
Doré Copper Mining Corp. (TSX-V: DCMC) (OTCQB: DRCMF) (FRA: DCM) is pleased to announce that it has entered into a definitive arrangement agreement on October 14, 2024 with Cygnus Metals Limited (ASX: CY5) to combine their respective businesses in a merger of equals transaction, pursuant to which Cygnus has agreed to acquire 100% of the issued and outstanding common shares of Doré Copper by way of a court approved plan of arrangement under the Canada Business Corporation Act.
This Transaction will create a Québec-focused critical minerals explorer and developer with high-grade copper and lithium resources. The merger of equals will bring together proven members of management with strong capital markets experience, project development, mine building and operational expertise and a proven track record of mineral discoveries.
Pursuant to the terms of the Agreement, holders of Doré Copper Shares will receive 1.8297 ordinary shares of Cygnus in exchange for each Doré Copper Share held immediately prior to the effective time of the Transaction. The Exchange Ratio is based on an approximate 5-day volume-weighted average price of Doré Copper Shares on the TSX Venture Exchange and Cygnus Shares on the Australian Stock Exchange as at October 11, 2024. This represents an implied value of C$0.141 per Doré Copper Share1 and an implied equity value for Doré Copper of C$24 million2. As of the date of the Agreement, existing shareholders of Doré Copper and shareholders of Cygnus will own approximately 45% and 55%, respectively, of the outstanding Cygnus Shares following completion of the Transaction (before taking into account the Cygnus Equity Raise (as defined below)). In connection with the Transaction, Cygnus intends to complete an equity raise of Cygnus Shares for aggregate gross proceeds of up to a maximum of A$11 million (with a minimum of A$5 million). The net proceeds of the Cygnus Equity Raise are expected to be used for, among other things, advancing the Chibougamau project (assuming the Transaction is completed) and Cygnus’ James Bay lithium projects. Pursuant to the Agreement, Cygnus has covenanted to use commercially reasonable best efforts to complete the Cygnus Equity Raise.
Transaction Strategic Rationale
Doré Copper President and Chief Executive Officer, Ernest Mast, commented: “The Doré Copper team is looking forward to working with the Cygnus team to create a critical metals company and to maximize the value of our quality assets in Chibougamau. This merger will provide the funding, additional expertise and the strategy to generate superior shareholder returns through brownfields exploration and to implement a profitable hub-and-spoke operation in the Chibougamau mining camp.”
Cygnus Executive Chairman, David Southam, stated: “This merger is an exceptional opportunity to create value for both groups of shareholders. By combining the proven exploration and management skills of the Cygnus team with the high-grade copper resources and immense upside potential at the Chibougamau properties, we have the potential to unlock substantial value. We intend to devise and implement an aggressive exploration program, utilizing highly experienced geologists and the latest technology, with the aim of driving strong resource growth at a time when the world desperately wants more copper from tier-one locations.
Being able to combine our skill sets with a Québec-based team who has experience in building large resource projects with support from the local communities also provides us with those local connections and experience to assist in advancing our lithium projects in a better macro environment.”
Benefits to Doré Copper Shareholders
Summary of Transaction Terms
Pursuant to the terms and conditions of the Agreement, Doré Copper Shareholders will receive 1.8297 fully paid Cygnus Shares for each Doré Copper Share held immediately prior to the Effective Time, implying a consideration of C$0.141 per Doré Copper Share. In addition, (i) all outstanding stock options of Doré Copper immediately prior to the Effective Time shall be exchanged for replacement options of Cygnus and exercisable to acquire such number of Cygnus Shares at such exercise price in accordance with the Exchange Ratio, (ii) all outstanding deferred share units of Doré Copper immediately prior to the Effective Time (whether vested or unvested) will be deemed to have been unconditionally vested and immediately redeemed and cancelled in consideration for Doré Copper Shares prior to the exchange for Cygnus Shares; and (iii) all outstanding warrants of Doré Copper will be adjusted in accordance with their terms and become exercisable, based on the Exchange Ratio, to purchase Cygnus Shares on substantially the same terms and conditions.
The Transaction will be effected by way of a court-approved plan of arrangement under the Canada Business Corporations Act and will require the approval of (a) at least 66 2/3% of the votes cast by Doré Copper Shareholders, and (b) if necessary, a simple majority of the votes cast by Doré Copper Shareholders, excluding certain related parties as prescribed by Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, in each case, voting in person or represented by proxy at a special meeting of Doré Copper Shareholders to consider the Transaction. The Doré Meeting is expected to be held in December 2024.
Doré Copper’s major shareholders, Equinox Partners and Ocean Partners and each director and officer of Doré Copper, representing, in the aggregate, approximately 61.34% of the issued and outstanding Doré Copper Shares, have entered into voting support agreements with Cygnus, pursuant to which each of them has agreed to, among other things, vote in favour of the Transaction at the Doré Meeting.
The Agreement includes customary representations and warranties for a transaction of this nature as well as customary interim period covenants regarding the operation of Cygnus’ and Doré Copper’s businesses. The Agreement also provides for customary deal protection provisions including fiduciary-out provisions, non-solicitation covenants and a right to match any superior proposal as defined by the Agreement as well as a termination fee payable to Cygnus in certain circumstances.
Completion of the Transaction is subject to customary conditions, including, among others, court approval, regulatory approval and Doré Copper Shareholder approval. In addition to customary closing conditions, the Transaction is also subject to the receipt of conditional approval of the TSXV for the listing of the Cygnus Shares.
Subject to the satisfaction (or waiver) of all conditions to closing set out in the Agreement, it is anticipated that the Transaction will be completed in December 2024. Upon closing of the Transaction, it is expected the Doré Copper Shares will be delisted from the TSXV.
Further information regarding the Transaction will be included in a management information circular to be delivered to Doré Copper Shareholders in connection with the Doré Meeting. Copies of the Circular, the Agreement, the voting support agreements and certain related documents will be filed with the applicable Canadian securities regulators and will be available on SEDAR+ at www.sedarplus.ca.
Board of Directors and Management
Upon closing of the Transaction, it is presently anticipated that the board of the combined company will be comprised of three (3) directors from each of Cygnus and Doré Copper. In addition, it is expected that David Southam, current Executive Chair of Cygnus, will remain as Executive Chair of the combined company and Ernest Mast, current President and Chief Executive Officer of Doré Copper, will be the President and Managing Director of the combined company. The remainder of the board of the combined company will be comprised of two (2) non-executive directors from each company: Kevin Tomlinson (Canada based) and Raymond Shorrocks (Australia based) from Cygnus, and Mario Stifano, current Executive Chairman of Doré Copper, and Brent Omland from Doré Copper.
Special Committee and Board Recommendations and Fairness Opinion
The board of directors of Doré Copper, having received a unanimous recommendation from a special committee comprised solely of independent directors of Doré Copper and after receiving outside legal and financial advice, unanimously determined that the Transaction is in the best interests of Doré Copper and is fair to the Doré Copper Shareholders and unanimously recommends that Doré Copper Shareholders vote in favour of the Transaction. In making their respective determinations, the Board and the Special Committee considered, among other factors, the oral fairness opinion of Paradigm Capital Inc. to the effect that as of the date hereof, subject to the assumptions, limitations and qualifications contained in its opinion, the consideration to be received by Doré Copper Shareholders pursuant to the Transaction is fair, from a financial point of view to the Doré Copper Shareholders. A copy of the fairness opinion of Paradigm Capital will be included in the Circular.
Advisors and Counsel
Doré Copper has engaged Paradigm Capital, who has provided a fairness opinion in respect of the Transaction, Bennett Jones LLP as Canadian legal advisor and Thomson Geer as Australian legal advisor in relation to the Transaction.
Cygnus has engaged Canaccord Genuity Corp. as financial advisor, Hamilton Locke as Australian legal advisor and Osler, Hoskin & Harcourt LLP as Canadian legal advisor in relation to the Transaction.
Canaccord Genuity and Euroz Hartleys are acting as joint lead managers to the Cygnus Equity Raise.
Qualified Persons
All scientific and technical data contained in this news release has been reviewed and approved by Ernest Mast, P.Eng, President and CEO of Doré Copper, and Jean Tanguay, P.Geo., General Manager of Doré Copper, Qualified Persons within the meaning of National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
About Doré Copper Mining Corp.
Doré Copper Mining Corp. aims to be the next copper producer in Québec with an initial production target of +50 million pounds of copper equivalent annually by implementing a hub-and-spoke operation model with multiple high-grade copper-gold assets feeding its centralized Copper Rand mill3. Doré Copper has delivered its PEA in May 2022 and is proceeding with a feasibility study. Doré Copper has consolidated a large land package in the prolific Lac Doré/Chibougamau and Joe Mann mining camps that has historically produced 1.6 billion pounds of copper and 4.4 million ounces of gold.4 The land package includes 13 former producing mines, deposits and resource target areas within a 60-kilometer radius of Doré Copper’s Copper Rand Mill.
About Cygnus Metals
Cygnus Metals Limited is an emerging exploration company focused on advancing the Pontax Lithium Project (earning up to 70%), the Auclair Lithium Project and the Sakami Lithium Project in the world class James Bay lithium district in Québec, Canada. In addition, Cygnus has REE and base metal projects at Bencubbin and Snake Rock in Western Australia. The Cygnus Board of Directors and Technical Management team have a proven track record of substantial exploration success and creating wealth for shareholders and all stakeholders in recent years. Cygnus’ tenements range from early-stage exploration areas through to advanced drill-ready targets.
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