Mr. John MacPhail reports
PACIFIC ARC RESOURCES ENTERS INTO LETTER OF INTENT FOR PROPOSED REVERSE TAKEOVER TRANSACTION TO ACQUIRE BRAZILIAN GOLD PRODUCTION AND EXPLORATION ASSETS
Pacific Arc Resources Ltd. has entered into a letter of intent (LOI) dated April 2, 2020, with
1232123 B.C. Ltd., whereby Pacific Arc will acquire all of the issued and outstanding securities of 1232123 B.C. by way of a share exchange, amalgamation or such other form of business combination as the parties may determine. Upon successful completion of the proposed acquisition of the securities of 1232123 B.C., it is anticipated that the company (the resulting issuer) will be listed as a mining issuer on the TSX Venture Exchange. Prior to the completion of the transaction, 1232123 B.C. will acquire certain mining assets located in Brazil, including the Cascavel,
projects. The transaction is at arm's-length and constitutes a reverse takeover of the company pursuant to Policy 5.2 of the TSX-V. Pacific Arc and 1232123 B.C. will now work toward negotiating a definitive agreement by May 29, 2020.
Cascavel was constructed in 2016, and has an existing fully dewatered underground mine and idled mill, including an in-line pressure jig, Gekko spinners and a Nelson concentrator. The crushing circuit was provided by Simplex. The tailings were dewatered and dry stacked. In excess of $20-million has been spent on exploration and development at Cascavel.
The mining assets principally comprise a large tenement package, located in the central Brazilian state of Goias, consisting of 20 tenements representing 137 square kilometres, which encompass the Cascavel, Sertao and Tinteiro projects, as well as numerous other advanced gold exploration targets, including Digo, Espanola and Antena-Xupe.
The Sertao gold project is located 28 kilometres by road from Cascavel.
From 2003 to 2007, Sertao produced 256,000 ounces of gold while under the ownership of Troy Resources at an average mill grade of 29 grams per tonne (g/t) (open pit). In Q1 2016, Australian Securities Exchange-listed
Orinoco Gold Ltd. completed a 3,035-metre drilling program in Q1 2016, which was used for
a 2017 technical report compliant with the joint ore reserves committee of the Australian Institute of Mining and Metallurgy (JORC), which included
a historical estimate. Historical drilling completed by the previous owner (Troy Resources) identified material depth and strike extensions to the known mineralization, which was only mined as a shallow oxide open pit to a depth of approximately 40 metres.
The historical estimate is based on two domains -- oxide and sulphide -- as highlighted in that attached table.
A cut-off of one g/t gold (Au) was used in consideration that grades are sufficient for a likely open-pit mining method (oxide zone). A higher cut-off grade of three g/t Au was used in consideration of the likely underground mining scenario (sulphide zone).
SERTAO HISTORICAL ESTIMATE AS AT MAY 30, 2017
Domain Category Cut-off (g/t Au) Tonnage (tonnes) Grade (g/t Au) Contained gold (ounces)
Oxide Measured 1.0 9,490 3.65 1,114
Indicated 1.0 24,030 6.96 5,377
Inferred 1.0 38,979 4.94 6,191
Sulphide Measured 3.0 - - -
Indicated 3.0 57,824 8.03 14,928
Inferred 3.0 92,788 7.26 21,658
Total Measured 9,490 3.65 1,114
Indicated 81,854 7.72 20,305
Inferred 131,767 6.57 27,849
A qualified person has not done sufficient work to classify the historical JORC estimate as
mineral resources or mineral reserves compliant with National Instrument 43-101, Standards of Disclosure for Mineral Projects, and the company is not representing any historical estimate as mineral resources or mineral reserves.
Upon review of the JORC report, the estimate is considered relevant and reliable to describe the historical estimate for the
Sertao gold project, but the reader should be cautioned that the data were not prepared under the supervision of a qualified person under NI 43-101.
The historical estimate in this release was prepared using data up until the date of the JORC report (May, 2017) and does not include any more recent data available to the company.
Additional work is required to upgrade and verify the historical estimate, if appropriate, to a compliant mineral resource or reserve. The additional work required includes incorporation of more recent drilling results and accompanying data, creating an updated data set, and subsequently the recalculation of the mineralization by, or under the supervision of, a qualified person under NI 43-101, which will be included in the technical report (as discussed below).
The mining assets are located south of established greenstone belts, largely occupied by mineral tenements surrounding AngloGold Ashanti's Crixas mine and Equinox Gold's Pilar mine. Collectively, Goias's northern greenstone belts have delivered total past gold production of 5.7 million ounces of gold. However, the host greenstone belt remains largely unexplored. Mineralization hosted on adjacent and/or nearby properties is not necessarily indicative of mineralization hosted on the mining assets.
Also included within the portfolio are:
- Tinteiro, a polymetallic prospect. Highlights of the 52-hole drill program include a drill intersection of 17.6 metres at 1,292 g/t silver in May, 2013, and reported rock chip samples grading up to 4,200 g/t of silver and seven g/t gold in June, 2014, and reported cobalt rock chip samples up to 1.75 per cent in June, 2018, in a sampling program consisting of 54 samples;
- The Antena-Xupe
cluster of five dormant open pits. In March, 2018, a drill program consisting of 12 holes included a highlight of 21.7 metres at 4.49 g/t at Antena-Xupe.
An existing 25-kilometre private haul road runs between Cascavel, Antena-Xupe and
Sertao. The processing plant complex includes a fully licensed state-of-the-art modular laboratory with a sample preparation section designed and commissioned by SGS. The laboratory is fully licensed by the CRQ (Conselho Regional de Quimica) and by the Brazilian military for the storage and usage of cyanide and acids. The laboratory is complemented with the latest computerized analyzing technology and will be central to future exploration drilling programs.
As a condition of the transaction, 1232123 B.C. is currently working to complete a technical report for the mining assets pursuant to NI 43-101. The technical report is planned to include an updated mineral resource estimate for the mineral assets.
1232123 B.C. is a party to a term sheet dated Jan. 8, 2020, with Orinoco Gold and Chancery Asset Management Pte. Ltd. Orinoco Gold is an ASX-listed Australian company that is currently subject to a deed of company arrangement and owns subsidiary companies with assets in Brazil. Chancery owns 75 per cent of CRH Purchasing Partner Inc., which holds a gold stream and security package over Orinoco Gold and all of its assets. 1232123 B.C. acquired its rights, title and interest in the Orinoco Brasil
Ltda. (OBM) acquisition term sheet from Grand Rock Capital Inc. pursuant to an assignment and assumption agreement dated Jan. 17, 2020.
The OBM acquisition term sheet contemplates, among other things, the sale by Orinoco Gold's wholly owned Australian subsidiary, Orinoco Resources Pty. Ltd., of 100 per cent of the shares of its wholly owned Brazilian subsidiary, OBM, to 1232123 B.C. Through its Brazilian subsidiaries, OBM holds all of the mining assets. The obligations of the parties to complete the OBM acquisition are subject to a number of conditions, including, but not limited to: the restructuring of the gold stream and release of any claims under the gold stream against Orinoco Gold; the extinguishment of all claims against Orinoco Gold by Chancery and associates; the extinguishment of all secured claims and
Personal Property Securities Act
registrations against Orinoco Gold; and the cancellation of certain convertible notes of Orinoco Gold held by Chancery.
Pursuant to the transaction, Pacific Arc will acquire all of the issued and outstanding shares of 1232123 B.C. in exchange for the issuance of Pacific Arc shares on a one-for-one basis. It is expected that before the effect of any proposed concurrent financing, the holders of 1232123 B.C. shares will hold approximately 89 per cent of the resulting issuer's shares, with the remaining 11 per cent held by current Pacific Arc shareholders.
As per the LOI, it is anticipated that prior to or concurrently with the closing of the transaction, Pacific Arc or 1232123 B.C., as the case may be, will complete a private placement to raise gross proceeds of $3.5-million or such other amount as may be agreed by the parties, with a view to satisfying the minimum listing requirements of the TSX-V with respect to working capital requirements and public distribution applicable to the resulting issuer.
The transaction is subject to a number of terms and conditions, including, but not limited to, the parties entering into a definitive agreement with respect to the transaction on or before June 30, 2020, with such agreement to include representations, warranties, conditions and covenants typical for a transaction of this nature, the completion of satisfactory due diligence investigations, and the approval of the TSX-V and other applicable regulatory authorities.
Trading in Pacific Arc shares will remain halted pending the completion of the transaction. Further details concerning the transaction and other matters will be announced, if and when a definitive agreement is reached.
Pacific Arc will provide further details in respect of the transaction in due course by way of news releases. However, Pacific Arc will make available to the TSX-V all information including financial information as required by the TSX-V and will provide, in a news release to be disseminated at a later date, required disclosure.
Information concerning 1232123 B.C.
1232123 B.C. is a British Columbia company incorporated in 2019.
Management and board of directors of the resulting issuer
Upon closing of the transaction, the board of directors of the resulting issuer shall consist of five members, including Bill Fisher (former chairman of Aurelian Resources Inc. and chairman of Goldquest Mining Corp.) and Chris Stewart (former president/chief operating officer of McEwen Mining Inc.).
The remaining officers and board members will be selected in due course prior to the closing of the transaction.
The company does not intend to seek shareholder approval of the transaction, as the transaction is not a related party transaction within the meaning of Multilateral Instrument 61-101 or the policies of the TSX-V, and no other circumstances exist that may compromise the independence of the company. The company is a NEX-listed issuer without active operations; the company is not and will not be subject to a cease trade order, and will not otherwise be suspended from trading on completion of the transaction; and shareholder approval of any aspect of the transaction is not required under applicable corporate laws or securities laws.
The company also intends to apply for a waiver from the requirement to obtain a sponsor for the transaction, however, there can be no assurance that a waiver will be obtained. If a waiver from the sponsorship requirement is not obtained, a sponsor will be identified at a later date. An agreement to act as sponsor in respect of the transaction should not be construed as any assurance with respect to the merits of the transaction or the likelihood of its completion.
Upon completion of the transaction, the company intends to change its name to a new name that is yet to be determined. The parties expect that the TSX-V will assign a new trading symbol for the resulting issuer.
Completion of the transaction is subject to a number of conditions, including, but not limited to, TSX-V acceptance and, if applicable, disinterested shareholder approval. Where applicable, 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 management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete, and should not be relied upon. Trading in the securities of Pacific Arc should be considered highly speculative.
We seek Safe Harbor.
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