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VANCOUVER,
Dec. 10, 2013 /CNW/ - Western
Pacific Resources Corp. ("Western Pacific" or the
"Company") (WRP - TSXV) is pleased to
announce that it has entered into an investment agreement (the
"Investment Agreement") with Quintana WRP Holding Company LLC
("Quintana WRP"), an affiliate of Quintana Minerals Corporation
("Quintana"), for a private placement of secured and unsecured
convertible notes (the "Financing") in the principal amount of up
to $10 million. In addition, the
Company announces that its wholly-owned subsidiary, Western Pacific
Resources (U.S.) Corp. (the "Subsidiary"), has concurrently entered
into a base metals purchase agreement (the "BMPA") with Quintana
Deer Trail Streaming Company LLC ("Quintana DTS"), an affiliate of
Quintana, for the purchase of certain percentages of base metals
that are produced from the Deer Trail Mine (the "DTM Project") by
the Company (the "Streaming Transaction").
This is a very exciting transaction as it
allows the Company to move forward with its plans at Deer
Trail Mine and demonstrates the potential that both companies
see in the project. "We are pleased to be partnering
with Western Pacific. We see great opportunity at the Deer Trail
Mine and with the expertise of the management team in place,"
commented Oliver Rodz, Managing
Director of Quintana Minerals Corporation. "We look forward to
supporting Western Pacific in bringing the Deer Trail Mine
profitably back into production in the near term and in making its
compelling growth strategy beyond Deer Trail a reality."
Warwick Smith, CEO of Western Pacific, comments:
"I am extremely pleased to announce this partnership with Quintana.
Not only were we able to arrange a $10
million convertible debt financing, but we were also able to
enter into an $8.5 million base metal
streaming transaction. We will now aggressively pursue our
development plans at the Deer Trail Mine in Utah and look for new growth opportunities.
Both Western Pacific and Quintana envision building the Company
into a multi-asset production company by acquiring other advanced,
production-ready assets. Gaining a financial partner such as
Quintana will help to attract a larger audience of investors and
analysts in the equity markets. This is just the beginning."
The development phase at the Deer Trail Mine is
expected to be comparatively rapid, and the ability to proceed
quickly to the production stage will highlight the stock for
investors over the near term. The proceeds from the Financing will
be used primarily to complete the Company's previously announced
acquisition of the DTM Project (the "DTM Acquisition"), to fund
exploration work such as sampling and drilling, to develop an
initial mine plan and to perform permitting work on the DTM
Project. The proceeds from the Streaming Transaction will
thereafter be used by the Company to complete the necessary
development to advance the Mine to the production stage.
The Financing
Pursuant to the Investment Agreement, Quintana
WRP will purchase secured convertible notes of the Company
("Secured Notes") in the principal amount of US$2,500,000 on the closing date for the initial
advance under the Financing (the "Closing Date") and will make
subsequent advances of US$2,500,000
to purchase additional Secured Notes upon the occurrence of certain
milestones.
The Secured Notes will be secured by a guarantee
from the Subsidiary and, subject to certain exceptions, first
ranking charges and security interests over all of the present and
future assets of the Company and the Subsidiary, including assets
relating to the DTM Project to be acquired by the Subsidiary
pursuant to the DTM Acquisition. The Secured Notes will mature
three years from the Closing Date and will bear annual compounded
interest at a rate of 8%.
In addition to the Secured Notes, the Investment
Agreement provides that Quintana WRP may elect to make available to
the Company up to US$5 million of
unsecured notes (the "Unsecured Notes" and together with the
Secured Notes, the "Convertible Notes") at any time prior to the
third anniversary of the Closing Date. The Unsecured Notes may be
offered in an amount up to the principal amount of Secured Notes
that have been advanced by Quintana WRP to the Company (up to
US$5 million aggregate principal
amount). The Unsecured Notes will be interest free and mature three
years from the Closing Date.
The Convertible Notes will, subject to the
approval of the TSX Venture Exchange ("TSXV"), be convertible at
any time at the option of Quintana WRP, and in the case of the
Unsecured Notes also at the option of the Company, in whole or in
part, into common shares of the Company (each a "Share") at a price
of CAD$0.1328 per Share, subject to
adjustment as provided in the Investment Agreement. Quintana
WRP may also elect to convert all or part of any accrued interest
on the Convertible Notes into Shares at a price equal to the
greater of (a) CAD$0.1328 per
Share, and (b) the closing price of the Shares on the TSXV (or
such other Canadian stock exchange on which the Shares are listed
for trading) on the trading day immediately preceding the date of
conversion. The Convertible Notes and any Shares issued on
conversion of the Convertible Notes will be subject to a four month
hold period from their date of issue under applicable securities
laws and the policies of the TSXV.
As long as Quintana WRP and its affiliates hold
at least 20% of the Company's Shares (assuming conversion of the
Convertible Notes), Quintana WRP will be entitled to certain
additional investor rights under the Investment Agreement,
including the following:
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(a) |
in the event that the Company
completes a public or private offering of Shares, Quintana WRP will
have the right to participate in such offering in order to maintain
its percentage interest in the Company's Shares (assuming
conversion of the Convertible Notes); |
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(b) |
following the Closing Date, in
certain circumstances where Western proposes to file a registration
statement in the United States or prospectus in a Canadian
jurisdiction with respect to an offering of equity securities, then
Western shall provide Quintana WRP piggyback rights to have its
securities registered or qualified under such registration
statement or prospectus, as applicable; |
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(c) |
on the Closing Date the board of
directors of the Company will be reconstituted to be comprised of
six directors, including three nominees provided by the management
of the Company and three nominees provided by Quintana WRP.
In addition, after the first anniversary of the Closing Date and
for as long as Quintana WRP, together with its affiliates, holds at
least 40% of the outstanding Shares, Quintana WRP will be entitled
to nominate the greater of a proportion of the total number of
directors equal to its shareholding percentage or one-half of the
total number of directors for appointment or election as directors
of the Company. For as long as Quintana WRP, together with
its affiliates, holds at least 10% of the outstanding Shares,
Quintana WRP will be entitled to nominate a proportion of the total
number of directors equal to its shareholding percentage at the
relevant time, and in any event at least one director; and |
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(d) |
Western will, prior to completing any
significant acquisition, provide Quintana WRP with a copy of all
materials relating to the proposed acquisition and provide Quintana
WRP with a reasonable opportunity to present its views and
recommendations and notify Quintana WRP of certain extraordinary
transactions, including any third party proposal involving a sale
of all or substantially all of the assets of the Company, a
transaction involving more than 10% of the Shares or a change of
control of the Company. |
Western also agrees, pursuant to the Investment
Agreement, to use commercially reasonable efforts to cause certain
of the Company's directors and officers to enter into lock-up
agreements with Quintana WRP with respect to their Shares on the
Closing Date.
Assuming that Quintana WRP subscribes for
US$10 million of Convertible Notes,
excluding any Shares acquired on conversion of accrued interest and
subject to adjustment as provided in the Investment Agreement,
Quintana WRP may acquire up to approximately 80,406,600 Shares (not
including any interest that may be converted), or approximately 69%
of the Company's Shares (based on the Bank of Canada USD/CAD
closing exchange rate and the number of issued and outstanding
Shares outstanding on December 4,
2013). Based on Quintana WRP's potential shareholding
position and the board nomination and other investor rights
provided to Quintana WRP under the Investment Agreement, the
Financing may result in Quintana becoming a Control Person of the
Company (as such term is defined in the TSXV's Corporate Finance
Manual). As such, the Company will be seeking disinterested
shareholder approval of the Financing and the creation of a new
Control Person at the Company's annual general and special meeting
of shareholders to be held on January 14,
2014.
The Financing is subject to the approval of the
TSXV.
The Streaming Transaction
Concurrent with the Investment Agreement, the
Subsidiary entered into the BMPA with Quintana DTS whereby it has
agreed to sell and Quintana DTS has agreed to purchase the Base
Metals, as follows:
- In the case of lead, 100% of the lead produced from the DTM
Project until 18,500,000 pounds of lead are delivered to Quintana
DTS in accordance with the terms of the BMPA (the "Lead Delivery
Hurdle"), and 60% thereafter;
- In the case of zinc, 100% of the zinc produced from the DTM
Project until 41,000,000 pounds of zinc are delivered to Quintana
DTS in accordance with the terms of the BMPA (the "Zinc Delivery
Hurdle"), and 60% thereafter; and
- In the case of any other base metal, 20% of the amount of such
base metal produced from the DTM Project.
Pursuant to the BMPA, the Subsidiary will
receive an upfront deposit payment of US$8,500,000 against the purchase price for the
Base Metals (the "Upfront Payment"), payable in installments in
accordance with the terms of the BMPA. An initial portion of the
Upfront Payment will be payable within five days of the date of the
fulfillment of certain conditions set out in the BMPA (the
"Commencement Date"), including receipt by Quintana DTS of a
satisfactory development plan and other documents relating to the
DTM Project, all applicable permits, licenses and other
authorizations having been obtained or likely to be obtained,
delivery of security documents from the Company and the Subsidiary
and construction of the DTM Mine being ongoing or completed.
The initial portion of the Upfront Payment will be in an amount
equal to the project costs expected to be incurred during the first
60 days after the Commencement Date. Subject to the Subsidiary
meeting certain conditions set out in the BMPA, subsequent advances
of the Upfront Payment will be payable every 60 days from the
payment of the initial portion of the Upfront Payment in amounts
equal to the project costs expected to be incurred during the 60
day period following each such advance.
Quintana DTS will pay the Subsidiary a fixed
purchase price for the Base Metals sold and delivered under the
BMPA, calculated as follows and subject to adjustment in accordance
with the terms of the BMPA:
- In the case of lead, the lesser of market price and the fixed
price of $0.24 per pound until the
Lead Delivery Hurdle is met, and then $0.36 per pound thereafter;
- In the case of zinc, the lesser of market price and the fixed
price of $0.22 per pound until the
Zinc Delivery Hurdle is met, and then $0.33 per pound thereafter; and
- In the case of any other Base Metal, 50% of the average daily
market price for such Base Metal in the three months immediately
preceding the commencement date.
Pursuant to the BMPA, the Subsidiary has granted
Quintana DTS a right of first refusal with respect to any future
streaming transactions relating to the DTM Project.
About Quintana Minerals Corporation
Quintana Minerals Corporation ("QMC") is the
management company for a portfolio of energy and natural
resources-based private and publicly-traded companies controlled
and/or operated by the Corbin J. Robertson Jr. family. The
company was formed in 1963 as a division of Quintana Petroleum
Corp. and has actively developed and operated precious and
industrial metals/minerals projects throughout the Americas.
The following are examples of some the group's on-going ventures:
Natural Resource Partners L.P., a publicly traded MLP (NYSE: NRP);
Great Northern Properties L.P., a private company that holds over
22 billion tons of coal reserves; Corsa Coal Corp., a publicly
traded junior mining company (TSXV: CSO); Quintana Energy Partners,
L.P., an energy-focused private equity fund; and Quintana Shipping
Ltd., the group's 2nd dry bulk shipping venture. For
more information please contact Oliver
Rodz, Managing Director of QMC, 601 Jefferson Street, Suite
3600, Houston, Texas 77002 (tel:
713-751-7500).
About Western Pacific Resources Corp.
Western Pacific is focused on advancing a strong
portfolio of projects in the Western
United States, including the Deer Trail Mine in Piute County, Utah. Western Pacific's team is
led by technical and financial experts who aim to succeed in
creating shareholder value. For more information, please visit our
website at www.westernpacificresources.com.
ON BEHALF OF THE BOARD
Warwick Smith, Chief Executive Officer
Neither TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
The Company has not established a National
Instrument 43-101 - Standards of Disclosure for Mineral
Projects ("NI 43-101") mineral resource estimate for the
DTM Project nor has it made a production decision with respect to
such project. Further, the Company has not based its decision
to enter into the Streaming Transaction on a feasibility study of
mineral reserves, demonstrating economic and technical viability,
and, as a result, there may be an increased uncertainty of
achieving any particular level of recovery of minerals or the cost
of such recovery, including increased risks associated with
developing a commercially mineable deposit. Historically,
such projects have a much higher risk of economic and technical
failure. There is no guarantee that production will begin as
anticipated or at all.
Eric Saderholm,
P. Geo, is the Company's Qualified Person (as such term is defined
by NI 43-101) and has reviewed and approved the technical
disclosure contained in this news release. Mr. Saderholm is
also the Company's Vice President of Exploration.
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements contained in this press
release constitute forward-looking statements within the meaning of
Canadian securities legislation. Forward-looking statements
contained in this news release include, without limitation,
statements in respect of the closing of the DTM Acquisition, the
closing of the proposed Financing and future payments and purchases
of Base Metals pursuant to the Streaming Transaction with
Quintana. These statements relate to future events, business
prospects or opportunities and product development. All such
statements other than statements of historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as "seek",
"anticipate", "plan", "continue", "estimate", "expect, "may",
"will", "project", "predict", "potential", "targeting", "intend",
"could", "might", "should", "believe" and similar expressions. The
Company believes that the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be
given that these expectations will prove to be correct and such
forward-looking statements should not be unduly relied upon. Actual
results and developments may differ, and may differ materially,
from those expressed or implied by the forward-looking statements
contained in this news release.
Forward-looking statements involve known and
unknown risks, uncertainties, assumptions of management and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statement, including but not limited to: (a) the conditions to
closing of the DTM Acquisition not being met; (b) the Company being
unable to meet the milestones for purchases of Secured Notes under
the Investment Agreement; (c) the company being unable to obtain
TSXV or disinterested shareholder approval of the Financing or
Streaming Transaction; (d) the Company being unable to raise
additional fund to finance the development of the DTM Project; (e)
the Company being unable to comply with the conditions to advances
to the Upfront Payment under the BMPA; (f) risks associated with
the results of exploration activities, the interpretation of
drilling results and other geological risks, estimation of mineral
resources and the geology, grade and continuity of mineral
deposits, project cost overruns or unanticipated costs and
expenses; and (g) such other risks detailed from time-to-time in
the Company's quarterly and annual filings with securities
regulators and available under the Company's profile on SEDAR at
www.sedar.com.
Although the Company believes that the
expectations conveyed by the forward-looking statements are
reasonable based on the information available to it on the date
such statements were made, no assurances can be given as to future
results, approvals or achievements. Such forward-looking
statements have been made for the purpose of assisting investors in
understanding the Company's business, financial and operational
performance and plans and may not be appropriate for other
purposes. The forward-looking statements contained in this
news release are expressly qualified by this cautionary
statement. The Company disclaims any duty to update any of
the forward-looking statements after the date of this news release
to conform such statements to actual results or to changes in the
Company's expectations except as otherwise required by applicable
law.
SOURCE Western Pacific Resources Corp.