KWG Resources Inc. & Spider Resources Inc. Enter Into Binding Letter Agreement Regarding Proposed Merger25 May 2015
Montréal, Canada – May 25, 2010 – KWG Resources Inc. (“KWG” or the “Company“) and Spider Resources Inc. (“Spider” – TSXV:SPQ) are pleased to announce that they have entered into a binding letter agreement (“Letter Agreement“) which sets out the principal terms upon which it is proposed that the two corporations will complete a business combination (the “Merger“), at the conclusion of which the shareholders of each corporation will hold 50% of the outstanding shares of the ongoing public corporation. The combined company will hold a current interest of 53% in the Big Daddy deposit, with the option to earn a further 7% to achieve a 60% interest in the project. It is anticipated that the ongoing public corporation will continue to be named “KWG Resources Inc.” for a period of time after the Merger and will continue to be listed on the TSX Venture Exchange (“TSXV“) and on the Canadian National Stock Exchange (the “CNSX“). Following the Merger, it is proposed that the name of the ongoing public company will be changed to “Spider-KWG Resources Inc.” subject to shareholder and regulatory approvals.
Rationale for the Merger
KWG and Spider have decided to combine, as the logical next step of the continued exploration, and development of their jointly held mineral projects in Northern Ontario. The Merger has been initiated in order to combine the companies’ respective assets and experienced management teams, facilitate future financings and rationalize operations, all with a view to enhancing shareholder value. In particular, the Merger will result in the combined company having a majority interest in the Big Daddy Deposit with the ongoing right to operate the continued exploration, development and mining activities thereon.
Frank Smeenk, President of KWG, stated: “We are delighted to have finally achieved an agreement to combine the majority operating interest in what has the potential to be one of the world’s pre-eminent chromite deposits.”
Neil Novak, President of Spider, stated: “After 18 years of exploring the James Bay Lowlands area of Northern Ontario as co-venturers, this Merger places all of our exploration successes into one corporation. A corporation which will be poised for the development of its main asset, the Big Daddy Deposit, while maintaining an enviable portfolio of exploration projects covering a range of minerals.”
Highlights of the Merger
It is anticipated that the Merger will be effected by way of a three cornered amalgamation under theCanada Business Corporations Act (the “CBCA“), pursuant to which Spider (a corporation formed under the CBCA) will amalgamate with a newly-incorporated, wholly-owned CBCA formed subsidiary of KWG, to become a wholly-owned subsidiary of KWG.
Prior to the completion of the Merger, KWG will transfer its interest in the railway right of way, in its 1% net smelter returns royalty covering the Big Daddy Deposit, the Black Thor Deposit and the Black Label Deposit granted by Freewest Resources Canada Inc., and cash in an amount to be agreed upon between KWG and Spider to KWG’s wholly-owned subsidiary, Debuts Diamonds Inc. (“Debuts“), in exchange for Debut’s interest in various diamond exploration projects and a number of common shares of Debuts to be specified, and will distribute all of the outstanding common shares of Debuts to the shareholders of record of KWG.
Under the terms of the Merger:
all of the common shares of Spider (the “Spider Shares“) outstanding will be exchanged for common shares of KWG (the “KWG Shares“) at the ratio of one (1) Spider Share for that number of KWG Shares equal to:
- the number of outstanding KWG Shares, divided by
- the number of outstanding Spider Shares,
- in each case calculated as at the close of business on the date immediately preceding the effective date of the Merger (the “Exchange Ratio“);
each of the outstanding warrants to purchase one Spider Share (“Spider Warrant“) will, subject to regulatory approval, be exchanged for a warrant of KWG (“KWG Warrant“) exercisable to acquire that number of KWG Shares equal to the Exchange Ratio. All other terms of such KWG Warrant, including the exercise price and the expiry date thereof, shall be the same as the Spider Warrant;
each of the outstanding options (whether or not vested) to acquire one Spider Share will, subject to regulatory approval, be exchanged for an option of KWG exercisable to acquire that number of KWG Shares equal to the Exchange Ratio at an exercise price per KWG Share and on other terms to be agreed upon and included in the definitive agreement in respect of the Merger (the “Definitive Agreement“);
each of the outstanding compensation options of Spider (each, a “Spider Unit Compensation Option“) to acquire a unit of Spider (each, a “Spider Unit“), each Spider Unit consisting of one Spider Share and one common share purchase warrant of Spider, will, subject to regulatory approval, be exchanged for one compensation option of KWG (each, a “KWG Unit Compensation Option“) exercisable to acquire a number of units of KWG equal to the Exchange Ratio (each, a “KWG Unit“), each KWG Unit consisting of one KWG Share and one common share purchase warrant of KWG. All other terms of the KWG Unit Compensation Options, including the expiry dates thereof, shall be the same as the Spider Unit Compensation Options for which they are exchanged and all terms of the common share purchase warrants of KWG comprising part of the KWG Unit, including the exercise price and expiry date thereof, shall be the same as the common share purchase warrant of Spider comprising part of the Spider Unit; and
- KWG shall continue with its listing on the TSXV and the CNSX.
KWG and Spider will cooperate in structuring the Merger, which may vary from the foregoing structure on the basis of tax, securities, corporate law and other advice in order to ensure the most efficient structure for each of the parties and their respective securityholders.
Completion of the Merger is subject to a number of conditions, including, but not limited to, confirmatory due diligence, the negotiation and execution of the Definitive Agreement, the receipt of all required regulatory approvals, including the approval of the TSXV, and approval of the shareholders of Spider.
The Merger will be submitted to the shareholders of Spider (the “Spider Shareholders“) for consideration and approval at a special meeting to be convened by Spider as soon as possible following the completion, to the satisfaction of Spider and KWG, as applicable, of their due diligence investigations and execution of definitive documentation.
Each party will pay its own costs and expenses (including all legal, accounting and financial advisory fees and expenses) in connection with the Merger, including expenses related to the preparation, execution and delivery of the Letter Agreement, the Definitive Agreement and such other required documents.
In addition, the parties have agreed that each party will pay the other a break fee of CDN$2.3 million if, among other things, the Merger is not completed as a result of such party completing an alternative transaction, including but not limited to a merger, amalgamation, share exchange, business combination, take-over bid, sale or other disposition of material assets, recapitalization, reorganization, liquidation, sale or issuance of a material number of treasury securities (except upon the due exercise of convertible securities outstanding on the date of this news release) or rights or interests therein or thereto or rights or options to acquire any material number of treasury securities or any type of similar transaction involving it or any of its subsidiaries other than with the other party to the Letter Agreement, the board of directors of such party withdraws or modifies, in a manner materially adverse to the other party to the Letter Agreement, its approval or recommendation of the Merger or otherwise fails to make such approval or recommendation, such party enters into a letter of intent or definitive written agreement with respect to a Superior Proposal (as defined in the Letter Agreement), or if such party is subject to a take-over bid initiated by a third party. This break fee will also be payable by Spider to KWG if KWG terminates the Letter Agreement following the failure by Spider to mail a proxy circular and related documents in respect of the Merger to its shareholder on or before June 21, 2010. The parties have further agreed that, in certain other circumstances, Spider will pay a break fee to KWG of CDN$1.1 million or, KWG will pay a break fee to Spider of CDN$1.4 million.
Proposed Take-Over Bids for KWG and/or Spider by Cliffs Natural Resources Inc.
On May 24, 2010, Cliffs Natural Resources Inc. (“Cliffs“) announced that it intends to make take-over bids for all of the issued and outstanding common shares (not already owned by Cliffs or its affiliates) of KWG and/or Spider for cash consideration of $0.13 per share. Cliffs advised that neither bid would be conditional upon the completion of the other. The board of directors of each of Spider and KWG has formed an independent special committee to consider the bid by Cliffs.
As at the date of this news release, the outstanding share capital of KWG is 577,741,471 common shares on an undiluted basis, and 828,923,980 common shares on a fully diluted basis, and the outstanding share capital of Spider is 476,336,465 common shares on an undiluted basis, and 653,538,978 common shares on a fully diluted basis. KWG owns 250,000 Spider Shares.
For further details regarding the Merger, see the Letter Agreement which will be filed on the respective SEDAR profiles of KWG and Spider at www.sedar.com.
About KWG Resources Inc.
KWG is a mineral exploration company with extensive claim holdings in the James Bay Lowlands of Northern Ontario, Canada, where important discoveries of nickel and chromium have been made recently in the Ring of Fire. KWG has an equal participating interest in a large claim block in the central part of the discovery area, with Spider. The co-optionees are developing the Big Daddy Chromite Deposit adjacent to the Black Thor and Black Label chromite discoveries of Freewest Resources Canada Inc. In addition, KWG holds a 1% net smelter royalty in all three prospects.
For further information concerning KWG Resources Inc., please contact:
About Spider Resources Inc.
Spider is the “Spark that set off the Ring of Fire”. Spider, the pioneer explorer in the James Bay Region of Northern Ontario since 1993, was responsible for the discovery of eight kimberlites (1994-95), ten VMS occurrences, including two VMS deposits (2002-2006), and one chromite deposit (2006). Regional geophysical surveying and other exploration efforts as initially conducted by Spider formed the exploration data-set that lead to the first discovery of chromite in the area in February 2006, in a peridotite intrusion, and about a year later lead to the eventual discovery of additional chromite deposits and related Magmatic Massive Sulphide Nickel Deposit by others. Spider is a Tier 2 Canadian exploration company, quoted for trading on the TSXV under the symbol SPQ. There are currently 476,336,465 shares issued in Spider. Spider has approximately $4.0 million in working capital at present.
For further information concerning Spider Resources Inc., please contact:
This news release contains or refers to forward-looking information. All statements, other than statements of historical fact, that address activities, events or developments that KWG and Spider believe, expect or anticipate will or may occur in the future are forward-looking information. Such forward-looking information includes statements contained in this news release regarding the completion of the Merger (including the entering into of the Definitive Agreement), and future plans and objectives of KWG and/or Spider. This forward-looking information reflects the current expectations or beliefs of KWG and Spider based on information currently available to them. Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of KWG and Spider to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on KWG and/or Spider. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: the failure of KWG and Spider to negotiate and enter into the Definitive Agreement; delays in obtaining or failure to obtain required regulatory and shareholder approval for the Merger; alternative transactions involving third parties; the failure to achieve any of the anticipated benefits from the Merger and other factors. Any forward-looking information speaks only as of the date on which it is made. Although KWG and Spider believe that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.
This news release, required by applicable Canadian securities law, is not for distribution to U.S. news services or for dissemination in the United States, and does not constitute an offer of the securities described herein. These securities have not been, and will not be, registered under the United States Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States, or to or for the benefit of U.S. persons, unless registered or exempt therefrom.
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.