Atico Mining Corporation (TSX-V:ATY) (OTC:ATCMF) and Toachi Mining Inc. (TSX-V:TIM) (OTC:TIMGF) are pleased to announce that they have entered into a definitive agreement today, whereby Atico will acquire all of the issued and outstanding shares of Toachi pursuant to a plan of arrangement to create a new Latin American focused copper-gold Company.
Under the terms of the Agreement, all of the Toachi issued and outstanding common shares will be exchanged on the basis of 0.24897 Atico common shares for each Toachi common share. The Exchange Ratio implies consideration of approximately C$0.073 per Toachi common share, based on the closing price of Atico common shares on the TSX Venture Exchange on July 5, 2019. This represents a 47% premium to Toachi’s closing price and a 49% premium to the 20-day volume-weighted average price as at July 5, 2019 on the TSX-V.
Upon completion of the Transaction, existing Atico and Toachi shareholders will own approximately 83% and 17% of the pro forma Company, respectively.
Highlights of the Transaction
Key investment highlights of the combined Company include:
Fernando Ganoza, CEO and Director of Atico, stated: “We are very pleased to bring this transaction forward for our shareholders that aligns us with our vision of growing the Company into a leading mid-tier producer. Atico has been successful in transforming the El Roble project into an important cash generating asset with high safety, environmental and operating standards. The results of this success have significantly strengthened our balance sheet and positioned the Company for additional value-creating opportunities that can complement the El Roble mine.” Mr. Ganoza continued, “We believe the high-grade gold and copper La Plata project provides such an opportunity as the combination of El Roble and La Plata creates a robust platform for accretive growth for both Atico and Toachi shareholders.”
1 As per the “NI 43-101 Preliminary Economic Assessment of the La Mina VMS Project, Cotopaxi Province, Ecuador”, prepared for Toachi by SGS Geological Services / Services Géologiques SGS pursuant to National Instrument 43-101 Standards of Disclosure for Mineral Projects, dated as of June 14th, 2019, and having an effective date of March 30, 2019, as announced by press release on April 30 and June 14, 2019 and filed on SEDAR.com on June 14, 2019.
Companies makes this business combination a logical step towards building a peer leading and profitable copper-gold producer in Latin America. The Board, Management and certain major shareholders of Toachi fully support the planned combination between our two Companies. Additionally, the Transaction offers an optimized combination of experienced mining professionals who share common values of protecting the environment and responsibly supporting the development of communities we operate in”.
Benefits to Atico Shareholders
Benefits to Toachi Shareholders
The proposed Transaction will be completed pursuant to a plan of arrangement completed under Section 192 of the Canada Business Corporations Act. The Transaction will require approval by 66 2/3 percent of the votes cast by the shareholders of Toachi at a special meeting of Toachi shareholders expected to be held in September 2019 and, to the extent required by Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, a majority of the votes cast by minority shareholders of Toachi. The directors, senior officers and certain shareholders of Toachi representing 28.09% of common shares outstanding have entered into voting support agreements, pursuant to which they will vote their common shares held in favour of the Transaction.
The Agreement includes customary provisions including non-solicitation provisions, a right by Atico to match any superior proposal, a C$245,000 termination fee payable to Toachi and a C$400,000 termination fee payable to Atico under certain circumstances. Pursuant to the Agreement, issued and outstanding options to acquire Toachi common shares, convertible debentures of Toachi, and share purchase warrants of Toachi will continue in accordance with the terms of the agreements governing each Toachi Convertible Security. Further, each issued and outstanding restricted share unit of Toachi will be exchanged for one Toachi share immediately prior to closing and thereafter exchanged for Atico shares based on the Exchange Ratio.
2 As per the PEA.
In addition to assuming Toachi’s current outstanding debt obligations, Atico has agreed to provide Toachi with a bridge loan of up to US$535,000 for general corporate purposes. In addition, a third party has agreed to also provide a US$1 million bridge loan for the purposes of permitting Toachi to immediately complete Toachi’s earn-in to a 60% interest in Compania Minera La Plata S.A. The terms of the bridge loans include a repayment date within 30 days following the date of termination of the Agreement and on demand following closing of the transaction and interest payable at CDOR plus 14% per annum.
Upon completion of the Transaction, it is expected that Jonathan Goodman will be appointed to the Atico Board of Directors and Alain Bureau will serve as President of Atico.
In addition to shareholders of Toachi and court approvals, the Transaction and the transactions contemplated in the Agreement are subject to any applicable regulatory approvals and the satisfaction of certain other closing conditions customary for a transaction of this nature.
Full details of the Transaction will be included in the meeting materials which are expected to be mailed to the shareholders of Toachi in August 2019.
Boards of Directors’ Recommendations
The Agreement has been unanimously approved by the Boards of Directors of Atico and Toachi. The Toachi Board of Directors unanimously recommends that the Toachi shareholders vote in favor of the Transaction.
The Board of Directors of Atico has received an opinion from Laurentian Bank Securities that based upon and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration to be paid by Atico pursuant to the Transaction is fair, from a financial point of view, to Atico. The Board of Directors of Toachi has received an opinion from Maxit Capital LP that based upon and subject to the assumptions, limitations, and qualifications stated in each such opinion, the consideration to be received by Toachi shareholders pursuant to the Transaction is fair, from a financial point of view, to Toachi shareholders.
Advisors and Counsel
Blake, Cassels & Graydon LLP is acting as Atico’s legal advisor. Laurentian Bank Securities acted as financial advisor to Atico.
Séguin Racine, Attorneys Ltd. is acting as Toachi’s legal advisor. Maxit Capital LP acted as financial advisor to Toachi.
About Atico Mining Corporation
Atico Mining is a Canadian-based Company focused on developing and operating copper-gold projects in Latin America. Drawing on the extensive operational experience of management and directors in Latin America, the Company’s strategy is to build a mid-tier copper-gold producer by acquiring advanced-stage projects with potential for high-margin operations and sustainable organic growth.
About Toachi Mining Inc.
Toachi brings a disciplined and veteran team of project managers together with one of the industry’s highest grade polymetallic projects at the La Mina VMS deposit in Ecuador. Toachi is focused on and committed to the development of advanced stage mineral projects throughout the Americas using industry best practices combined with a strong social license from local communities.
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