common share and one-half of a common share purchase warrant. Each full warrant will entitle the holder thereof to purchase one additional Nomad common share at a price of $1.71 for a period of two years following the effective date of the transaction. If the daily volume-weighted average trading price of Nomad's shares on the TSX exceeds the warrant exercise price by at least 25 per cent for any period of 20 consecutive trading days after one year from the effective date of the transaction, Nomad will have the right to give notice in writing to the holders of the warrants that the warrants will expire 30 days following such notice, unless exercised prior thereto.
Each stock option to acquire common shares of Coral will be subject to accelerated vesting in accordance with Coral's stock option plan, and the option holders are expected to enter into option exercise and termination agreement with Coral prior to closing of the transaction, pursuant to which the optionholders will be required to exercise their stock options prior to closing of the transaction or, if they fail to do so, any and all outstanding and unexercised stock options of Coral shall expire and be terminated as of the effective date of the transaction.
Overview of Coral
Coral Gold Resources is a precious metals royalty company with assets in Nevada. Coral's primary asset is a 1.00-per-cent-to-2.25-per-cent sliding-scale NSR royalty on the Robertson property. The sliding-scale NSR royalty rate will be determined based on the observed gold price during each quarterly period based on the average London bullion market gold price PM during the quarterly period, as shown in the associated table.
Average gold price during the quarter (US$/oz) Applicable NSR royalty rate
up to and including $1,200.00 1.00%
$1,200.01 to $1,400.00 1.25%
$1,400.01 to $1,600.00 1.50%
$1,600.01 to $1,800.00 1.75%
$1,800.01 to $2,000.00 2.00%
over $2,000.00 2.25%
In addition, in the event that the Robertson property is not placed into production by Dec. 31, 2024, then beginning on Jan. 1, 2025, and continuing on an annual basis thereafter until the earlier of (i) the date commercial production commences and (ii) Jan. 2, 2034, Barrick Cortez Inc. will make annual advance royalty payments to the royalty holder of $500,000, which will be non-refundable and fully credited against any future obligations under the Robertson royalty.
Coral also holds a portfolio of strategically located exploration projects near Nevada Gold Mines' Pipeline/Cortez mine complex on Nevada's Battle Mountain/Cortez trend. Coral is debt free with a strong balance sheet holding in excess of $11.5-million (Canadian) in cash.
Coral's initiatives to enhance shareholder value
In 2016, Coral's management team, in consultation with Coral's board of directors and its financial and legal advisers, began considering and implementing various strategic and financial initiatives to create shareholder value. Coral's share price increased from a low of six Canadian cents on Jan. 5, 2016, to 83 cents on Aug. 21, 2020, representing an increase of 1,283 per cent. The aggregate consideration per Coral share of approximately $1.21 (Canadian) represents an increase of approximately 1,900 per cent compared with the aforementioned Jan. 5, 2016, Coral share price of six Canadian cents.
On June 20, 2016, with very limited cash and financial resources on hand and Coral shareholders facing significant potential dilution in order for Coral to advance its projects, Coral changed its business model to become a royalty-focused company through a transaction with Barrick. Coral believed that, as the Robertson property was advanced and benefited from Barrick's operating expertise and existing infrastructure, the NSR would become a valuable and sought-after royalty within the industry. Since the announcement of this transition to the royalty business model, Coral did not complete any dilutive equity financings and instead embarked on an aggressive campaign to reduce its outstanding common shares by acquiring Coral shares at what Coral believed were attractive prices. This included the return and cancellation of 4.15 million Coral shares held by Barrick as part of the royalty model transition when the market price of Coral shares was eight Canadian cents per share, as well as the repurchase of 8,007,000 common shares through three normal course issuer bids since 2017 at an average purchase price of approximately 39 Canadian cents per share. The value creation for Coral shareholders from these strategic and financial initiatives is evident culminating in the announcement of the transaction with Nomad.
Coral's chief executive officer, David Wolfin, commented: "I am delighted to announce this important transaction with Nomad. Coral has patiently and confidently executed a clear, focused strategy over the past five years with the objective of maximizing shareholder value. This transaction offers numerous benefits to Coral shareholders immediately as well as over the medium to long term. I look forward to becoming both a Nomad shareholder and warrantholder, and benefiting from the Nomad management team's expertise, key industry partnerships and growth strategy. I also look forward to seeing the Robertson NSR become an important asset within Nomad's growing portfolio."
Benefits to Coral shareholders:
Significant premium to the current share price and continued upside through ownership of Nomad common shares and warrants;
Attractive mix of consideration including cash, Nomad common shares and Nomad warrants;
- Immediate exposure to substantial free cash flow from Nomad's diversified portfolio of royalties, streams and gold loans;
- Enhanced scale with better access to capital and greater balance sheet flexibility;
Robust rerate potential as Nomad pursues its growth trajectory toward intermediate royalty company status.
Approvals and timing
The transaction, which is expected to close on or about Nov. 6, 2020, received the unanimous support of the boards of directors of Nomad and Coral. Certain Coral shareholders as well as Coral's directors and officers, holding or having control or direction over an aggregate of 39.46 per cent of the issued and outstanding Coral shares, have entered into a support and voting agreement with Nomad to vote in favour of the transaction.
The transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia). It will be subject to the approval of at least two-thirds of the votes cast by Coral shareholders, and a simple majority of votes cast by Coral minority shareholders in accordance with Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions, at a special meeting of Coral shareholders to be held on or about late October, 2020, to consider the transaction.
In addition to Coral shareholders' and court approval, the transaction is subject to regulatory approval, including approval by the TSX for the listing of the shares to be issued by Nomad and the common shares issuable upon exercise of the warrants, if any, and other closing conditions customary for transactions of this kind. The arrangement agreement includes customary deal protection provisions in favour of Nomad, including non-solicitation covenants and a right to match superior proposals, and a termination fee in favour of Nomad equal to 4.5 per cent of the market capitalization of Coral on the date of any termination of the arrangement agreement by Coral.
Financial and legal advisers
Coral's financial adviser is Cantor Fitzgerald Canada Corp. and PI Financial Corp. provided an independent fairness opinion to Coral's board of directors. Harper Grey LLP is Coral's legal counsel. Fasken Martineau DuMoulin LLP is Nomad's legal counsel.
The technical content of this news release has been reviewed and approved by Lewis Teal, PGeo, a qualified person under National Instrument 43-101 -- Standards of Disclosure for Mineral Projects.
About Nomad Royalty Company Ltd.
Nomad Royalty is a gold and silver royalty company that purchases rights to a percentage of the gold or silver produced from a mine, for the life of the mine. Nomad owns a portfolio of 10 royalty, stream and gold loan assets, of which five are on currently producing mines. Nomad plans to grow and diversify its low-cost production profile through the acquisition of additional producing and near-term producing gold and silver streams and royalties.
About Coral Gold Resources Ltd.
Coral Gold Resources is a precious metals exploration company operating in Nevada, where it has explored one of the world's richest gold districts for over 30 years. The company's primary asset is a sliding scale net smelter returns production royalty on Nevada Gold Mines' Robertson property in Nevada. The company also holds a portfolio of strategically located exploration projects near Nevada Gold Mine's Pipeline/Cortez mine complex on Nevada's Battle Mountain/Cortez trend.
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