Serengeti Resources Inc. (TSX-V: SIR) and Sun Metals Corp. (TSX-V: SUNM) are pleased to announce, further to their joint news releases dated November 30, 2020 and December 2, 2020, the closing of the previously announced upsized bought deal financing of 82,800,000 subscription receipts of Sun Metals, at a price of $0.125 per Subscription Receipt for gross proceeds of $10,350,000. The Offering included a full exercise of the underwriters’ over-allotment option and was co-led by PI Financial Corp. and Haywood Securities Inc. and included Agentis Capital Markets Canada Limited Partnership, Clarus Securities Inc. and Cormark Securities Inc.
The Offering is being conducted in connection with the previously announced merger transaction, whereby Serengeti will acquire all of the shares of Sun Metals on the basis of 0.43 common shares of Serengeti for each share of Sun Metals held, to create a premier Canadian multi-asset copper-gold developer. Proceeds from the issue and sale of the Subscription Receipts will be used to advance the collective portfolio of copper-gold exploration and development assets in British Columbia, and for general working capital purposes.
The Subscription Receipts were issued pursuant to a subscription receipt agreement entered into by Sun Metals, Serengeti, the Co-Lead Underwriters, and Computershare Trust Company of Canada as subscription receipt agent. Pursuant to the Subscription Receipt Agreement, the gross proceeds of the Offering (less 50% of the Underwriters’ cash commission and all of the Underwriters’ expenses) will be held in escrow pending satisfaction of certain conditions, including, amongst others, (a) the satisfaction or waiver of each of the conditions precedent to the Transaction; and (b) the receipt of all required shareholder and regulatory approvals in connection with the Transaction and the Offering, including the conditional approval of the TSX Venture Exchange. If the Escrow Release Conditions have not been satisfied on or prior to March 31, 2021, the holders of Subscription Receipts will be returned a cash amount equal to the Issue Price of the Subscription Receipts and any interest that has been earned on the Escrowed Funds.
Upon the satisfaction of the Escrow Release Conditions prior to March 31, 2021, each Subscription Receipt will automatically convert into one Unit of Sun Metals which shall be exchanged, adjusted, or converted into securities of Serengeti at the Exchange Ratio, on a post-Consolidation basis, upon completion of the Transaction. The number of units of Serengeti to be exchanged or adjusted will reflect the previously announced consolidation, whereby immediately prior to the closing of the Transaction, Serengeti will consolidate its common shares on a two for one basis, subject to the receipt of all necessary approvals.
Each Unit will consist of one common share of Sun Metals and one-half of one common share purchase warrant. Each full Warrant will be exercisable to acquire one common share of Sun Metals for a period of 24 months from the closing of the Offering, at an exercise price of $0.18. Each Warrant is subject to acceleration in the event that the volume weighted average trading price of the common shares of Sun Metals on the TSX Venture Exchange is equal to or greater than $0.30 for 20 consecutive trading days. All prices to be adjusted by the Exchange Ratio upon completion of the Transaction. It is expected that an aggregate of 17,802,000 post-Consolidation shares of Serengeti will be issued and the warrants will be adjusted to entitle the holders to acquire an additional 8,901,000 post-Consolidation shares of Serengeti at an approximate effective price of $0.84 per share, on or before December 17, 2022, subject to agreed acceleration provisions, on conversion of the Subscription Receipts and following completion of the Transaction.
The Subscription Receipts were offered by way of a private placement in all the provinces of Canada and in the United States on a private placement basis pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended (the “U.S. Securities Act“). The Subscription Receipts and the Common Shares, Warrants and Warrant Shares underlying the Subscription Receipts, will be subject to a statutory four-month hold period in accordance with Canadian securities legislation, or until such securities are exchanged or adjusted pursuant to the Transaction.
Certain insiders of Sun Metals acquired Subscription Receipts pursuant to the Offering and as such the Offering is considered a related party transaction with the meaning of TSX Venture Policy 5.9 and Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions. Neither Sun Metals, nor to the knowledge of Sun Metals after reasonable inquiry, a related party, has knowledge of any material information concerning Sun Metals or its securities that has not been generally disclosed. Sun Metals has relied on exemptions from the formal valuation and minority approval requirements of sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect of such insider participation, based on a determination that the fair market value of the participation in the Offering by insiders will not exceed 25% of the market capitalization of the Sun Metals, as determined in accordance with MI 61-101. Sun Metals did not file a material change report more than 21 days before the expected closing of the Offering because the details of the participation therein by related parties of Sun Metals were not settled until shortly prior to closing of the Offering and the parties wished to close on an expedited basis for business reasons.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the Subscription Receipts in the United States. The Subscription Receipts and the Common Shares, Warrants and Warrant Shares have not been and will not be registered under the U.S. Securities Act, or any state securities laws and may not be offered or sold within the United States except pursuant to an available exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws.
Serengeti is a mineral exploration company managed by an experienced team of professionals with a solid track record of exploration success. The Company is currently advancing its majority-owned, advanced Kwanika copper-gold project and exploring its extensive portfolio of properties in north-central British Columbia.
About Sun Metals
Sun Metals is advancing its 100% owned flagship, high-grade Stardust Project located in north-central British Columbia, Canada. Stardust is a high-grade polymetallic Carbonate Replacement Deposit with a rich history. Sun Metals also owns the Lorraine copper-gold project, and the OK copper-molybdenum project.
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We acknowledge the [financial] support of the Government of Canada.