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Calico Resources Agrees To Business Combination With Paramount Gold Nevada

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Calico Resources Agrees To Business Combination With Paramount Gold Nevada

 

 

 

 

 

Calico Resources Corp. (TSX-V:CKB) and Paramount Gold Nevada Corp. (NYSE MKT:PZG) are pleased to announce that they have entered into an arrangement agreement dated March 14, 2016 pursuant to which Paramount has agreed to acquire all of the issued and outstanding common shares of Calico by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia).

 

 

Paul Parisotto, Calico’s President and CEO, said: “The board of directors of Calico believes that the proposed transaction will unlock the considerable value in our Grassy Mountain project for the benefit of our shareholders. Paramount has a strong cash position of approximately US$7.9 million  along with experienced technical and operational leadership able to take the project forward to production and the financial resources needed to complete the permitting process and a feasibility study, work which our Calico team has so ably advanced to this point. We also believe Paramount’s Sleeper Gold Project will represent an excellent economic opportunity in a better metal price environment. Calico shareholders will also benefit from Paramount’s listing on the NYSE MKT. In our view, the proposed combination is synergistic; the combined company will have a stronger asset base than Calico or Paramount separately, offering shareholders a better opportunity for capital appreciation while also reducing administrative costs.”

 

 

Particulars of the Transaction

 

 

Pursuant to the Arrangement Agreement, holders of Calico Shares will be entitled to receive 0.07 of a share of common stock of Paramount in exchange for each Calico Share held representing an implied offer price of CDN$0.112 per Calico Share and a premium of 49.2% (based on the Bank of Canada noon exchange rate of US$1.00 to CDN$1.3215 on the last trading day prior to the announcement of the Arrangement) and a premium of 45.5% based on the trailing 30-day volume weighted average trading price of Calico Shares on the TSX Venture Exchange and Paramount Shares on the NYSE MKT as of the date of the Arrangement Agreement. Based on the foregoing, the Arrangement represents total consideration to Calico Shareholders of CDN$11.5 million. All existing Calico stock options will be cancelled in connection with the Arrangement.

 

 

In connection with the Arrangement, approximately 7,171,209 Paramount Shares are expected to be issued to existing Calico Shareholders, which would result in existing Calico Shareholders owning approximately 46% of the combined company on a basic basis and approximately 43% on a fully-diluted basis (based on the Exchange Ratio, the number of issued and outstanding Calico Shares and Paramount Shares, and the number of outstanding options to acquire Paramount Shares as of the date of the Arrangement Agreement).

 

 

To be effective, the Arrangement will require approval by a majority of at least 66 2/3% of the votes cast by Calico Shareholders at a special meeting expected to take place in May 2016 . Calico Shareholders representing approximately 37.8% of the issued and outstanding Calico Shares (including FCMI Parent Co. (approximately 19.6%), Seabridge Gold Inc. (approximately 13.5%) and the directors and officers of Calico (approximately 4.7%)) have entered into (or have agreed to enter into) voting and support agreements with Paramount in support of the Arrangement. The board of directors of Calico, on the recommendation of its independent special committee after having received advice from Canaccord Genuity Corp. its financial advisor, has unanimously approved the Arrangement and will provide a written recommendation that Calico Shareholders vote in favour of the Arrangement which will be included in the management information circular to be mailed to Calico Shareholders in connection with the Arrangement.

 

 

In addition, to be effective, the Arrangement will also require approval of a majority of at least 50% of the votes cast by holders of Paramount Shares at a special meeting expected to take place in the second quarter of 2016. The board of directors of Paramount, on the recommendation of the Special Committee, has unanimously approved the Arrangement and will provide a written recommendation that Paramount shareholders vote in favour of the Arrangement which will be included in the proxy statement to be mailed to Paramount shareholders in connection with the Arrangement.

 

 

The Arrangement Agreement includes customary provisions, including with respect to non-solicitation of alternative transactions, a right granted to Paramount to match superior proposals for Calico and a provision entitling Calico to a fiduciary-out. In addition, Calico and Paramount have each agreed to pay a termination fee of US$300,000 to the other party upon the occurrence of certain events. In addition to shareholder and court approvals, the transaction is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature.

 

 

In connection with the Arrangement, Paramount will provide Calico with interim debt financing of up to US$800,000 to be repaid 90 days following the termination of the Arrangement Agreement. The loan will be convertible into Calico Shares at a price of CDN$0.10 per share, subject to the approval of the TSX Venture Exchange, and will be secured by all of Calico’s assets. The proceeds of the Interim Loan will be used by Calico for general corporate purposes prior to the completion of the Arrangement.

 

 

Full details of the Arrangement will be included in a management information circular of Calico describing the matters to be considered at the Calico Meeting, respectively, which is expected to be mailed to Calico Shareholders April 2016 and will be made available on SEDAR under the issuer profile of Calico at www.sedar.com. It is anticipated that the transaction will close in the second quarter of 2016.

 

 

About Paramount Gold

 

 

Paramount is a U.S. based precious metals exploration company. Paramount owns a 100% interest in the Sleeper Gold Project located in Northern Nevada. The Sleeper Gold Project, which includes the former producing Sleeper mine, totals 2,322 unpatented mining claims (approximately 60 square miles or 15,500 hectares).

 

 

On December 10, 2015, Paramount filed on SEDAR a technical report prepared under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (entitled “Preliminary Economic Assessment: Sleeper Project, Humboldt County, Nevada”, prepared for Paramount by Metal Mining Consultants) relating to the PEA of the Sleeper Gold Project (the “Sleeper Gold PEA”). Sleeper Gold PEA has been made available on SEDAR under the issuer profile of Paramount at www.sedar.com, and should be referenced to determine key assumptions, parameters and methods used to determine the global mineralized material estimate below.

 

 

Highlights of the Sleeper Gold PEA include:

 

  • low initial capital cost of US$175 Million for a 30,000 tonne per day operation
  • estimated annual production of 102,000 ounces of gold and 105,000 ounces of silver
  • low cash operating cost of US$529 per ounce of gold equivalent produced
  • base case pre-tax net cash flows of US$244 million
  • net present value of US$167 million (assuming a 5% discount rate and an internal rate of return of 25%)
  • quick capital payback period of 3.5 years (based on after tax cash flows)
  • confirmed potential to add mineralized material

 

 

The Sleeper Gold PEA incorporates, among other things, (i) a global mineralized material estimate completed by SRK Consulting, (ii) results of new metallurgical tests completed over the previous two years by McClelland Laboratories, and (iii) updated pricing for gold (US$1250) and silver (US$16) to reflect the current metals market.

 

 

The Sleeper Gold PEA includes the following global mineralized material estimate:

 

Resource
Category

Mineralized
 Material
 (000s
 Tonnes)

Gold
 Grade
 (g/T)

Gold
 (000s of
 ounces)

Silver
 Grade
 (g/T)

Silver
 (000s of
 ounces)

Measured

32,596

0.38

399

3.54

3,714

Indicated

10,089

0.35

112

2.29

744

Measured and Indicated

42,685

0.37

511

3.25

4,458

Inferred

34,924

0.46

511

0.57

640

Notes:

  1. Rounding may cause apparent discrepancies.
  2. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral resources estimated will be converted into mineral reserves.
  3. The mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves once economic considerations are applied.
  4. The Sleeper Gold PEA, as a preliminary economic assessment, is considered too preliminary in nature, based, in part, on inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves.

 

 

This Sleeper Gold PEA is preliminary in nature and should not be considered to be a pre-feasibility or feasibility study, as the economics and technical viability of the Sleeper Gold Project have not been demonstrated at this time. Furthermore, there is no certainty that the Sleeper Gold PEA will be realized.

 

 

For more information, please see the website of Paramount at www.paramountnevada.com.

 

 

About Calico Resources Corp.

 

 

Calico is a Canadian company engaged in the acquisition, exploration and development of mineral property interests. Calico is focused on advancing its 100%-owned Grassy Mountain Gold Project located in Malheur County, Oregon.

Posted March 14, 2016

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