Titan Minerals Limited (ASX: TTM) (“Titan”) and Core Gold Inc. (TSX-V: CGLD, OTCQX: CGLDF) (“Core Gold”) are pleased to announce that the companies have entered into a binding arrangement agreement (the “Arrangement Agreement”), pursuant to which Titan will acquire all of the issued and outstanding Core Gold common shares by way of a share exchange (the “Merger”).
Image: A gold mineral. Photo: courtesy of carlos aguilar/Freeimages.com.
The Merger will create a diversified Latin America focused ASX-listed gold company (the “Company”) with a robust portfolio of exploration, development and production assets in both the emerging mining jurisdiction of Ecuador and the well-established mining jurisdiction of Peru. The Company will have a strong pipeline of growth opportunities.
The Merger will be affected by means of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). Under the Arrangement:
each Core Gold shareholder will receive twenty (20) fully paid ordinary shares in Titan pre-consolidation (“Titan Shares”) for every one (1) Core Gold common share (the “Exchange Ratio”); and
holders of Core Gold Options and Warrants will receive options in Titan on comparable terms, taking into account the Exchange Ratio under the Merger.
Cautionary Note for Australian Investors
The information in this announcement relating to Mineral Resource Estimates for the Dynasty Goldfield Project is a foreign estimate and is not reported in accordance with the JORC Code. A competent person has not done sufficient work to classify this foreign estimate as a mineral resource in accordance with the JORC Code and it is uncertain that following further exploration work that this foreign estimate will be able to be reported as a mineral resource in accordance with the JORC Code.
Refer to the Pro-forma Capital Structure below for further details.
The total consideration payable pursuant to the Arrangement Agreement values Core Gold at approximately C$72 million inclusive of the conversion of existing convertible debt and based on the closing price of Titan Shares on the ASX on February 15, 2019, representing a premium of:
44.7% to the closing price of Core Gold common shares on the TSX Venture Exchange (the “TSX-V”) of C$0.31 on February 22, 2019, being the last trading day prior to announcement of the Merger;
53.8% to the 20-day volume weighted average price (“VWAP”) of Core Gold common shares on the TSX-V as of February 22, 2019; and
65.3% to the 30-day VWAP of Core Gold common shares on the TSX-V as of February 22, 2019.
Pursuant to the Merger, Titan expects to issue approximately 319,505,438 Titan Shares, assuming a 10:1 share consolidation of Titan Shares, and 83,772,324 Options (post-consolidation). Pro-forma after the Merger and completion of the A$20 million equity financing assuming an issue price of A$0.024 per Titan Share, Titan will have approximately 659,209,377 Titan Shares, 88,272,324 options and 8,050,000 performance rights on issue on a post-consolidation basis.
Following completion of the Merger, Core Gold and Titan shareholders will each hold approximately 48.5% and 38.9% of the combined company, respectively, with the new shareholders subscribing for Titan Shares under the Placement (refer below) holding approximately 12.6% of the combined company, based on a minimum raise of A$20 million. On completion of the Merger and the Placement, the combined company will have approximately C$25 million (A$27 million) in cash before costs of the Merger.
Benefits to Titan Shareholders
- Provides growth potential across a robust portfolio of high-grade gold exploration, development and production projects in Ecuador
- Exposure to existing high grade foreign (Non JORC) mineral resource estimation comprised of an estimated Measured: 437k oz Au (2.9Mt @ 4.7 g/t gold), Indicated: 585k oz Au (4.0Mt @ 4.6 g/t gold) categories in accordance with Canadian NI 43-101 reporting) and Inferred: 1.1 million oz Au (7.8Mt @ 4.4 g/t gold) in the Dynasty Goldfield Project
- Diversifies Titan’s asset base into the emerging mining jurisdiction of Ecuador
- Establishes an operating presence in Ecuador, where Core Gold is currently operating the Dynasty Goldfield project and processing all material at the Portovelo mill and processing plant
- Creates a larger pro-forma company with an enhanced capital markets presence, increased trading liquidity and a strengthened shareholder base
- Provides strong re-rating potential in-line with ASX-listed precious metal peers
- Potential for operational and corporate synergies
Benefits to Core Gold Shareholders
- Delivers a significant and immediate up-front premium to Core Gold shareholders of 53.8% based on 20-day VWAP and 65.3% based on 30-day VWAP while maintaining meaningful equity participation in a well-funded and professionally managed gold company
- Provides significant access to capital and improves the overall balance sheet with a pro-forma cash position of approximately C$25 million (A$27 million), including the conversion of existing convertible debt and completion of the Placement by Titan at closing, before costs of the Merger
- Strengthens Board and Management Team with three Titan board nominees and operational experience of new Managing Director and CEO Laurence Marsland and Chief Geologist Travis Schwertfeger. Titan principals, shareholders and directors have an extensive track record in Australia, including experience with Cobalt One (sold to First Cobalt) and Galaxy Resources
- Creates a larger pro-forma company with an enhanced capital markets presence, increased trading liquidity and a strengthened shareholder base
- Diversifies asset base into Peru, a well-established mining jurisdiction, providing additional cash flow generation through additional gold production capability, while maintaining exposure to future growth in Ecuador
- Provides strong re-rating potential in-line with ASX-listed precious metal peers
- Potential for operational and corporate synergies
Commenting on the Merger, Matthew Carr, Executive Chairman of Titan, said “The combination of Titan and Core Gold has compelling strategic logic and merit, which was unanimously recognised by the Board of Directors of both companies. The combined organisation will be an emerging Ecuador and Peru focused gold company with an outstanding portfolio of gold assets. We are confident that merging the companies will result in significant benefits to both sets of shareholders with a potential re-rating opportunity for the expanded shareholder base from an enhanced capital markets profile.”
Core Gold Lead Director, Gregg Sedun added “The Merger with Titan allows Core Gold shareholders to unlock value from Core Gold’s underexplored exploration and development assets. With the additional A$20 million of equity capital to be obtained at closing of the Merger, we can now undertake a significant exploration program at Dynasty Goldfield, drill test the other highly prospective properties, as well as optimize production capacity and recoveries at the Portovelo mill and processing plant, which has been underperforming due to Core Gold’s capital constraints. While still retaining 48.5% of the pro-forma entity, this transaction with Titan provides an attractive and immediate premium to Core Gold shareholders and allows them to participate as meaningful shareholders in a well-funded gold company listed in Australia where we believe more attractive valuations will be afforded to our asset base.”
Combined Management and Board of Directors
Post-Merger, the proposed Board of Directors will consist of three nominees from Titan (Nicholas Rowley, Matthew Carr and Laurence Marsland) and three nominees from Core Gold (Gregg Sedun, Javier Reyes, and Mark Bailey). The Chairman of the combined company will be chosen from among the Core Gold director nominees. Laurence Marsland has been nominated to assume the role of CEO and Managing Director, Matthew Carr will assume an Executive Director role and it is proposed that Keith Piggott will assume the role of President in Ecuador. In addition, Armando Alexandri is nominated to assume the role of Chief Operating Officer and Travis Schwertfeger is nominated to assume the role of Chief Geologist. The Company will be based in Perth, Australia and the operational teams for each project will remain in place.
Additional Capital Raising
In connection with the Merger, Titan will conduct a placement of new Titan Shares to certain eligible institutional and high net worth investors to raise a minimum of A$20 million at an issue price to be agreed by Titan and Core Gold (each acting reasonably and taking into account the then current market conditions) (the “Placement”). If a minimum of A$20 million is raised under the Placement, assuming an issue price of A$0.024 (being the closing price of Titan Shares on the ASX on February 15, 2019), approximately 833,333,333 new Titan Shares will be issued under the Placement. The issue of new Titan Shares under the Placement will be subject to Titan shareholder approval. Completion of the Merger is conditional on completion of the Placement.
In addition, it is a condition of the Merger that prior to completion of the Arrangement, Titan enters into a credit committee approved term sheet or subscription commitments with a view to undertaking an additional financing to raise gross proceeds of US$10 million. The additional financing may be comprised of a credit facility, other borrowing or the issue of new Titan securities, or a combination thereof. Completion of the additional financing would be subject to customary conditions precent, including (i) completion of the Arrangement, (ii) completion of the Placement detailed above, and (iii) if the additional financing is by way of borrowing, the provision of first ranking security over the Ecuadorian assets of Core Gold.
Titan will provide an update to shareholders in respect to the status and progress of the Placement and the additional financing by way of an ASX announcement.
Board of Directors’ Recommendations and Voting Support
The Board of Directors of Core Gold has unanimously approved the Merger and will recommend that Core Gold security holders vote in favour of the Merger. Officers and directors of Titan have also entered into voting support and lock-up agreements (totalling approximately 3.57%). Core Gold has committed to delivering voting support agreements within 60 days.
PI Financial Corp. has provided a fairness opinion to the special committee of independent directors of Core Gold (the “Special Committee”) that, subject to the assumptions, limitations and qualifications set out in the fairness opinion, the consideration to be received by Core Gold shareholders under the Arrangement is fair, from a financial point of view, to the Core Gold shareholders. The written fairness opinion from PI Financial Corp. will be set out in the Core Gold management information circular.
Titan’s Board of Directors has unanimously approved the terms of the Merger and intends to recommend that shareholders vote in favour of the issue of Titan Shares in respect to the Merger and the Placement at a general meeting.
Source: Company Press Release