Solvista Gold Corp. and Rockcliff Resources Inc. have entered into a letter of intent, which sets out the principal terms upon which it is proposed that the two corporations will complete a business combination. The merger will be effected on the basis of 0.9 of a Solvista share for each 1.0 Rockcliff share, representing a premium to Rockcliff shareholders of approximately 20 per cent, based on the last closing prices of Solvista shares and Rockcliff shares. Solvista will issue 35,171,701 shares to acquire the issued and outstanding shares of Rockcliff. Each issued and outstanding security of Rockcliff will be exchanged for 0.9 of an equivalent security of Solvista. At the conclusion of the merger, the existing Solvista shareholders will hold approximately 66.5 per cent of the outstanding shares of the combined entity, and the existing shareholders of Rockcliff will hold approximately 33.5 per cent of the outstanding shares of the combined entity on an undiluted basis. It is anticipated that the combined entity will continue to be named Solvista Gold, and will maintain its listings on the TSX Venture Exchange and the OTC bulletin board (OTCBB) under the ticker symbols SVV and SVVZF, respectively. Currently, Rockcliff has 39,079,668 common shares issued and outstanding, and Solvista has 69,729,318 common shares issued and outstanding. The combined entity will have an aggregate total of 104,901,019 common shares issued and outstanding upon closing of the merger and prior to the settlement of certain current liabilities of Rockcliff as discussed elsewhere in this news release.
Reasons for the merger
The merger has been initiated to combine Rockcliff's Snow Lake project (as described below) with the working capital of Solvista to create a strong, well-financed exploration company with an experienced management team to enhance shareholder value for both companies. The combined entity will be well positioned in Manitoba, a stable, mining-friendly jurisdiction, to advance the Snow Lake project.
Rockcliff president and chief executive officer Ken Lapierre stated: "The board and management of Rockcliff unanimously support the planned merger between our two companies. The new Solvista will be well funded and well managed by a dynamic board with an excellent track record and long history of success. The outstanding technical and financial team will perfectly augment Rockcliff's exceptional property portfolio with high-grade copper deposits in Manitoba and Solvista's prolific flagship Caramanta copper-gold property in Colombia, where Iamgold has an option to earn up to a 70-per-cent interest in the property. The new Solvista will focus on systematically advancing its Manitoba high-grade copper assets through a diligent priority process, focusing on its best assets that can generate exciting news in the coming months with a view to long-term success to transition the company from an explorer to a mine finder. We believe that this merger will provide the best opportunity for Rockcliff shareholders to participate in the long-term value and advancement of our assets, which we have worked so hard to advance through very trying market conditions over the last few years."
Solvista president and CEO Bruce Durham stated: "This is a classic business amalgamation that combines management, directors, projects and capital at a low point in the cycle. We think the amalgamation will begin to benefit the shareholders of both companies immediately as well and even more so in the long term. While Iamgold continues under our option agreement on the Caramanta project, we are free to leverage our capital and management into this unique opportunity in Northern Manitoba. We have been patiently searching for an acquisition or merger opportunity since completing the Iamgold option more than a year ago. There is no doubt Ken and his team have put together a package of properties that any serious explorer would envy. The projects all host significant mineralization, and several have at least historic resources outlined already. Talbot in particular, a 2003 discovery by HudBay, was only acquired by Rockcliff last year and has not been drilled since being acquired. It boasts a historic resource by HudBay, remains open to expansion, has proximal untested targets as well as indications of mineralization on other parts of the property. It is already a high-grade copper-zinc-gold-silver deposit, and we feel that it could be just a few holes short of becoming a very significant larger deposit. This transaction gives our shareholders significant exposure in a world-class base and precious metal belt. The recent Fraser Institute annual survey of mining jurisdictions ranks Manitoba No. 4 in the world. Manitoba has it all: great exploration potential, certainty of title, excellent access and infrastructure, MEAP [mineral exploration assistance program] grants, and superflow through. Jurisdiction is always a key element in capital allocation for mineral exploration projects, and that is especially important these days. I have known Ken for more than 30 years, we are both successful explorers, and we want to find more mines. We are excited to get to work together and make this a successful business venture for all of our shareholders."
Structure of the merger
It is anticipated that the merger will be effected by way of a three-cornered amalgamation under the Business Corporations Act (Ontario) (OBCA), pursuant to which Rockcliff (a corporation formed under the OBCA) will amalgamate with a newly incorporated, wholly owned, OBCA-formed subsidiary of Solvista, to be become a wholly owned subsidiary of Solvista.
Under the terms of the merger:
- All of the common shares of Rockcliff outstanding will be exchanged for common shares of Solvista at the ratio of 0.9 of a Solvista share for each one Rockcliff share;
- Each of the outstanding convertible securities of Rockcliff will be converted into securities of Solvista on the same terms and conditions after adjustment for the exchange ratio;
- The accounts payable to insiders of Rockcliff are to be capped at $362,500 (including the release of $84,000 of debt by one insider), and will be settled on closing through the payment by Solvista of $180,000 in cash and the issuance of 3.3 million Solvista shares;
- Solvista shall maintain its listing on the TSX-V and the OTCBB.
In connection with the merger, Solvista shall also provide a bridge loan to Rockcliff within 30 days of the date the parties enter into the amalgamation agreement, in the principal amount of no less than $186,200 and up to $200,000 with interest calculated and payable monthly in arrears at an annual rate of prime plus 8 per cent. Such loan shall be advanced on a drawdown basis to be applied to payables as determined by Solvista and evidenced by invoices provided by Rockcliff to Solvista, with such expenses to be paid by Solvista on behalf of Rockcliff. The loan shall have a term of 120 days and shall be secured against Rockcliff's Rail property, located in the Snow Lake district in Manitoba.
The merger will be submitted to the shareholders of Rockcliff for consideration and approval by special resolution, and a simple majority resolution of the minority shareholders of Rockcliff at the annual and special meeting to be convened by Rockcliff on June 10, 2015. The currently scheduled annual and special meeting of Rockcliff for April 30, 2015, will be cancelled.
The transaction terms outlined in the LOI are expected to be superseded by a definitive agreement. The merger is subject to regulatory approval, including the approval of the TSX-V, standard closing conditions, including the approval of the merger by the directors of each of Rockcliff and Solvista, and the Rockcliff shareholders, and completion of due diligence investigations to the satisfaction of each of the parties, as well as the conditions described elsewhere in this news release. The legal structure for the merger may change after the parties have considered all applicable tax, corporate and securities laws, and accounting efficiencies.
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 LOI, the definitive agreement and such other required documents.
The definitive agreement will include a standard superior proposal out for Rockcliff, with Solvista having the right to match any superior offer. It is anticipated that the definitive agreement will be signed on or before April 15, 2015.
Board of directors and management of the combined entity
Under the terms of the LOI, Rockcliff will be entitled to appoint two directors to the board of directors of Solvista, who will be Mr. Lapierre and William (Bill) R. Johnstone. The remaining directors of Solvista on a postmerger basis will be Gerald McCarvill, Bruce Durham, Donald Christie, G. Edmund King, Miller O'Prey and Roger Easterday. Mr. Lapierre, the president and chief executive officer of Rockcliff, will be appointed president and chief executive officer of Solvista on closing of the merger.
Following are the backgrounds of the proposed Rockcliff nominees to the board of Solvista.
Mr. Lapierre, president, chief executive officer and a director
Mr. Lapierre is a professional geologist and a member of the Association of Professional Geoscientists of Ontario who graduated from the University of Western Ontario in 1983. He is the founder, and has been the president and CEO of Rockcliff Resources since its inception in 2005. Prior to that, Mr. Lapierre held management positions as president and CEO of JML Resources (2001 to 2006), and vice-president of exploration with Mustang Minerals Corp. (1996 to 2006), Findore Minerals Inc. (1987 to 1995) and Tyranex Gold Inc. (1986 to 1989). Mr. Lapierre has over 30 years experience in exploration, discovery, production and mining in base and precious metals across North and South America.
Mr. Johnstone, director
Mr. Johnstone has been a partner at Gardiner Roberts LLP since February of 2005, practising in the areas of securities and corporate law. Mr. Johnstone is the practice leader of the firm's securities law group. Prior to that, Mr. Johnstone was the proprietor of Johnstone & Company, a boutique corporate and securities law firm, for 12 years. Mr. Johnstone has been practising law for 30 years. Mr. Johnstone is also a director and/or officer of five TSX-V-listed companies (including Rockcliff) and two Canadian Securities Exchange-listed companies.
Rockcliff's Snow Lake project
Rockcliff is earning a 51-per-cent interest in the Talbot property, totalling 4,458 hectares in size, from Hudson Bay Exploration and Development Company Ltd. (HBED), a wholly owned subsidiary of HudBay Minerals Inc., by spending $6-million over six years. The property is located in Manitoba, Canada, 35 kilometres west of Rockcliff's Tower property and host of the Talbot deposit.
HISTORICAL MINERAL RESOURCE ESTIMATE FOR THE TALBOT DEPOSIT Documented by HudBay in 2008 Deposit (i) Tonnes Copper % Zinc % Silver g/t Gold g/t Talbot 1,434,0003.42.9 58.41.9 (i) Although the historical resource is viewed as reliable and relevant, based on the information and methods used at the time, it does not satisfy the requirements set out by National Instrument 43-101 -- Standards of Disclosure for Mineral Projects. Neither Rockcliff nor its qualified persons have done sufficient work to classify the historical estimate as current mineral resources, and Rockcliff is not treating the historical estimate as current mineral resources. The historical estimate should not be relied upon.
The Talbot deposit is defined as a volcanogenic massive sulphide (VMS) deposit, a stratabound accumulation of sulphide minerals that precipitated at or near the sea floor in association with contemporaneous volcanism. The depositional environment is similar to that of present- and past-producing base metal deposits of felsic to mafic volcanic and volcaniclastic rocks in the Flin Flon-Snow Lake greenstone belt. Three lenses outline the Talbot deposit, and mineralization tops at 150 metres vertical, and consists generally of coarse-grained disseminated to massive sulphides of pyrite, chalcopyrite, sphalerite and pyrrhotite in a quartzofeldspathic gneiss.
The deposit is located proximal to numerous untested pulse and borehole geophysical anomalies. These high-priority drill targets have similar geophysical similarities as the Talbot deposit's geophysics.
Potential expansion of the Talbot deposit and additional copper discoveries proximal to the deposit is considered excellent.
Rockcliff is pleased to report that its winter surface geophysical (DPEM (dual-primal electromagnetic)) program at the Talbot property is nearing completion. The first-phase program focused on historical geophysical anomalies centred around the high-grade Talbot deposit. Additional geophysics concentrated north of the deposit, where two historical drill holes intersected multiple highly anomalous copper lenses coincident with an airborne VTEM (versatile time-domain EM) anomaly. A total of over 40 line kilometres of DPEM geophysics have been completed to date. Expected interpretive results are anticipated in the next four to six weeks.
Rockcliff has now applied for a summer drill permit based on preliminary findings of the present survey. A diamond drill program is planned at Talbot after winter breakup.
Rockcliff is also pleased to report that after the completion of the geophysical program, the first year's expenditure requirement on the Talbot property will be satisfied.
Rockcliff owns a 100-per-cent interest in the Rail property, which is subject to a 2-per-cent net smelter return royalty to HBED. A National Instrument 43-101 mineral resource statement from the report entitled, "Mineral Resource Evaluation, Rail Polymetallic Sulphide Deposit, Snow Lake, Manitoba," dated Dec. 19, 2010, prepared by Sebastian Bernier, MSc, PGeo, and Dominic Chartier, PGeo, on behalf of SRK Consulting (Canada) Inc., is tabulated in this news release.
RAIL DEPOSIT NI 43-101 MINERAL RESOURCE STATEMENT (i) Resource Quantity GradeContained category(tonnes)Cu (%)Zn (%)Au (g/t)Ag (g/t)Cu (pounds) Indicated 822,0003.040.900.669.25 55,090,000 (i) Reported at a cut-off grade of 2 per cent copper. The cut-off grade is based on a copper price of $3 (U.S.) per pound and a metallurgical recovery of 80 per cent, without considering revenues from other metals. All figures are rounded to reflect the relative accuracy of the estimates. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
The Rail property is located approximately 40 km west-southwest of Snow Lake, Man., covers approximately 2,000 hectares and lies within the Flin Flon-Snow Lake greenstone belt. The property hosts a near-surface VMS lens known as the Rail deposit. The deposit remains open in all directions. The deposit is interpreted as a stratabound, massive sulphide deposit, rich in copper, zinc, silver and gold. The deposit is associated with a five-kilometre-long conductive VMS horizon of juvenile arc assemblage rocks. Juvenile arc assemblage rocks presently host all of the mined VMS deposits in the Flin Flon and Snow Lake camps.
Numerous additional underexplored and untested geophysical pulse and borehole anomalies, similar in appearance to the Rail deposit geophysics, are associated along the conductive horizon and are rated as high-priority drill targets.
Potential expansion of the deposit and additional discoveries along the conductive horizon is considered excellent.
Rockcliff owns a 70-per-cent interest in the Tower property (remaining 30 per cent owned by Pure Nickel Inc.), which totals 9,530 hectares and is located approximately 120 km south-southeast of Snow Lake, Man. The property hosts the T-1 deposit. An NI 43-101 mineral resource statement in the report entitled, "Independent Technical Report, Tower Property, Grand Rapids, Manitoba, Rockcliff Resources Inc.," dated Jan. 20, 2013, prepared by Zsuzsanna Magyarosi, PhD, PGeo, Julie Selway, PhD, PGeo, Jason Baker, BEng, PEng, and Julie Palich, MSc, PGeo, of Caracle Creek International Consulting Inc., is tabulated in this news release.
NI 43-101 MINERAL RESOURCE STATEMENT, T-1 DEPOSIT, MANITOBA Resource Tonnes Cu (%)Zn (%)Ag (g/t)Au (g/t) Contained category pounds Cu Indicated 1,084,1863.731.05 17.280.55 88,968,303 Inferred1,253,5222.001.029.780.27 55,154,968 Notes: 1. Canadian Institute of Mining, Metallurgy and Petroleum definitions were followed for the estimation of mineral resources. 2. Mineral resources are estimated at a Cu cut-off of 0.5 per cent. 3. The cut-off grade was based on a copper price of $3.63 (U.S.) per pound. 4. Given the tonnage, grade and orientation of the deposit, Caracle Creek considers the T-1 copper deposit to be reasonably amenable to extraction using underground mining methods. 5. Specific gravity measurements were taken on a portion of the samples and, where actual measurements were not available, an average of 3.00 was used. 6. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
The T-1 deposit is a remobilized, single, vertical-dipping, high-grade, copper-rich lens that is located immediately below a 100-metre-thick layer of Paleozoic limestone cover. It consists of stringers and massive sulphide lenses of chalcopyrite, pyrite, pyrrhotite and sphalerite. Drilling has intersected the deposit over a strike length of 800 m and to a vertical depth of up to 600 m. The deposit mineralization remains open at depth where surface (DPEM) and borehole geophysics have indicated a continuation of the sulphide conductivity beyond the limits of the resource. The deposit is associated with a 12-kilometre-long arcuate-trending copper horizon hosting a second zone of copper mineralization (T-2 copper zone) and several additional conductive targets worthy of follow-up exploration.
Lon-Dickstone North properties
Rockcliff owns a 100-per-cent interest in the Lon-Dickstone North properties, totalling approximately 9,500 hectares and located 30 km west of Snow Lake, Man. The properties lie within the Flin Flon-Snow Lake greenstone belt and host prospective juvenile arc rocks along a 15- to 25-kilometre strike length. The Lon deposit (subject to a 1/2-per-cent net smelter return royalty) and numerous additional untested targets lie along this juvenile arc horizon.
HISTORICAL MINERAL RESOURCE ESTIMATE FOR THE LON DEPOSIT Documented by Granges Inc. in 1993 Deposit (i) Tonnes Copper % Zinc % Silver g/t Gold g/t Lon250,000 3.20 5.20 18.8 0.34 (i) Although the resource is viewed as reliable and relevant, based on the information and methods used at the time, it does not satisfy the requirements set out by NI 43-101. Neither Rockcliff nor its qualified persons have done sufficient work to classify the historical estimate as a current mineral resource, and Rockcliff is not treating the historical estimate as a current mineral resource. The historical estimate should not be relied upon.
The Lon deposit is classified as a stratabound, massive sulphide deposit, and consists of two massive sulphide lenses of pyrrhotite, pyrite, chalcopyrite and sphalerite. The mineralized zones have strike lengths between 50 and 200 metres, plunge extents of at least 600 metres, and a range of up to 3.9 metres wide. Excellent potential remains to increase the resource of the deposit along strike and at depth, and to identify additional mineralization associated with untested pulse and borehole anomalies proximal to the deposit.
Additional surface areas on the property associated with juvenile arc rocks and prospective for VMS mineralization have been identified along strike of the Lon deposit. They include, for example, surface grab samples of 3.64 per cent and 6.12 per cent zinc (DC zone), located 0.5 km and 7.0 km, respectively, from the deposit. Excellent potential remains to find additional copper-bearing mineralization throughout the property.
Rockcliff owns a 100-per-cent interest in the Freebeth property, totalling 7,400 hectares and located approximately 40 km south of Snow Lake, Man. HudBay is presently earning a buyback interest of 55 per cent in the property by paying $170,000 cash (completed) and completing $1.8-million in exploration by May, 2016.
The property hosts two known copper-rich zones within favourable juvenile host rocks and numerous additional untested geophysical pulse anomalies. The property surrounds the former Spruce Pont mine and is located approximately 10 km east of the Reed Copper mine operated by HudBay Minerals.
Rockcliff owns a 100-per-cent interest in the Jackfish property, subject to a 3-per-cent net smelter return royalty. The property totals 3,712 hectares and is located approximately 30 km south of Snow Lake. The property hosts an underexplored low-grade copper zone worthy of additional drilling.
Rockcliff owns a 100-per-cent interest in the Tramping property, totalling 904 hectares. The property is located approximately 15 km south of Snow Lake, Man., and seven km south of HudBay's Lalor mine. The property hosts favourable juvenile arc rocks associated with a coincident, untested mag and pulse (EM) anomaly.
Other conditions to the merger
Completion of the merger is subject to a number of conditions, including but not limited to TSX-V acceptance. Where applicable, the merger cannot close until the required Rockcliff shareholder approval is obtained. There can be no assurance that the merger will be completed as proposed or at all. Other conditions to completion of the merger include but are not limited to: (a) negotiation and execution of a definitive agreement in respect of the merger; (b) preparation and filing of a disclosure document outlining the definitive terms of the merger in accordance with the rules of the TSX-V and applicable securities law; (c) receipt of all requisite approvals from Rockcliff shareholders, regulatory authorities (including the TSX-V) and third parties, if applicable, relating to the merger; (d) no material adverse change prior to completion of the merger; (e) the representations and warranties being true and correct in all material respects as of the closing of the merger; (f) receipt of legal opinions in relation to the merger; (g) there being no debts or amounts owing to certain insiders and other non-arm's-length persons, other than for expenses incurred in the ordinary course; (h) no legal proceeding, regulatory action, inquiry or investigation as at the closing of the merger which may have a material adverse effect; (i) no prohibition at law against the merger; (j) compliance with the terms of the LOI; and (k) no material breach of the covenants contained in the merger documents.
Bruce Durham, PGeo, president and CEO of Solvista Gold, a qualified person in accordance with Canadian regulatory requirements as set out in NI 43-101, has reviewed and approved the technical information in this press release relating to Solvista.
Kenneth J. Lapierre, PGeo, president and CEO of Rockcliff Resources, a qualified person in accordance with Canadian regulatory requirements as set out in NI 43-101, has reviewed and approved the technical information in this press release relating to Rockcliff.
This press release should not be considered a comprehensive summary of the merger. Additional information will be disseminated at a future date. Completion of the merger is subject to a number of conditions including but not limited to TSX-V approval. The merger cannot close until the required shareholder approval is obtained. There can be no assurance that the merger will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the information circular to be prepared in connection with the merger, any information released or received with respect to the transaction may not be accurate or complete, and should not be relied upon.