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Sherwood Mining Corporation (TSXV:SWM) announced today that it has entered into a binding agreement whereby Sherwood could acquire a 100% working interest in the advanced stage Minto copper-gold project (the “Minto Project”) in the Yukon Territory.
Sherwood has agreed to make a take over offer (the “Offer”) for Minto Explorations Ltd. (“Minto Explorations”), a TSX Venture Exchange listed company, which has a 100% working interest in the Minto Project, whereby Sherwood will offer C$0.615 in cash or 2.5 shares of Sherwood for each Minto Explorations share, representing at least a 10% premium to the trade weighted average ratio over the past 5, 30 and 45 trading sessions. Sherwood will also issue a participation right (the “Participation Rights”) for each Minto Exploration share tendered to the Offer, as discussed below.
Minto Explorations’ Board of Directors has unanimously recommended approval of Sherwood’s offer (the “Offer”) following a nine month sale process overseen by an independent committee of the Board. ASARCO LLC, a wholly owned subsidiary of Grupo Mexico, holds 3,397,500 shares (57.5%) of Minto Explorations and has agreed to enter into an irrevocable lock-up agreement with Sherwood in support of the Offer. If successful in its Offer, Sherwood anticipates a closing date of on or before June 15, 2005 (the “Closing Date”).
Separate to its shareholding, ASARCO LLC also holds approximately C$680,000 in debt owed by Minto Explorations, which will be repaid in full on closing of the Offer. ASARCO LLC will also transfer to Sherwood its rights to earn a 70% working interest in the Minto Project on closing. In addition, Sherwood has the option to purchase ASARCO LLC’s 0.375% NSR royalty on the Minto Project for C$350,000, payable on closing in cash or shares of Sherwood, at Sherwood’s election, with the price based on the trade weighted average of Sherwood’s shares for the 10 days prior to the Closing Date. This option must be exercised prior to executing the definitive agreements in respect of the Offer and related transactions.
Falconbridge Limited has certain rights in respect of portions of the Minto deposit, including the right to repurchase a portion of the deposit for C$500,000 after March 31, 2005. Falconbridge has agreed to extend the March 31 date to June 15, 2005 provided Sherwood makes the Offer, and to surrender those rights in exchange for a cash payment of C$2,686,000 on closing. In addition, Sherwood has the option to purchase Falconbridge’s 0.75% NSR royalty on the Minto Project for C$700,000, payable on closing in cash or shares of Sherwood, at Sherwood’s election, with the price based on the trade weighted average of Sherwood’s shares for the 10 days prior to the Closing Date. This option must be exercised prior to executing the definitive agreements in respect of the Offer and related transactions.
Should Sherwood decide to sell the Minto Project within 12 months of the closing date or the completion of a bankable feasibility study, whichever is later, Sherwood has agreed to distribute 50% of any sales proceeds over and above $7 million (the “Additional Consideration”), allocated 42.5% to Falconbridge and 57.5% to the holders of the Participation Rights. Each Participation Right will be eligible to receive an equal share (defined as 1 over 5,912,501) in 57.5% of the Additional Consideration over and above the $7 million.
Minto Project
The Minto Project is an advanced stage copper-gold project located approximately 240km northwest of Whitehorse in the Yukon Territory of Canada. ASARCO LLC was earning a 70% interest in the project by spending US$25 million to put the project into production based on a 1995 feasibility study. This study was based on a 1994, pre-NI 43-101 resource estimated to contain 9.7 million tons grading 1.73% copper, 0.014 oz/ton gold and 0.22 oz/t silver based on more than 37,000m of drilling in 300 drill holes. The feasibility study assumed open pit mining of 6.5 million tons grading 2.13% copper, 0.018 oz/ton gold and 0.27 oz/ton silver, of which 191,000 tons was mined from underground. Since these estimates were prepared before the introduction of NI 43-101, they should be treated as historical estimates only. Investors are cautioned that recent independent verification has not been completed and Sherwood has not completed sufficient work to independently verify the historical resource and reserve estimates. Sherwood is not treating the historical estimates as NI 43-101 defined resources and reserves verified by a qualified person and the historical estimates should not be relied upon.
The 1995 feasibility study assumed open pit mining at a life-of-mine strip ratio of 4.9 to 1 and milling 1,500 tons of ore per day producing 254 million pounds of copper over a 12 year mine life, with higher grades in the first three years of production. Capital costs were estimated at C$26.6 million. An independent review of the Minto feasibility study in 2000 proposed increasing mill throughput to 1,723 tons per day and reducing the mine life to 11 years. Additional work would be required to update the feasibility study to take into account changes since the last review, including changes in metal prices, exchange ratios, costs of consumables and labour, and any other changes since then. Sherwood is not treating the historical estimates as NI 43-101 compliant estimates verified by a qualified person and these historical estimates should not be relied upon. Some of the material proposed to be mined may have been categorized as inferred resources under NI43-101 if it had been in place at the time of estimation and, by definition, have insufficient information to apply mining methods and costs and cannot be relied up in forecasts.
Engineering work had been completed, a Class A water licence granted and construction commenced. In 1996-99, a 28.8km mine access road was completed, the mill foundations excavated and concrete footings poured, a camp constructed and a SAG mill and ball mills purchased and moved to site. All construction ceased in 1999, and the property has lain largely idle since then.
Sherwood Mining Corporation
Sherwood is a junior exploration company focused on the acquisition, exploration and development of mineral projects. Sherwood currently has 26,124,994 shares issued and is expected to have approximately 38.7 million shares issued on closing of the Offer, prior to completion of the share consolidation discussed below.
Financing
To be in a position to finance the Offer and related transactions, Sherwood has arranged a standby credit facility of C$7 million with Quest Capital Corp. Terms of the Quest facility include a non-refundable standby fee of 3% payable as to 954,545 common shares of Sherwood, a 10% draw down fee payable in common shares of Sherwood priced at a 20% discount to the prior 10-day weighted average share price at the time of the drawdown, and a 12% per annum compounded monthly interest rate.
Miramar Mining Corporation (MAE-TSX) currently owns 10 million shares of Sherwood, representing 38% of the issued capital. In order to facilitate the transaction, Miramar has agreed to provide a $300,000 private placement at C$0.25 per share to fund Sherwood’s cost during the period of the offer. In addition, to facilitate the funding of the offer, Miramar has agreed to grant Quest an option to purchase 1.0 million of its Sherwood shares on execution of the standby credit facility at a price of C$0.25 per share for a period of 18 months, and, upon completion of the Offer, Miramar will grant Quest an option to purchase an additional 1.5 million shares at a price of $0.35 per share for a period of 18 months from the closing date of the Takeover Offer. In consideration of facilitating the Quest financing, Sherwood will issue Miramar $150,000 in units at a deemed price of C$0.35 per unit, each unit comprised of one common share and one common share purchase warrant. Each warrant is exchangeable for a period of one year for one common share priced at the greater of (a) $0.35 per share, and (b) the issue price for any financing completed by Sherwood on or before the Closing Date. This would result in Miramar receiving 428,571 shares plus 428,571 warrants in Sherwood.
Conditions
The delivery of the Offer is subject to execution and delivery of definitive agreements by the parties, completion of due diligence by Quest in connection with the Minto Project and all required regulatory approvals. Assuming satisfactory completion of these conditions, it is expected that the Offer would be delivered to Minto Explorations shareholders on or about April 15, 2005.
Sherwood’s Plans
On the successful completion of the Offer, Sherwood intends to initiate the work required to make the resource estimates compliant with NI 43-101, to update the feasibility study, to apply for and obtain any necessary amendments to the current permits and, based on successful completion of these matters, to commence construction of a low cost copper-gold mining operations at the earliest possible date. During these activities, Sherwood would also look to evaluate several exploration opportunities to expand the available mineable reserves in areas where potential has been identified by prior drilling, including the following:
1. Potential for underground mining of higher grade portions of the resources contemplated as being left in the pit walls in earlier studies;
2. Potential for extensions to the main deposit (a) to the north of an offsetting fault and (b) to the southwest where a 2001 drill hole by ASARCO intercepted 3.05% copper over 73 feet in drill hole 2001-14;
3. Poorly tested exploration areas away from the main deposit where drilling has intercepted up to 3.2% copper over 52 feet in hole A5-71 and 5.3% copper over 25 feet in hole A137-74 in poorly evaluated zones of copper mineralization that may offer opportunities for delineation of satellite deposits;
4. Numerous other showings and targets identified during more than 30 years of exploration.
Chicago Option
Given the material nature of this transaction, Sherwood will be focussing all of its energy and efforts on completing this transaction and, if successful, on moving the Minto project forward. As a result, Sherwoodwill be terminating forthwith the option announced on December 29, 2003 to earn an interest in the Chicago claims on the Hope Bay belt from Miramar Mining Corporation.
Share Consolidation
Sherwood intends to propose for consideration by its shareholders a special resolution to approve a share consolidation of up to four old shares for each one new share at its annual and special meeting of shareholders to be held April 15, 2005. It is not currently intended that the share consolidation would be effected unless the Takeover Offer and related transactions are completed, or a significant acquisition or financing is otherwise completed by Sherwood. There are currently 26,124,994 common shares of Sherwood outstanding and, if the full proposed consolidation was effected, would result in 6,531,249 common shares being issued after the consolidation, before taking into account shares to be issued in connection with the Offer and related transactions that would also be subject to the share consolidation.
All share consolidations will take place on the successful completion of the Offer, the financing discussed above, the payments to Miramar and other related transactions.
Sherwood will effect a name change in conjunction with the share consolidation to a name to be approved by the Sherwood Board. Completion of the share consolidation and name change are subject to shareholder approval and TSXV acceptance.
Forward Looking Statements
This presentation contains certain forward looking statements and you are referred to Sherwood’s Annual Report and Annual Information Form for a discussion of the risks associated with forward looking statements and other risk factors.
The technical information in this news release has been prepared in accordance with Canadian regulatory requirements set out in National Instrument 43-101 and reviewed by David Gunning, P.Eng. of Orequest Consultants Ltd., a Qualified Person under NI43-101.
ON BEHALF OF THE BOARD OF
DIRECTORS
“D. Bruce McLeod”
D. Bruce McLeod, President
The
TSX
Venture Exchange has not reviewed and does not accept responsibility for
the adequacy or accuracy of this press release.
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