Abcana Capital Inc. Announces Qualifying Transaction
910-1050 West Pender Street Vancouver, B.C. V6E 3S7
FOR IMMEDIATE RELEASE (TSX V Symbol: ABQ.P) July 12, 2013
ABCANA CAPITAL INC. ANNOUNCES QUALIFYING TRANSACTION
Vancouver, British Columbia - Abcana Capital Inc. ("Abcana”) (TSX VENTURE: ABQ.P), a Capital Pool Company ("CPC") trading on the TSX Venture Exchange (the "Exchange"), has entered into a binding letter agreement dated July 5, 2013 (the "Agreement") regarding a proposed transaction (the "Transaction") with IRG Exploration & Mining Inc. ("IRGEM") and IRG Capital Corp. (“IRGCC”), both privately held companies incorporated under the Business Corporations Act (British Columbia).
It is intended that the Transaction will constitute Abcana's "Qualifying Transaction" in accordance with Policy 2.4 of the Exchange. Abcana is at arm’s length to IRGEM and IRGCC and accordingly the Qualifying Transaction is not a "Non-Arm's Length Qualifying Transaction". As such, it is anticipated that the approval of the shareholders of Abcana will not be required. Subject to any regulatory, director or other approvals that may be required, and other conditions contained in the Agreement, it is intended that a newly-incorporated subsidiary of Abcana (the “Abcana Subsidiary”) will amalgamate with IRGCC and the company so formed will then amalgamate with IRGEM (collectively, the “Amalgamation”). As a result of the Amalgamation, Abcana will own 100% of a subsidiary corporation formed from the amalgamation of and possessing all of the assets and liabilities of the Abcana Subsidiary (as constituted immediately prior to the Amalgamation), IRGEM and IRGCC. Pursuant to the Amalgamation, the existing shareholders of IRGEM and IRGCC will receive Consolidated Abcana Shares, as defined hereafter, in exchange for their shares in IRGEM and IRGCC, in amounts to be determined in accordance with the valuation principals referred to hereafter. Upon completion of the Qualifying Transaction, it is expected that the Resulting Issuer, as defined in Exchange Policy 2.4, (the “Resulting Issuer”) will be listed on the Exchange as a Tier 1 or Tier 2 mining issuer.
As a condition of the Amalgamation, the shareholders of Abcana will be asked to approve a consolidation (the "Share Consolidation") of Abcana’s common shares on the basis of four old shares for one new share, which would become effective prior to completion of the Qualifying Transaction. The Abcana shares as so consolidated are hereinafter referred to as the “Consolidated Abcana Shares”. Concurrently with closing of the Qualifying Transaction, Abcana will change its name to "IRG Exploration & Mining Inc.”, or such other name as may be selected by IRGEM.
IRGCC has been recently formed to provide financing to IRGEM prior to closing of the Qualifying Transaction as referred to under “Contemplated Financing” hereafter. As the number of shares that IRGCC will distribute has not yet been determined, definitive numbers of Consolidated Abcana Shares to be issued pursuant to the Amalgamation cannot yet be determined. However the number of shares to be so issued will be based on the following valuation principles:
a. the Consolidated Abcana Shares will be valued at $0.35 per share;
b. 100% of the issued and outstanding common shares of IRGCC immediately prior to Closing will be valued at the amount raised by IRGCC pursuant to the financing referred to under “Contemplated Financing” hereafter, and will be exchanged for common shares of Consolidated Abcana at the rate of $0.35 per share; and
c. 100% of the issued and outstanding shares of IRGEM will be valued at $20,460,364.05, and will be exchanged for common shares of Consolidated Abcana at the rate of $0.35 per share resulting in the issue of 58,458,183 Consolidated Abcana Shares.
The foregoing valuation principles may be subject to amendment in the event that there is discovered a material change in the valuations of IRGEM, IRGCC or Consolidated Abcana resulting from due diligence currently being undertaken by the parties or from the Exchange’s review of the Transaction.
There are no finder's fees or other similar fees payable to any person or party with respect to the Transaction.
Contemplated Financing
IRGCC has been recently incorporated for the purpose of raising between $3,000,000 and $7,000,000, as available, required by IRGEM to fund its operations before and after completion of the Qualifying Transaction (the “Financing”). In that regard, IRGCC is currently undertaking a private placement of units consisting of one common share and one share purchase warrant (a “Unit”) at a price of $0.35 per Unit. Each share purchase warrant will entitle the holder to purchase one additional share of IRGCC at a price of $0.50 per share, exercisable on or before the date that is six months from the date that the shares of the Resulting Issuer first trade on the Exchange following completion of the Qualifying Transaction. Finders’ fees equivalent to 8% of the funds raised may be paid to arm’s length finders in cash or shares. Pursuant to the Amalgamation, each share of IRGCC issued to investors or finders will be exchanged for one share of Consolidated Abcana, and each warrant will be exchanged for one warrant of Consolidated Abcana, exercisable on the same terms.
The net proceeds from the foregoing financing will be loaned to IRGEM, as received. Upon completion of the Amalgamation, the loan will be eliminated as both lender and borrower will be amalgamated into a single entity. Proceeds from the financing will be used to provide working capital and advance exploration on IRGEM’s properties, referred to hereafter.
Resulting Issuer Capital Structure
Assuming completion of the Share Consolidation and the Amalgamation, and assuming for illustrative purposes that the Financing is completed to the extent of $5,000,000, the Resulting Issuer would have outstanding approximately 73,743,897 Consolidated Abcana Shares, and warrants for the purchase of 14,285,714 Consolidated Abcana Shares at $0.50. The actual number of shares and warrants outstanding following completion of the Share Consolidation, Financing and Amalgamation will vary depending on the number of shares and warrants issued under the Financing.
Closing Conditions
The closing of the Qualifying Transaction is subject to certain material conditions, including, but not limited to the following:
1. completion of due diligence reviews by both Abcana and IRGEM to be completed by July 15, 2013;
2. execution of formal agreements with respect to the Amalgamation and related transactions;
3. completion of the Financing to the extent of at least $5,000,000 in gross proceeds;
4. Abcana consolidating its share capital on the basis of four old shares for one new share;
5. certain principals of Abcana entering into agreements for the sale of 1,840,000 common shares of Abcana (460,000 common shares of Consolidated Abcana) to principals of IRGEM;
6. the current directors of Abcana resigning in favour of the current directors of IRGEM;
7. the IRGEM and IRGCC shareholders entering into such escrow agreements as may be required by the Exchange and applicable securities regulatory policy;
8. receipt of all director and shareholder approvals as may be required under applicable laws or regulatory policies;
9. receipt of required Kazakhstan government approvals;
10. the receipt of all required regulatory approvals, including the approval of the Exchange, to the Qualifying Transaction; and
11. satisfaction of the Minimum Listing Requirements of the Exchange and all requirements under the Exchange rules relating to completion of a "Qualifying Transaction".
IRGEM has agreed to reimburse Abcana up to a maximum of $100,000 for costs and fees incurred in connection with the Qualifying Transaction.
A filing statement in respect of the proposed Qualifying Transaction will be prepared and filed on SEDAR in accordance with Exchange policy 2.4, Capital Pool Companies.
IRGCC
IRGCC is a private company incorporated on June 28, 2013 under the Business Corporations Act (British Columbia). Its sole purpose is to complete the Financing and loan the proceeds to IRGEM, as referred to under “Contemplated Financing”. Upon completion of the Qualifying Transaction, the net funds it raises will have been transferred to the benefit of the Resulting Issuer and the shares and warrants it issues will be exchanged for the equivalent number of shares and warrants in the Resulting Issuer. Other than the funds so raised and loaned to IRGEM, IRGCC will have no material assets or liabilities. Its directors are Yuhai Li, Sik Lap Chan and Murray Seitz, who are referred to under “Directors, Officers and Other Insiders of the Resulting Issuer”
IRGEM
IRGEM is private company incorporated on November 5, 2010 under the Business Corporations Act (British Columbia). Its wholly owned Hong Kong subsidiary, International Resources Group Limited, wholly owns a Kazakhstani subsidiary, IRG Kazakhstan LLP (“IRG Kazakhstan”). IRG Kazakhstan is party to a subsoil use contract with the government of Kazakhstan pursuant to which it is a subsoil user with respect to the Charskiy Gold Ore Field in the East Kazakhstan Oblast, Kazakhstan (the “Charskiy Property”) and therefore entitled to explore and commercially exploit the Charskiy Property.
The Charskiy Property. The subsoil use rights comprising the Charskiy Property cover seven gold oxide properties, Mirage, Tergulgen, Skak, Pridorojnoe, East Mukur, North Kostobe and Kara-Choko, distributed throughout seven non-contiguous blocks. The majority of the properties have been drilled and surface sampled in trenches, with mineralization defined utilizing a Soviet classification scheme that is not compliant with NI 43-101. The properties cover 250 square kilometers and contain over 15,000 historical drill holes.
Mineralization in the district is interpreted as associated with faults with gold mineralization hosted primarily in sediments, with historic exploration efforts focused on shallow, oxide mineralization with drilling limited to generally less than 30 metres in vertical depth. As such, the potential for primary sulphide mineralization at depth has not been tested, and may represent a significant opportunity. This potential is further evidenced by an inspection of old oxide open pits in the district by SRK Consulting (Australasia) Pty Ltd. of Melbourne, Australia, which indicated primary sulphide mineralization in the bottom of the pits.
The available geological data shows a broadly NW-trending sequence of prospective host rocks for gold mineralization in the district, which are spatially related to major NW trending structures. The exact timing and controls to mineralization relative to these and subsidiary structures is yet to be confirmed, however it is clear that multiple locations within the overall geological setting are gold mineralized. The opportunity may exist to discover similar mineral zones within the properties covered by IRG Kazakhstan’s subsoil use rights.
Gold mineralization within the region is evidenced by active mining of oxide material by heap-leach extraction at Jerek, and recently completed and soon to be completed mining activities at Central Mukur, Myaly, Suzdal and Mizek. The large Bakyrchik Gold deposit to the south further indicates the mineralization potential of the area.
The North Kostobe and Kara-Choko properties will be IRG Kazakhstan’s primary focus for initial exploration, with immediate drilling programs aimed at verifying historic Soviet estimates, identifying additional resources, and making any resources NI 43-101 compliant.
IRGEM and its subsidiaries have expended approximately $5,820,872 to date in acquisition and exploration costs on the Charskiy Property, which covers 250 square kilometres.
Technical Report. A National Instrument 43-101 ("NI 43-101") compliant technical report in respect of the Charskiy Property is being prepared by Dr. Luis Bucci of SRK Consulting. Dr. Bucci is an independent "qualified person" within the meaning of NI 43-101.
Financial Position. IRGEM, on a consolidated basis, has aggregate assets of approximately $7,939,027 and aggregate liabilities of approximately $807,506, based on management prepared financial statements as at May 31, 2013. Audited financial statements are currently being prepared and will be included in the Filing Statement.
Abcana
Abcana, a capital pool company under Exchange policy 2.4, Capital Pool Companies, was incorporated on April 19, 2010 under the Business Corporations Act (British Columbia) and listed on the Exchange on November 9, 2011. Abcana does not have any operations and has no assets other than cash. Abcana’s business is to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction.
Directors, Officers and Other Insiders of the Resulting Issuer
Following the completion of the Qualifying Transaction, the officers, directors and insiders of the Resulting Issuer will be as follows:
Barry Davis, President, CEO & Director
Barry Davis has 25 years in the mining industry and has worked for a number of public and private companies with increasing levels of responsibility. Mr. Davis has extensive working experience and a unique geological understanding of Central Asian countries, including Kazakhstan, Uzbekistan, Kyrgyzstan, and Western China where he has worked since 1997. He had also spent nine months studying the 170 M oz Au Muruntau gold deposit. His work experience includes six years with Rio Tinto, 12 years in a senior management roles with companies focused in Central Asia and China, Exploration Manager for Normandy Exploration and Director of Dragon Mountain Gold Ltd (an ASX listed company). Mr. Davis has received a BSc in Geology from the University of Canberra and is a member of the Australian Institute of Mining and Metallurgy.
Li Yuhai, Chairman, Director & >10% Shareholder
Li Yuhai has been the Director of Tianjin Dragon Fly Invest Development Co. Ltd. since 2004, a private company located at Tianjin Port Free Trade Zone engaging in a variety of businesses including mining, finance, pharmaceuticals, information technology, logistics, trading and business investment. Dragon Fly owns a copper mine in Indonesia, through which Mr. Li has gained expertise in the commodity trading of copper concentrate and copper boards. Mr. Li has over 30 years of professional experience in management, investment, shipping export, finance and business development. Prior to establishing Tianjin Dragon Fly Invest Development Co. Ltd. in 2004, Mr. Li served in management positions at Hebei Ocean Shipping Co. and Tianjin Hanyang Transport Ltd.
Chan Sik Lap, Director
Jacky Chan is the Chief Executive Officer of Dragon Mining Consulting Limited a private mining consulting company. Mr. Chan has over nine years of experience in the mining industry, with expertise in gold, coal and base metals exploration, and has consulted on various projects in gold, coal, silver, iron, copper, lead, zinc, potash, uranium, phosphate and oil and gas in China, Kazakhstan, Indonesia, Malaysia, Cambodia, the Philippines, Russia, Australia, South Africa and Mexico. Mr. Chan’s expertise extends to mineral exploration, feasibility studies, mine operation and processing, property acquisition, public company listing, corporate finance and mergers and acquisitions. Mr. Chan is now a visiting Lecturer teaching mining at the University of Hong Kong, and is the founding Vice-chairman of the Hong Kong Mining Investment Professional Association. Mr. Chan holds an M.Phil degree in Geology from the University of Hong Kong.
Kang Yongjiang, Director
Kang Yongjjiang has served as Chief Financial Officer of Tianjin Dragon Fly Invest Development Co. Ltd. since 2005, a private company located at Tianjin Port Free Trade Zone engaging in a variety of businesses including mining, finance, pharmaceuticals, information technology, logistics, trading and business investment. Mr. Kang has been involved in a number of commodity transactions, including key participation in the commodity trading of copper concentrate and copper boards for Dragon Fly’s copper mine in Indonesia. Mr. Kang has over 25 years of experience in finance, accounting and management. He was the Vice-President of Tianjin Baoyide International Trade Co. Ltd. and the Financial Manager of Tianjin Dragon Telecom. Mr. Kang holds a Bachelor of Industrial Administration degree with a concentration in Statistics.
Grant Thomas, Director
Grant Thomas has 27 years of experience in the mining industry. His experience includes Exploration Manager/Managing Director of Tianshan Goldfields Limited (ASX), Exploration Manager/Director of Mojo Minerals Limited, principal geologist for Rio Tinto (Brazil) and Country Manager / Chief Representative for Rio Tinto in China. Mr. Thomas graduated from the University of Adelaide with a BSc and is a member of the Australian Institute of Mining and Metallurgy.
Murray Seitz, Director
Murray Seitz graduated from University College of the Cariboo with a Bachelor of Business Administration (finance concentration) in 1996. Mr. Seitz has served as a Director and Officer of a number of private and public companies listed on the TSX Venture Exchange, advising in the areas of business development, corporate compliance and mining exploration. Mr. Seitz is a founder of Riverside Resources Inc., an Exchange-listed company. His other responsibilities include serving as President of Corex Management Inc. and Triesse Capital Corp. and as a Director of Pan American Hydro Corporation, all of which are private companies.
Edward Low, Chief Financial Officer & Secretary
Edward Low is a Certified General Accountant with 16 years of financial management experience. His experience includes providing audit and accounting services with a chartered accounting firm and serving as a senior analyst with a private real estate and mezzanine lending company. Mr. Low’s most recent experiences during the past two years have included providing financial reporting support services to TSX Venture Exchange listed mineral exploration companies.
The directors and officers and any companies controlled by them collectively will own a total of 41,657,284 shares of the Resulting Issuer, assuming that none of them participate in the Financing. Information as to the individual shareholdings of each of the current officers and directors of Abcana is available on SEDAR.
Cautionary Statement
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
Contact
For further information, contact Murray Seitz, Director of IRGEM at (778) 327-5799.
Forward-Looking Statements
This news release contains certain forward-looking statements, including statements regarding the business and anticipated financial performance of Abcana and the Resulting Issuer. These statements are subject to a number of risks and uncertainties. Actual results may differ materially from results contemplated by the forward-looking statements. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and should not place undue reliance on such forward-looking statements. Abcana does not undertake to update any forward looking statements, oral or written, made by itself or on its behalf.