Vancouver, British
Columbia - August 27th, 2013 - Pacific
Potash Corporation (TSX-V: PP; OTCQX: PPOTF; FSE: P9P, "Pacific
Potash", "the Company") is pleased to announce that on
August 27, 2013, it has
entered into an agreement in principal to merge (the "Transaction")
with Cowley Mining Plc ("Cowley"). If completed, the merger will
effectively make Pacific Potash the holder of the second largest
land holdings in the Amazonas Potash Basin and similar in size to,
the land separately controlled by Petrobras and Brazil
Potash.
The parties also
intend to raise up to $12 million in equity financing for the
merged entity to be completed upon closing of
the Transaction.
Highlights
-Cowley's land
holdings could potentially host expansive potash deposits based on
historical data and based on recent discoveries found within the
basin.
-Part of Cowley's
landholdings are immediately adjacent to Brazil Potash (inferred
resource of 381Mt @ 31.2% KCl based on the latest corporate
presentation given by Ercosplan and NI 43-101 compliant) and
Petrobras deposits, Fazendinha and Arari - *cautionary note*
Fazendinha and Arari deposits
estimates were presented as reports to the Mineral authority in
Brazil and based on 29 and 23 drill holes respectively, a qualified
person has not done sufficient work to classify the historical
estimate as current mineral resources and the issuer is not
treating the historical estimate as current mineral resources as
defined by NI 43-101.
-Combined entity to
become the largest publicly listed land rights holder in the Amazon
Potash Basin (see map below).
-Brazil is the
3rd largest potash
consumer globally - consuming 8.1Mt in 2012 and expected to grow to
13-14Mt by 2020 - but is dependent on imports by over 90% of annual
demand, whereas domestic supply could offer a transportation cost
advantage.
Click Image To View Full Size
Cowley is a
widely-held, unquoted junior exploration company headquartered in
the Isle of Man with corporate offices in Brasilia, Brazil, and
London, UK. No shareholder holds a controlling interest in
Cowley.
Cowley is focused on
the exploration and development of three potash exploration claim
blocks in the states of Amazon and Para, Northern Brazil, East of
Manaus. Cowley holds approximately 929,000 hectares extending over
the Amazonas Potash Basin including areas adjacent to proven
Petrobras and Brazil Potash deposits. According to Cowley's
unaudited financial information for the financial year ended
December 12, 2012, Cowley had a cash position of approximately
US$675,000, with a net asset value of approximately US$1.18
million. Its major liabilities consisted of a loan facility and
convertible notes in the aggregate amount of approximately US$1.4
million.
Cowley's license
areas are subject to historic work consisting of 31 wells and
2,095km of 2D seismic, focused on Oil & Gas exploration, which
resulted in a strong potential for the development of potash
deposit as the ones already identified within the basin.
*cautionary
note* there is no certainty
further exploration will lead to the development of deposits
similar to the Petrobras and Brazil Potash deposits.
Advantages of
Merger
The combined entity
("the Merge-Co") following the completion of the merger transaction
will have the following main value drivers:
-The Merge-Co will
have the 2nd largest
land holdings in the basin (1,725,041 hectares) similar to the land
packages separately held by Petrobras and Brazil Potash.
-The Merge-Co's
management and advisory team will have over 300 years of combined
mineral exploration and mining experience, primarily with expertise
in potash primarily located in the Amazon Basin.
-The financial assets
of the companies will be combined. In addition, the resulting
company will have better access to sources of funding in the
capital markets particularly in Europe, Asia, North America and
Brazil.
-The merger will
reduce competition in the basin and leave two major active
players--Brazil Potash and Pacific Potash.
-Merge-Co will
benefit from economies of scale ensuring that administration,
operations and other costs will be streamlined.
-Joint management is
anticipating commencing drilling in September as previously planned
by Pacific Potash's exploration team.
-As a result of
combined resources, the merger will greatly enhance our ability to
complete the major six well drill program presently budgeted to
cost $10 million.
Mr. Balbir Johal,
Executive Co-Chairman and Director of Pacific Potash said "The
Merger will make the new company stronger and better. That is the
greater value for all stakeholders. Together with Cowley, we will
have a stronger exploration team in Brazil, connections to greater
sources of finance capital in Asia, Europe, North America and
Brazil and a common vision to build an extraordinary
company."
Mr. Oliver Polcher of
Cowley Mining Plc stated "Cowley considers the planned combination
with Pacific Potash to be consistent with our mission to build a
first-class potash project in Brazil. We believe that by combining
our expertise, adding to each other's global reach and
consolidating our land packages in the Amazonas Potash Basin we may
create a stronger value proposition for investors and ultimately
deliver returns for all stakeholders involved."
Transaction
Summary
The
Transaction is expected to be effected by way of a plan of
arrangement, share offer exchange or other arrangement, whereby the
shareholders of Cowley (the "Cowley Shareholders") will exchange
their shares for common shares in Pacific Potash on the basis that
will result in the Cowley Shareholders owning 37.5% of the issued
and outstanding common shares of Pacific Potash upon completion of
the Transaction. As such, the effective rate of exchange is
expected to be approximately 0.2267 Pacific Potash share for each
Cowley share. Each party will be responsible for their own cost with respect to this
Transaction.
Pacific
Potash currently has an issued and outstanding share capital of
109,400,396 common shares. As a result, following the completion of
the Transaction, the Company would have 175,040,634 common shares
issued and outstanding.
The
parties to the Transaction are at arm's length. Following the completion of the Transaction, which cannot
close until the required shareholder and Exchange approvals are
obtained, it is anticipated that Pacific Potash will
continue to be a Tier 2 mining issuer on the Exchange.
Given the intended
concurrent Fundraising, as noted below, the Transaction will
constitute a Reverse Takeover under the policies of the
Exchange.
For the purposes of
Rule 2.5(a) of the City Code on Takeovers and Mergers ("the Code"), in relation to the
Transaction Pacific Potash reserves the right to vary the form
and/or mix of the consideration and, with the recommendation or
agreement of the Cowley board, the share exchange ratio.
In accordance with
Rule 2.6(a) of the Code, Pacific Potash must, by not later than
5.00pm on September 24, 2013 either announce a firm intention to
make an offer for Cowley in accordance with Rule 2.7 of the Code or
announce that there is no intention to make an offer for Cowley, in
which case the announcement will be treated as a statement to which
Rule 2.8 of the Code applies. This deadline will only be extended
with the consent of the Panel in accordance with Rule 2.6(c) of the
Code.
Pre-Conditions to
the Transaction
A firm intention to make an offer
under Rule 2.7 of the Code is conditional on the satisfaction or
waiver of mutual due diligence and execution of a definitive merger
implementation agreement. This announcement is not an announcement
of a firm intention to make an offer under rule 2.7 of the Code and
there can be no certainty that an offer will be made even if these
pre-conditions are satisfied or waived.
Fundraising for Merge-Co
Pacific
Potash and Cowley also intend to carry out a fundraising by way of
private placement for Merge-Co, to close upon completion of the
Transaction (the "Fundraising"). The Fundraising would only be
subject to regulatory approval. This would aim to raise up to
$12,000,000 in gross proceeds by the issuance of 120 million units
at $0.10 per unit. Each unit would consist of one common share of
Merge-Co and one half of one Merge-Co common share purchase
warrant. Each full Merge-Co common share purchase warrant would
entitle the holder to purchase a further Merge-Co common share at a
price of $0.17 for a term of 12 months from closing of the
Fundraising. The proceeds of the Fundraising would be used to fund
the exploration and development of potash exploration
property in the states of Amazon and Para, Northern Brazil, East of
Manaus and for general working capital
following the completion of the Transaction. Subject to regulatory
approval, it is anticipated that certain finders' fees will be paid
in relation to the Fundraising. All the securities to be issued in
the financing will be subject to a four month hold period. Assuming
the Fundraising is fully subscribed, Merge-Co would have
295,040,634 common shares issued and outstanding.
If no
Cowley Shareholders participate in the Fundraising, the aggregate
percentage holding of issued and outstanding common shares of
Merge-Co held by Cowley Shareholders upon completion of the
Transaction would reduce from 37.5% to 22.2% (or 18.5% if all the
common share purchase warrants above were exercised). The effective
rate of exchange on completion of the Transaction would remain as
approximately 0.2267 Pacific Potash share for each Cowley share,
although Cowley Shareholders would be diluted by approximately
40.7% (or approximately 50.7% if all the common share purchase
warrants were exercised).
Pacific Potash will be applying for
an exemption from the sponsorship requirement pursuant to the
policies of the Exchange.
For the purposes of
Rule 2.5(a) of the Code, Pacific Potash reserves the right to vary
the terms of the
Fundraising with the
recommendation or agreement of the Cowley board.
This announcement is being made with
the agreement of Cowley.
Proposed Changes to Management and Directors
It is anticipated that the board of
directors of Pacific Potash following the completion of the
Transaction will be comprised of five individuals, four of which
shall be nominated by Pacific Potash and one of which shall be
nominated by Cowley Mining Plc.
The President &
CEO of Cowley, Oliver Polcher will become CEO and a Director of the
combined company. Andre Costa will move from his current CEO role
to Chief Operating Officer and Chief Geologist. Tao Liu and Balbir
Johal will remain as Executive Co-Chairmen and
Directors.
Oliver Polcher has 18
years of business building and investment banking experience with a
successful track record in corporate leadership positions, deal
making and fund raising, of which he has spent the last 6 years in
the Natural Resources Industry.
Since early 2011 he
has been the President & CEO of privately-held Cowley Mining
Plc. Before he was the CEO and Director of privately-held metals
trading company Metalcorp Group with revenues of over US$300m in
metals trading, secondary aluminium smelting and exploration
projects in South Africa (manganese), Namibia (manganese) and
Guinea (bauxite).
Previously, Oliver
spent 7 years in investment banking with Deutsche Bank, JP Morgan
and Schroders as well as co-founding Inquam Ltd., a privately-held
technology investment fund with approx. US$500 million in
equity.
About Cowley Mining Plc
Cowley is a
privately-owned junior exploration company registered on the Isle
of Man with corporate offices in Brasilia, Brazil, and London, UK.
The Company is focused on the exploration and development of three
potash exploration claim blocks in the states of Amazon and Para,
Northern Brazil, East of Manaus. Cowley holds approx. 929,000
hectares extending over the Amazonas Potash Basin including areas
adjacent to proven Petrobras deposits, Fazendinha and
Arari.
About Pacific
Potash Corporation
Pacific Potash Corporation trades on
the TSX Venture Exchange under the symbol: PP, as well on the OTCQX
under the symbol: PPOTF and on the Frankfurt Stock Exchange under
P9P. Pacific Potash is engaged in the exploration and development
of the Amazonas Basin Project and the surrounding potash claims
targeting the Middle Amazonas Potash Basin, currently the host to
multiple new exploration campaigns for potash. The Company also is
exploring the Provost Potash Property and the surrounding potash
claims targeting the prolific Prairie Evaporite Formation, which is
host to multiple conventional and solution potash mines.
Investors are
cautioned that, except as disclosed in the disclosure document to
be prepared in connection with the Transaction, any information
released or received with respect to the reverse takeover may not
be accurate or complete and should not be relied upon. Trading in
the securities of Pacific should be considered highly speculative.
Trading in the common shares of Pacific will remain halted pending
further filings with the Exchange. Additional information
will be provided in subsequent news releases and prior to any
resumption in trading.
The Exchange has in no way passed
upon the merits of the proposed transaction and has neither
approved nor disapproved the contents of this press release.
We seek safe harbour.
On behalf of the Board,
Pacific Potash
Corporation
Balbir Johal, LL.B
Executive Co-Chairman
& Director
For further
information, please visit our website at www.pacificpotash.com
or contact our V.P of Corporate Communications, Mike
Blady:
Mike Blady
Office:
604.895.7446
Email:
mblady@pacificpotash.com
Andre Costa, P.Geo, CEO & President of
Pacific Potash Corp and qualified person for the purposes of NI
43-101, has reviewed and approved the preparation of the technical
information in this news release.
Neither the 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.
Caution
concerning forward-looking information
This press release contains "forward-looking information" and
"forward-looking statements" within the meaning of applicable
securities laws. This information and statements address future
activities, events, plans, developments and projections. All
statements, other than statements of historical fact, constitute
forward-looking statements or forward-looking information. Such
forward-looking information and statements are frequently
identified by words such as "may," "will," "should," "anticipate,"
"plan," "expect," "believe," "estimate," "intend" and similar
terminology, and reflect assumptions, estimates, opinions and
analysis made by management of Pacific Potash in light of its
experience, current conditions, expectations of future developments
and other factors which it believes to be reasonable and relevant.
Forward-looking information and statements involve known and
unknown risks and uncertainties that may cause Pacific Potash's
actual results, performance and achievements to differ materially
from those expressed or implied by the forward-looking information
and statements and accordingly, undue reliance should not be placed
thereon.
Risks and uncertainties that may cause actual results to vary
include but are not limited to the availability of financing;
fluctuations in commodity prices; changes to and compliance with
applicable laws and regulations, including environmental laws and
obtaining requisite permits; political, economic and other risks;
as well as other risks and uncertainties which are more fully
described in our annual and quarterly Management's Discussion and
Analysis and in other filings made by us with Canadian securities
regulatory authorities and available at www.sedar.com. Pacific Potash disclaims any obligation to
update or revise any forward-looking information or statements
except as may be required.
In
accordance with Rule 2.10 of the Code, Pacific Potash confirms
that, as at the close of business on 20 August 2013, it had
109,400,396 ordinary shares in issue. The International Securities
Identification Number for the ordinary shares is CA 694781105
6.
Under Rule 8.3(a)
of the Code, any person who is interested in 1% or more of any
class of relevant securities of an offeree company or of any paper
offeror (being any offeror other than an offeror in respect of
which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following
the commencement of the offer period and, if later, following the
announcement in which any paper offeror is first identified. An
Opening Position Disclosure must contain details of the person's
interests and short positions in, and rights to subscribe for, any
relevant securities of each of (i) the offeree company and (ii) any
paper offeror(s). An Opening Position Disclosure by a person to
whom Rule 8.3(a) applies must be made by no later than 3.30 pm
(London time) on the 10th business day following the commencement
of the offer period and, if appropriate, by no later than 3.30 pm
(London time) on the 10th business day following the announcement
in which any paper offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a
paper offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b)
of the Code, any person who is, or becomes, interested in 1% or
more of any class of relevant securities of the offeree company or
of any paper offeror must make a Dealing Disclosure if the person
deals in any relevant securities of the offeree company or of any
paper offeror. A Dealing Disclosure must contain details of the
dealing concerned and of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of
(i) the offeree company and (ii) any paper offeror, save to the
extent that these details have previously been disclosed under Rule
8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies
must be made by no later than 3.30 pm (London time) on the business
day following the date of the relevant dealing.
If two or more
persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in
relevant securities of an offeree company or a paper offeror, they
will be deemed to be a single person for the purpose of Rule
8.3.
Opening Position
Disclosures must also be made by the offeree company and by any
offeror and Dealing Disclosures must also be made by the offeree
company, by any offeror and by any persons acting in concert with
any of them (see Rules 8.1, 8.2 and 8.4).
Details of the
offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures
must be made can be found in the Disclosure Table on the Takeover
Panel's website at www.thetakeoverpanel.org.uk, including details
of the number of relevant securities in issue, when the offer
period commenced and when any offeror was first identified. You
should contact the Panel's Market Surveillance Unit on +44 (0)20
7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing Disclosure.
A
copy of this announcement will be available on Pacific Potash's
website at www.pacificpotash.com. The content of the website
referred to in this announcement is not incorporated into and does
not form part of this announcement.
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