DRUMMOND VENTURES AND ELTON RESOURCES ENTER INTO DEFINITIVE MERGER AGREEMENT WITH RESPECT TO QUALIFYING TRANSACTION
/Not for distribution to
The completion of the Proposed Transaction is subject to the satisfaction of various conditions that are customary for a transaction of this nature, including but not limited to: (i) the completion of one or more concurrent brokered financings by Elton for gross proceeds of a minimum of
Subject to satisfaction or waiver of the conditions precedent referred to herein and in the Merger Agreement, Drummond and Elton anticipate that the Proposed Transaction will be completed by
Trading in the common shares of Drummond (each, a "Drummond Share") is currently halted in accordance with the policies of the Exchange and will remain halted until such time as all required documentation in connection with the Proposed Transaction has been filed with and accepted by the Exchange and permission to resume trading has been obtained from the Exchange.
The Proposed Qualifying Transaction
The Proposed Transaction will result in Drummond acquiring all of the issued and outstanding securities of Elton in exchange for the issuance of securities of Drummond by way of a three-cornered amalgamation between Elton, Drummond and AcquisitionCo, which will result in the entity resulting from the amalgamation under the Business Corporations Act (
The Proposed Transaction will not constitute a "Non-Arm's Length Qualifying Transaction" (as such term is defined in the Policy 2.4) or a related party transaction pursuant to the policies of the Exchange and applicable securities laws.
Prior to the effective time of the Proposed Transaction (the "Effective Time"), it is expected that Drummond will complete a stock split (the "Split") in respect of the Drummond Shares on a 2:1 basis such that, immediately following the Split, there shall be 10,250,000 post-Split
As consideration for the acquisition of all of the outstanding securities of Elton, holders of the issued and outstanding common shares of Elton ("
In addition, there are currently 2,000,000 outstanding incentive stock options of Elton, each exercisable for one Elton Share, and holders thereof will receive approximately an aggregate of 2,000,000 incentive stock options of the Resulting Issuer, each exercisable to acquire one Resulting Issuer Share, pursuant to the Exchange Ratio. The final structure of the Proposed Transaction is subject to the receipt of tax, corporate and securities law advice by both Drummond and Elton. The Agents' Warrants shall also be exchanged for warrants of the Resulting Issuer on substantially the same basis.
Upon closing of the Proposed Transaction, a finder's fee in the amount of
The Private Placement
As disclosed in the news release of Drummond dated
The Private Placement shall comprise of a private placement of a combination of: (1) subscription receipts of Elton ("NFT Subscription Receipts") at a price per NFT Subscription Receipt of
In connection with the Private Placement, Elton has also granted the Agents an option (the "Agents' Option") to increase the size of the Private Placement by up to 15% in any combination of NFT Subscription Receipts and FT Subscription Receipts, which Agents' Option shall be exercisable in whole or in part at any time for a period of up to 48 hours prior to the closing of the Private Placement.
Each NFT Subscription Receipt will automatically convert into one common share in the capital of Elton (an "Elton Share") and each FT Subscription Receipt will automatically convert into one Elton Share that qualifies as a "flow-through share" (together with the Elton Shares underlying the NFT Subscription Receipts, the "Subscription Receipt Shares") pursuant to the Income Tax Act (
In connection with the Private Placement and upon satisfaction of the Escrow Release Conditions, the Agents will be paid a cash commission equal to 7.0% of the gross proceeds raised under the Private Placement and be issued such number of Elton Share purchase warrants (the "Agents' Warrants") as is equal to 7.0% of the Subscription Receipts sold under the Private Placement. Each Agents' Warrant will entitle the holder to acquire an Elton Share at an exercise price of
Further details regarding the Private Placement are disclosed in the news release of Drummond dated
Drummond Financing
The Company also announces that it proposes to undertake a non-brokered private placement (the "Drummond Financing") of subscription receipts of Drummond ("Drummond Subscription Receipt") at a price per Drummond Subscription Receipt equal to the NFT Subscription Receipt Price for such amounts as may be agreed between Elton and Drummond so long as the aggregate gross proceeds from the Drummond Financing and the Private Placement total a minimum of
Drummond may also issue Drummond Post-Split Share purchase warrants ("Drummond Agents' Warrants") and pay finder's fees on substantially the same basis as applicable to the Private Placement in connection with the Drummond Financing.
Resulting Issuer Capitalization
On completion of the Proposed Transaction, assuming (a) no changes to the capitalization of either Drummond or Elton prior to the Effective Time (including no exercise of any convertible securities), (b) all incentive stock options of Drummond are cancelled, and (c) that the Subscription Receipts and Drummond Subscription Receipts are converted into
Shareholders |
Number of Resulting |
Percentage |
Percentage Diluted |
Existing shareholders of Drummond |
10,250,000 |
10.7 % |
10.3 % |
Current existing shareholders of Elton |
35,000,000 |
36.6 % |
35.0 % |
Subscription Receipt and Drummond |
34,285,715 |
35.9 % |
34.3 % |
|
16,000,000 |
16.8 % |
16.0 % |
Total (Undiluted): |
95,535,715 |
100 % |
95.6 % |
Elton Options(3) |
2,000,000 |
|
2.0 % |
Agents' Warrants(1) |
2,400,000 |
|
2.4 % |
Total (Diluted): |
99,935,715 |
|
100 % |
Notes:
(1) |
Assuming: (i) the sale of 20,000,000 NFT Subscription Receipts/Drummond Subscription Receipts for gross proceeds of |
(2) |
Among other things, pursuant to the Property Agreement, Elton agreed to issue to Generation immediately prior to the Effective Time, such number of |
(3) |
Each exercisable to acquire one (1) Elton Share (Resulting Issuer Share) for a period of ten (10) years from the date of issuance thereof at an exercise price of |
The completion of the Proposed Transaction is subject to the satisfaction of various conditions as are standard for a transaction of this nature, including but not limited to (i) the receipt of shareholder approval for the Proposed Transaction to the extent required by applicable law and policies of the Exchange; (ii) the receipt of regulatory and Exchange approval for the Proposed Transaction to the extent required by applicable law and policies of the Exchange; (iii) the filing with the applicable securities regulatory authorities of a filing statement or information circular regarding the Proposed Transaction; (iv) the receipt of conditional approval from the Exchange for the Proposed Transaction and the listing of the Resulting Issuer Shares upon completion of the Proposed Transaction; and (v) the completion of the Private Placement, Name Change, Split and other matters as may be agreed to between Elton and Drummond. There can be no assurance that the Proposed Transaction will be completed on the terms proposed above or at all.
Sponsorship
Sponsorship of a Qualifying Transaction (as such term is defined in Policy 2.4) is required by the Exchange unless a waiver from the sponsorship requirement is obtained. Drummond intends to apply for a waiver from sponsorship for the Proposed Transaction. There is no assurance that a waiver from this requirement will be obtained.
Information About Elton
Elton was incorporated under the Business Corporations Act (
Darnley Bay Property – Elton's Material Property
Elton's interest in the
Further to the Property Agreement, Elton entered into a concession agreement with IRC and ILC on
The Darnley Bay Property is in the vicinity of
Elton Financial Information
Set forth below is certain financial information derived from Elton's unaudited financial statements, with all amounts in Canadian dollars:
|
Fiscal Year Ended |
Fiscal Year Ended |
Assets |
|
|
Liabilities |
|
|
Revenues |
Nil |
Nil |
Comprehensive Loss |
|
|
Figures are unaudited and remain subject to change.
Insiders and Non-Arm's Length Parties of the Resulting Issuer
Upon completion of the Proposed Transaction, it is anticipated that the board of directors of the Resulting Issuer will consist of four directors:
Other than the individuals as disclosed above, the Resulting issuer has no other anticipated Principals or Insiders, as defined in Policy 1.1 – Interpretation of the Exchange.
Drummond was incorporated under the Business Corporations Act (
Qualified Person
The scientific and technical content of this news release was reviewed, verified, and approved by David White, P. Geo., and a Qualified Person as defined by Canadian Securities Administrators' National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
Neither the
This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the
Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to the Exchange acceptance and, if applicable pursuant to the Exchange requirements, majority of the minority shareholder approval. Where applicable, the Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed 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 Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Drummond should be considered highly speculative.
The Exchange has in no way passed upon the merits of the Proposed Transaction and has not approved or disapproved of the contents of this news release.
Cautionary Note Regarding Forward-Looking Information
This press release contains statements which constitute "forward-looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of Drummond and Elton with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding: expectations regarding Elton's and the Resulting Issuer's capitalization, whether the Proposed Transaction will be consummated and whether the Private Placement will be completed, including whether conditions to the consummation of the Proposed Transaction will be satisfied and whether the Private Placement will be fully subscribed and whether the conversion of the Subscription Receipts and Drummond Subscription Receipts will occur prior to the Escrow Release Deadline, the ability of the Resulting Issuer to carry out its exploration activities and incur and renounce exploration expenditures, or the timing for completing the Proposed Transaction and Private Placement.
Readers are cautioned that forward-looking information is not based on historical facts but instead reflect management of Drummond and Elton's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although Drummond and Elton believe that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the combined company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the ability to consummate the Proposed Transaction and/or Private Placement and to cause the conversion of the Subscription Receipts and Drummond Subscription Receipts prior to the applicable deadlines; the ability of Elton meet its obligations under the Property Agreement; the ability to obtain requisite regulatory and other approvals and the satisfaction of other conditions to the consummation of the Proposed Transaction and/or Private Placement on the proposed terms and schedule; the potential impact of the announcement or consummation of the Proposed Transaction and/or Private Placement on relationships, including with regulatory bodies, employees, suppliers, customers and competitors; changes in general economic, business and political conditions, including changes in the financial markets; changes in applicable laws; the ability of the Resulting Issuer and Elton to carry out its exploration activities as currently contemplated; compliance with extensive government regulation; and the diversion of management time on the Proposed Transaction and/or Private Placement. This forward-looking information may be affected by risks and uncertainties in the business of Drummond and Elton and market conditions.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although Drummond and Elton have attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Drummond and Elton do not intend, and do not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
SOURCE