Key Gold Holding Inc. (TSX VENTURE:KGH) (the "Company" or "Key Gold") is pleased
to announce that it has entered into a letter of intent (the "LOI") with
Pangolin Diamonds Corp. ("Pangolin"), an Ontario private company, which outlines
the general terms and conditions pursuant to which Key Gold and Pangolin would
complete a transaction resulting in a reverse take-over of Key Gold by the
shareholders of Pangolin (the "Proposed Transaction"). The LOI was negotiated at
arm's length and is effective as of February 20, 2012.
The LOI is to be superseded by a definitive merger or amalgamation agreement
(the "Definitive Agreement") to be completed on or before April 15, 2012 (or
such other date as may be mutually agreed between the parties). The Transaction
is subject to requisite regulatory approval, including the approval of the TSX
Venture Exchange (the "TSXV") and standard closing conditions, including the
approval of the directors and shareholders of each of Key Gold and Pangolin of
the Definitive Agreement and completion of due diligence investigations to the
satisfaction of each of Key Gold and Pangolin, as well as the conditions
described below. The legal structure for the Proposed Transaction will be
determined after the parties have considered all applicable tax, securities law,
and accounting efficiencies and it is currently contemplated will result in a
merged entity continuing under the laws of Ontario (the "Resulting Issuer").
Trading in the common shares of Key Gold (the "Key Gold Shares") is halted at
present. It is the intention of the parties that the Key Gold Shares will not
resume trading until the Proposed Transaction is completed and approved by the
TSXV.
Conditions to Proposed Transaction
Prior to completion of the Proposed Transaction (the "Closing") (and as
conditions of closing):
-- Pangolin must complete a private placement financing (the "Offering")
for minimum gross proceeds of not less than $1,000,000 at an issue price
of $0.10 per share and maximum gross proceeds of $1,500,000;
-- Key Gold must convert, prior to the Closing, approximately $150,000 of
its current indebtedness into Key Gold Shares at a price of $0.05 per
share pursuant to TSXV Policy 4.3 - Shares for Debt;
-- Key Gold and Pangolin will enter into a Definitive Agreement in respect
to the Proposed Transaction;
-- A joint information circular will be prepared in accordance with the
policies of the TSXV, outlining the terms of the Proposed Transaction
and seeking the approval of the shareholders of Key Gold and Pangolin at
shareholder meetings called for that purpose;
-- Key Gold and Pangolin will obtain the requisite shareholder approvals
for the Proposed Transaction and the ancillary matters contemplated in
the Definitive Agreement; and
-- All requisite regulatory approvals relating to the Proposed Transaction,
including, without limitation, TSXV approval, will have been obtained.
There can be no assurance that the Proposed Transaction will be completed as
proposed or at all.
Proposed Transaction Highlights
The Proposed Transaction is to be completed, subject to respect of the
conditions precedents, by the amalgamation of Key Gold and Pangolin (the
"Amalgamation"). Pursuant to the Amalgamation, the Resulting Issuer will issue
one Resulting Issuer common share (a "Resulting Issuer Share") for every two (2)
Key Gold Shares and one (1) Resulting Issuer Share for each existing common
share of Pangolin (a "Pangolin Share") issued and outstanding at Closing.
There are currently 20,000,000 Pangolin Shares issued and outstanding and,
assuming completion of the maximum Offering, Pangolin will have 35,000,000
Pangolin Shares issued and outstanding prior to Closing.
Pangolin has no other securities outstanding and, to the exception of the
Pangolin Shares to be issued under the Offering, no securities are expected to
be issued prior to Closing. On the Closing, any outstanding options in Key Gold
will be cancelled with the consent of the holders.
If the Proposed Transaction is completed and assuming completion of the maximum
Offering, a total of 49,262,806 Resulting Issuer Shares would be issued and
outstanding of which 40.6% would be held by the current Pangolin shareholders
(20,000,000 Resulting Issuer Shares), 28.9% by the current Key Gold shareholders
(14,262,866 Resulting Issuer Shares) and 30.4% by subscribers to the Offering
(15,000,000 Resulting Issuer Shares).
Information about Pangolin
Pangolin was incorporated on November 9, 2011 under the laws of the Province of
Ontario. Pangolin is a privately owned junior exploration company that holds,
through its wholly owned Seychelles subsidiary Pangolin Diamonds Ltd. ("Pangolin
Seychelles"), which holds, in turn, through two wholly owned subsidiaries
located in Botswana, namely Geocontracts Botswana (Pty) Ltd. and Pangolin
Diamonds (Pty) Ltd., a 100% interest in 11 diamond Prospecting Licenses (the
"Licenses"). Specifically, on December 24, 2011, Pangolin acquired a 100%
interest in Pangolin Seychelles pursuant to share purchase agreement with
Pangolin Seychelles, by which it acquired all the securities of Pangolin
Seychelles in exchange of 14,000,000 Pangolin Shares.
The Licenses cover an area of 6,620 square kilometers and consist of 5 project
areas namely: Tsabong North, Jwaneng South, Lorolwane (application pending);
Malatswae and Madinare. Of these, the priority target property of Pangolin is
the Tsabong North Property. The Tsabong North Property covers an area of 2,080
square kilometers and is located approximately 100 kilometers north of the City
of Tsabong (located in the southwestern portion of Botswana). Pangolin has
identified drill ready aeromagnetic targets and has commissioned a National
Instrument 43-101 Technical Report to be prepared in connection with its Tsabong
North Property. Such Technical Report will be filed on SEDAR when Key Gold files
its circular with respect to the Proposed Transaction.
Summary of the Tsabong North Project
The Tsabong North diamond exploration project is situated on the western edge of
the Archaean Kaapvaal Craton, immediately north of the diamondiferous Tsabong
kimberlite field. Soil sampling has produced highly anomalous concentrations of
kimberlite indicators within the project area. Microprobe analyses of garnets
has confirmed the presence of G10 garnets, indicative of the presence of a
mantle conducive to the crystallization of diamonds. A detailed aeromagnetic
survey has identified fifty targets. Soil trace element results are consistent
with orientation trace element results over known kimberlites. The craton margin
location of the project is similar to that of kimberlites in Lesotho known to
host large, high value Type II diamonds.
Mr. Leon Daniels, Ph.D., the President, Chief Executive Officer and a director
of Pangolin, is a "qualified person" under National Instrument 43-101 and has
reviewed the technical disclosure regarding Pangolin in this Press Release.
Selected Financial Statement Information
Pangolin is in the process of engaging an auditor with respect to the
preparation of its consolidated financial statements for the year ended December
31, 2011. The audited financial information on Pangolin will be filed on SEDAR
when Key Gold files the joint circular with respect to the Proposed Transaction.
Directors and Officers of the Resulting Issuer
In conjunction with the completion of the Proposed Transaction, it is intended
that Graham Warren, the current Chief Financial Officer and a director of Key
Gold, will remain as a director and officer of the Resulting Issuer and that
Willem Smuts, the current President & Chief Executive Officer of Pangolin, will
join the board and will act as President & Chief Executive Officer of the
Resulting Issuer. In addition, Leon Daniels, a current director of Pangolin, is
proposed to be the Chairman of the Resulting Issuer and Sean McGeorge and Louis
Peloquin, current directors of Pangolin, are proposed to be directors of the
Resulting Issuer.
At the time of closing of the Proposed Transaction and assuming completion of
the maximum Offering, it is anticipated that only Nomathata Diamonds Inc. will
exercise control or direction over more than 10% of the then issued and
outstanding shares of the Resulting Issuer.
Brief biographies for the proposed directors and officers of the Resulting
Issuer are set out below:
Willem Smuts, President & CEO, Director, Ph.D. Geology, M. Sc., B.Sc. Hons. Geology
Dr. Smuts has over 25 years experience in exploration, reserve evaluation and
planning in the mining sector. He has extensive success in leadership roles in
environments ranging from government, small consultancy to global corporations.
Dr. Smuts has successfully coordinated and executed exploration programs in
Africa, including being executive manager and co-owner of Genres (coal bed
methane in Botswana and Zimbabwe) from 1994 to 2000. He also has performed
environmental impact studies for several firms and was editor/managing editor of
three award-winning mining magazines.
Graham Warren, Chief Financial Officer& Director, B. Comm.
Mr. Warren is a senior financial executive with over 25 years of experience with
emerging companies in the oil and gas, mining, environmental, biotech and
software sectors. He has extensive operations, international business, corporate
finance and public market experience. Mr. Warren has served as Chief Financial
Officer and Director of several public issuers. He holds a B.Comm. degree from
Concordia University and a C.M.A. designation from the Society of Management
Accountants.
Leon Daniels, Chairman of the Board, Ph.D. Geochemistry, B.Sc., B.Sc. Hons.
Geology, Director
Dr. Daniels has over 35 years experience in diamond exploration and production.
He discovered the Klipfontein kimberlite pipe in South Africa early in his
career. Dr. Daniels previously worked for Falconbridge Exploration, Botswana,
evaluating the 180 ha crater facies M1 kimberlite, for Trans Hex Group in
Swaziland overseeing the evaluation of the Dokolwayo Diamond Mine, for Roan
Selection Trust International in Angola, overseeing production of five alluvial
mines, and consulted on the evaluation of the River Ranch kimberlite in
Zimbabwe. Dr. Daniels also discovered the DK4 kimberlite (only kimberlite in the
Orapa kimberlite field not discovered by De Beers), the Mambali kimberlite field
in Zimbabwe for Trillion Resources Ltd., and more recently co-founded African
Diamonds Plc, subsequently acquired by Lucara Diamond Corp., in 2010.
Sean McGeorge, BA, BA Hons, Director
Mr. McGeorge spent many formative years in diamond camps and operations across
southern Africa. He has served on the board of Pangolin Diamonds Ltd. as the
Chief Executive Officer, and has been a director of Pangolin Diamonds (Pty) Ltd.
since 2008. Mr McGeorge is a media specialist and has worked on advertising
campaigns for major banks and mining related companies.
Louis Peloquin, BBA, LL.B, LL.M., Director
Mr. Peloquin is a business consultant combining several specialties, including
transactional law, and has extensive international experience in management,
mergers and acquisitions, corporate development, government relations and
corporate finance. He has developed a solid expertise in natural resources with
over ten years experience as senior executive at major mining companies in
Canada and the United States. Mr. Peloquin was a member of the management
committees and senior executive of Golden Star Resources Ltd., an international
mining company based in Denver, and of Quebec Cartier Mining Company (now
Arcelor Mittal Mines Canada).
Financing Arrangements
It is a condition precedent to the closing of the Proposed Transaction, that up
to $150,000 of current indebtedness of Key Gold be converted into Key Gold
common shares at a price of $0.05 (equivalent to $0.10 post closing of the
Proposed Transaction) per Key Gold common share. In addition, as discussed
above, Pangolin must complete the minimum Offering.
Sponsorship
Sponsorship of a reverse take-over is required by the TSXV Policy 2.2 -
Sponsorship and Sponsorship Requirements. Key Gold has not yet appointed a
sponsor, but plans to be in discussion with several investment firms to act as
sponsor in connection with the Proposed Transaction. Key Gold intends to include
any additional information regarding sponsorship in a subsequent press release.
About Key Gold Holding Inc.
Key Gold Holding Inc. is a mineral exploration company that is currently mainly
focused on the acquisition, exploration and development of gold and copper
properties.
Key Gold has 28,525,732 common shares outstanding and is listed on the TSXV
under the symbol KGH.
Reader Advisory
This press release contains forward-looking statements with respect to the
Proposed Transaction and matters concerning the business, operations, strategy,
and financial performance of the Resulting Issuer, Pangolin and Key Gold. These
statements generally can be identified by use of forward looking word such as
"may", "will", "expect", "estimate", "anticipate", "intends", "believe" or
"continue" or the negative thereof or similar variations. The completion of the
Proposed Transaction and the future business, operations and performance of the
Resulting Issuer discussed herein could differ materially from those expressed
or implied by such statements. Such forward-looking statements are qualified in
their entirety by the inherent risks and uncertainties surrounding future
expectations, including that the Proposed Transaction contemplated herein is
completed. Forward-looking statements are based on a number of assumptions which
may prove to be incorrect, including, but not limited to: the ability of Key
Gold and Pangolin to obtain necessary shareholder approval to complete the
Proposed Transaction or to satisfy the requirements of the TSXV with respect to
the Proposed Transaction. The cautionary statements qualify all forward-looking
statements attributable to Key Gold and Pangolin and persons acting on their
behalves. Unless otherwise stated, all forward-looking statements speak only as
of the date of this press release and Key Gold and Pangolin have no obligation
to update such statements except as required by law.
Completion of the Proposed Transaction is subject to a number of conditions,
including but not limited to, TSXV acceptance and disinterested shareholder
approval. 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 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
Key Gold Holding Inc. should be considered highly speculative.
The TSXV has in no way passed upon the merits of the Proposed Transaction and
has neither approved nor disapproved the contents of this press release.
Pangolin Diamonds Corporation (TSXV:KGH)
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