TSX Venture Exchange Symbol: PGR
Shares Issued: 53,649,254
VANCOUVER, July 31, 2012 /CNW/ - Paragon Minerals Corporation (TSX-V: PGR) ("Paragon") is pleased to announce that it has entered into a definitive agreement
(the "Arrangement Agreement") with Canadian Zinc Corporation (TSX: CZN) ("Canadian Zinc") whereby Canadian Zinc will acquire all of the outstanding common shares of
Paragon in exchange for common shares of Canadian Zinc by way of a
statutory plan of arrangement (the "Arrangement"). The Arrangement is
subject to approval by the Paragon shareholders, regulatory and court
approvals, and other customary closing conditions.
Pursuant to the Arrangement Agreement:
Paragon shareholders will receive, in exchange for each Paragon share
held, 0.136 shares of Canadian Zinc (the "Exchange Ratio"). The
consideration represents a total of CDN$0.061 per Paragon share, based
on the volume weighted average price of Canadian Zinc shares on the TSX
for the 30 trading days ended July 20, 2012 and a premium of 52% to
the volume weighted average price of Paragon shares on the TSX-Venture
for the same period.
In addition, all outstanding options and warrants to purchase Paragon
common shares will be exchanged for replacement options and warrants to
purchase Canadian Zinc common shares and will be exercisable to
purchase that number of Canadian Zinc common shares at an exercise
price each determined by reference to the Exchange Ratio.
On signing of the Arrangement Agreement, Canadian Zinc has also agreed
to immediately purchase, in a non-brokered private placement financing,
7,000,000 Paragon common shares at a price of $0.07 per share for a
total consideration of $490,000 (the "Private Placement"). The closing
of the Private Placement will be as soon as practicable after
acceptance by the TSX Venture Exchange and receipt of other required
regulatory approvals for the Private Placement.
John Kearney, Canadian Zinc's Chairman and CEO commented, "The merger is
consistent with Canadian Zinc's strategy of building a growth focused
base metal producer in North America and represents an excellent value
opportunity for shareholders of both companies. We believe that the
addition of Paragon's advanced exploration assets like the South Tally
Pond VMS project in central Newfoundland is a major step towards
achieving our strategy of creating a strong intermediate base metal
company with an attractive growth profile focused on enhancing
Michael Vande Guchte, President and CEO of Paragon, commented, "Canadian
Zinc is a well-funded Canadian exploration and development company that
is in the process of putting its high grade Prairie Creek
silver-lead-zinc deposit into production. Given the prevailing market
conditions, it is the Board and management's view that Paragon
shareholders will benefit from Canadian Zinc's financial strength and
development expertise in unlocking shareholder value in Paragon's base
metal assets. The transaction provides Paragon shareholders with the
opportunity to participate in the future potential of a near-term
producer with a portfolio of production, development and exploration
Canadian Zinc's 100%-owned Prairie Creek Mine is a silver-lead-zinc
development project located in the Northwest Territories, 500 km west
of Yellowknife. The Prairie Creek deposit has the potential to be a
significant zinc-lead-silver producer, based on NI 43-101Mineral
Resource estimates which include:
Measured & Indicated Resource: 5.43 million tonnes grading 10.8% zinc, 10.2% lead, 160 g/t silver, and
Inferred Resource: 6.24 million tonnes grading 14.5% zinc, 11.5% lead, 229 g/t silver and
0.57% copper using a 8% zinc equivalent cut-off.
A portion of the Mineral Resources was converted to a Mineral Reserve Estimate of 5.2 million tonnes grading 9.4% zinc, 9.5%
lead and 151 g/t silver. A prefeasibility study completed by SNC Lavalin for Canadian Zinc in
June, 2012 indicates a pre-tax net present value ("NPV") of $253
million using an 8% discount, with an internal rate of return ("IRR")
of 40.4% and payback period of 3 years based on long-term metal price
projections of $1.00/lb zinc, $1.00/lb lead, $26.00/oz silver (see
Canadian Zinc press release dated June 27, 2012). The Prairie Creek
deposit remains open for expansion. Please note that mineral resources
that are not mineral reserves do not have demonstrated economic
Paragon's key asset, the 100%-owned South Tally Pond VMS project is
located in a proven mining district in central Newfoundland,
immediately southwest of Teck Resources Limited's Duck Pond Cu-Zn mine
and mill complex. In January 2012, Paragon announced an initial
NI43-101 Mineral Resource Estimate on the South Tally Pond Lemarchant
VMS deposit (see Paragon press release dated January 23, 2012 and
related technical report entitled "NI 43-101 Technical Report and
Mineral Resource Estimate on the Lemarchant Deposit, South Tally Pond
VMS Project, Central Newfoundland, Canada" and dated effective March 2,
2012). The resource estimate includes:
Indicated Resource: 1.24 million tonnes grading 5.38% zinc, 1.19% lead, 0.58% copper, 1.01
g/t gold and 59.17 g/t silver using a 7.5% zinc equivalent grade cut-off
Inferred Resource: 1.34 million tonnes at 3.70% zinc, 0.86% lead, 0.41% copper, 1.00 g/t
gold and 50.41 g/t silver using a 7.5% zinc equivalent grade cut-off
The Lemarchant Deposit remains open along strike and to depth, and there
are numerous, other untested priority VMS targets on the property.
Implements Canadian Zinc's strategy of building a base metal producer
with a combined portfolio of operating mines and pipeline of
high-potential growth projects in mining friendly jurisdictions.
Further asset diversification in a proven mining area.
Financial strength to review potential for consolidating resources in
Establish a pipeline of zinc deposits for the time when it is believed
the zinc price will see significant upside improvement.
Highlights for Paragon Shareholders
Opportunity to participate in the future potential of a growth-oriented
base metal company.
Exposure to an exceptional portfolio of near producing, development, and
exploration base metal assets.
A platform through which to participate in future sector consolidation.
Increased trading liquidity through ownership of Canadian Zinc shares.
The proposed transaction will be carried out by way of a court-approved
plan of arrangement whereby Canadian Zinc will acquire all of the
issued and outstanding common shares of Paragon. Paragon will become a
wholly owned subsidiary of Canadian Zinc.
Paragon shareholders will be entitled to receive, in exchange for each
Paragon share held, 0.136 shares of Canadian Zinc. The proposed
transaction is subject to certain customary conditions including the
approval of not less than 66-2/3% of the votes cast at a special
meeting of Paragon security holders that is expected to be held in
September 2012. Approval will also be required from the majority of
votes cast by "disinterested" shareholders pursuant to Multilateral
Instrument 61-101 Protection of Minority Security Holders in Special Transactions.
Pursuant to the terms of the Arrangement Agreement, the proposed
transaction is also subject to applicable regulatory approvals and the
satisfaction of certain closing conditions customary for transactions
of this nature. The Arrangement Agreement also provides for, among
other things, customary board support and non-solicitation covenants
from Paragon (subject to customary "fiduciary out" provisions that
entitle Paragon to consider and accept a superior proposal). The
Arrangement Agreement also provides for the payment of a break fee of
C$150,000 to Canadian Zinc on the occurrence of certain termination
After giving effect to the Arrangement, Canadian Zinc and Paragon
shareholders will own approximately 95.5% and 4.5%, respectively, of
the Canadian Zinc issued and outstanding common shares.
The Paragon Board of Directors have determined that the proposed
transaction is in the best interest of Paragon, is fair to the Paragon
shareholders, and intend to recommend in the Information Circular that
Paragon shareholders vote in favour of the proposed transaction. The
Paragon Board of Directors' determinations are based on the
recommendations of a special committee of independent Paragon
directors; Roman Friedrich & Company Ltd., Paragon's financial advisor;
and Evans & Evans Inc, the fairness opinion provider to the special
committee. Evans & Evans have provided an opinion to the effect that
the consideration to be received by Paragon shareholders is fair from a
financial point of view. Paragon's directors and senior management
representing, in aggregate, approximately 2.7% of Paragon's issued and
outstanding shares, have entered into customary voting support
agreements pursuant to which, among other things, they have agreed to
vote their Paragon shares in favour of the proposed transaction.
If it is approved by shareholders of Paragon, the proposed transaction
is expected to be completed in September 2012 and is subject to certain
customary conditions, including receipt of all necessary court, TSX,
TSX-Venture and shareholder approvals. The terms and conditions for the
proposed transaction will be summarized in the Paragon Management
Information Circular to be mailed to Paragon shareholders in August
2012. Copies of the Arrangement Agreement, the Management Information
Circular, and certain related documents and agreements will be filed
with Canadian securities regulators and will be available at the SEDAR
website at www.sedar.com under Canadian Zinc and Paragon profiles, as applicable.
Roman Friedrich & Company is acting as financial advisor to Paragon and
its board of directors and a success fee is payable upon closing of the
transaction to Roman Friedrich & Company in respect to the Arrangement
Agreement. Evans & Evans Inc is acting as fairness opinion provider to
the special committee of the board of directors of Paragon. Paragon's
legal counsel is Davis LLP. Canadian Zinc's legal counsel is DuMoulin
About Canadian Zinc Corporation
Canadian Zinc Corporation is a Toronto-listed junior exploration and
development company trading under the symbol CZN on the Toronto Stock
Exchange, under "CZICF" on the Over the Counter OTCOB in the US, and
under the symbol "SAS" on the Frankfurt Exchange. The company's main
project is the Prairie Creek Zinc, Silver, Lead Mine in the Northwest
Territories, Canada with Measured and Indicated Resources of 5.43
million tonnes grading 10.8% zinc, 10.2% lead, 0.31% copper and 160 g/t
silver and Inferred resources of 6.24 million tonnes grading 14.5%
zinc, 11.5% lead, 0.57% copper and 229 g/t silver. A portion of the
Mineral Resources was converted to a Mineral Reserve Estimate of 5.2
million tonnes grading 9.4% zinc, 9.5% lead and 151 g/t silver. For
further information on Canadian Zinc visit the website at www.canadianzinc.com
About Paragon Minerals Corporation
Paragon Minerals Corporation is a Canadian-based mineral exploration
company focused on gold and base-metal exploration in Newfoundland and
northwest Ontario. Paragon's flagship project is the 100%-owned South
Tally Pond VMS project where it is advancing a significant precious
metal rich massive sulphide deposit located in producing base metal
mining district in central Newfoundland. Paragon is also exploring a
portfolio of gold properties through partner and company-funded
PARAGON MINERALS CORPORATION
"Michael J. Vande Guchte"
President & CEO
Qualified Person: This news release has been prepared under the supervision of Michael J.
Vande Guchte, P.Geo., who serves as the qualified person under National
Instrument 43-101 for Paragon Minerals Corporation.
Forward-looking Statements: This news release contains certain statements that may be deemed
"forward-looking statements". All statements in this release, other
than statements of historical fact, that address events or developments
that Paragon expects to occur, are forward looking statements.
Forward-looking statements are statements that are not historical facts
and are generally, but not always, identified by the words "expects",
"plans", "anticipates", "believes", "intends", "estimates", "projects",
"potential" and similar expressions, or that events or conditions
"will", "would", "may", "could" or "should" occur. Forward-looking statements in this document include statements regarding
current and future exploration programs, activities and results,
resource and reserve estimates and other projections based on such
estimates, and statements regarding approvals for, and completion of,
the proposed plan of arrangement. Although Paragon believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions, such
statements are not guarantees of future performance and actual results
may differ materially from those in forward-looking statements.
Factors that could cause the actual results to differ materially from
those in forward-looking statements include market prices, exploitation
and exploration success, continued availability of capital and
financing, inability to obtain required regulator, shareholder or
governmental approvals and general economic, market or business
conditions. Investors are cautioned that any such statements are not
guarantees of future performance and actual results or developments may
differ materially from those projected in the forward-looking
statements. Forward-looking statements are based on the beliefs,
estimates and opinions of Paragon's management on the date the
statements are made. Except as required by securities laws, Paragon
undertakes no obligation to update these forward-looking statements in
the event that management's beliefs, estimates or opinions, or other
factors, should change. These statements are based on a number of
assumptions, including, among others, assumptions regarding general
business and economic conditions, the timing of the receipt of
regulatory, shareholder and governmental approvals for the transactions
described herein, the ability of Paragon and other relevant parties to
satisfy stock exchange and other regulatory requirements in a timely
manner, the availability of financing for Paragon's proposed
transactions and exploration and development programs on reasonable
terms and the ability of third-party service providers to deliver
services in a timely manner. The foregoing list of assumptions is not
exhaustive. Events or circumstances could cause results to differ
Information concerning Estimates of Indicated and Inferred Resources:
This news release uses the terms "indicated resources" and "inferred
resources". Paragon advises investors that although these terms are
recognized and required by Canadian regulations (under National
Instrument 43-101 Standards of Disclosure for Mineral Projects), the
U.S. Securities and Exchange Commission does not recognize them.
Investors are cautioned not to assume that any part or all of the
mineral deposits in these categories will ever be converted into
reserves. In addition, "inferred resources" have a great amount of
uncertainty as to their existence, and economic and legal feasibility.
It cannot be assumed that all or any part of an Inferred Mineral
Resource will ever be upgraded to a higher category. Under Canadian
rules, estimates of Inferred Mineral Resources may not form the basis
of feasibility or pre-feasibility studies, or economic studies except
for Preliminary Assessment as defined under 43-101. Investors are
cautioned not to assume that part or all of an inferred resource
exists, or is economically or legally mineable.
"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."
SOURCE: Paragon Minerals Corp.
For further information:
For more information, please visit the company website or contact Michael Vande Guchte at (604) 629-2353.