TSX: TVI OTCQX: TVIPF
CALGARY, Dec. 11, 2013 /CNW/ - TVI Pacific Inc. (TSX:TVI) (OTCQX:TVIPF)
("TVI" or the "Company") announced today the execution of various definitive agreements
relating to the private placement in TVI and third-party investment in
its indirectly held Philippine assets previously announced in the
Company's October 21, 2013 news release. The parties to the definitive
agreements include TVI, Prime Resources Holdings, Inc. ("PRHI"), which is an arm's-length Philippines corporation and wholly-owned
subsidiary of Prime Asset Ventures, Inc. ("PAVI"), and various subsidiaries/affiliates of TVI. Certain aspects of the
proposed transactions have changed since the date of TVI's original
announcement (October 21, 2013) as a result of transaction structuring
and ongoing negotiations among the parties. The transactions reflected
in the definitive agreements (the "Transactions") will result in PRHI acquiring an approximate 5% direct equity
interest in TVI and a 68.42% direct equity interest in TVI Resource
Development Philippines, Inc. ("TVIRD"), TVI's Philippine operating affiliate. The definitive agreements for
the Transactions contemplate aggregate investments by PRHI of U.S.
The Transactions are expected to occur in multiple closings and include:
Private Placement of 33,333,333 common shares in capital of TVI at U.S.
$0.06 per share for gross proceeds of U.S. $2 million.
Investments in TVI International Marketing Limited ("TVIIM") and TVI
Minerals Processing, Inc., in the aggregate amount of U.S. $7.845
Investments in TVIRD in the aggregate amount of U.S. $13.055 million (to
acquire 68.42% of the voting shares of TVIRD).
Agreement between the parties to seek a listing for the shares of TVIRD
on the Philippine Stock Exchange.
The Transactions are expected to provide U.S. $10.650 million to TVI and
U.S. $11.850 million to TVIRD and various subsidiaries, each before tax
and related fees, while a net U.S. $350,000 is expected to be used to
repurchase all of the outstanding TVIRD Class A shares.
TVI, certain of its subsidiaries/affiliates and PRHI have entered into
definitive agreements relating to the proposed investments by PRHI
comprising the Transactions, including an Investment Agreement (the "Investment Agreement"), which sets out the terms of PRHI's investments in TVI and its
subsidiaries, the various agreements, timing, conditions and corporate
actions necessary to effect the Transactions. The parties have also
entered into a Shareholder Agreement (the "Shareholder Agreement"), relating to the conduct of the business and affairs of TVIRD and the
rights and obligations of each of PRHI and TVIIM, a subsidiary of TVI,
as shareholders of TVIRD. The Shareholder Agreement will take effect
upon Initial Closing, as defined further in this announcement.
One of the Transactions contemplated in the Investment Agreement is the
private placement to PRHI of 33,333,333 common shares in the capital of
TVI ("TVI Shares") at a price of U.S. $0.06 per share for gross proceeds of U.S. $2
million (the "Private Placement"). The Private Placement, which is anticipated to close later this
week, will result in PRHI acquiring approximately 5% of the issued and
outstanding TVI Shares. The Private Placement has been conditionally
approved by the Toronto Stock Exchange.
Structure of the Transaction
The Transactions are expected to occur in multiple closings upon the
satisfaction or waiver of certain conditions. The following elements
of the Transaction are scheduled to occur this week (the "Initial Closing"):
U.S. $1.545 million to be invested by PRHI in TVIIM to receive one
deferred non-voting share TVIIM that is redeemable at par value;
U.S. $2 million to be paid by PRHI to purchase 33,333,333 TVI Shares at
a price of U.S. $0.06 per share, which shares represent approximately
5% of the total number of issued and outstanding TVI Shares;
U.S. $2 million to be advanced by PRHI as partial payment of PRHI's
investment in TVIRD; and
U.S. $12.655 million to be advanced by PRHI and placed into an escrow
account to satisfy certain additional amounts to be invested by PRHI in
subsequent closings (the "Escrow Amount").
As part of the Initial Closing, PRHI will have invested or advanced (in
escrow) an aggregate of U.S. $18.2 million. The parties will also
enter into the Shareholder Agreement at the time of the Initial
Closing, which provides for, among other things, certain shareholder
protections for TVIIM, including anti-dilution protections, minority
voting requirements in certain circumstances, spending controls, board
representation rights and agreement to seek a listing for the shares of
TVIRD on the Philippine Stock Exchange. It is expected that following
completion of the Transaction, the Board of Directors of TVIRD will be
composed of two directors nominated by TVIIM and three directors
nominated by PRHI. Mr. Clifford M. James is expected to continue in
his role as Chairman of the TVIRD Board while continuing also in his
role as Chairman, President and CEO of TVI. The current TVIRD senior
management team is expected to remain in place in TVIRD.
The following elements of the Transaction are expected to occur in one
or more closings shortly after satisfaction or waiver of certain
conditions, including the approval of the Philippine Securities and
Exchange Commission ("PSEC") of an increase in the authorized capital stock of TVIRD to allow for
PRHI's investment in TVIRD (the "Subsequent Closings"):
U.S. $1.305 million released from the Escrow Amount, representing the
balance of the subscription price for PRHI's investment in TVIIM;
U.S. $11.35 million released from the Escrow Amount, representing the
purchase price payable by PRHI to acquire newly issued voting shares of
U.S. $4.3 million invested by PRHI to acquire a direct interest in TVI
Minerals Processing, Inc., a wholly-owned Philippine subsidiary of
The proceeds will also be applied through the Transactions to
restructure various parts of the TVI group of companies, resulting in
Exploration Drilling Corporation, currently a wholly-owned subsidiary
of TVIIM, becoming a wholly-owned subsidiary of TVIRD. The Transaction
will also result in the repurchase of all the outstanding TVIRD Class A
As a result of the Transactions, assuming satisfaction or waiver of all
conditions and the occurrence of the Subsequent Closings, PRHI will
directly own approximately 5% of the outstanding TVI Shares and 68.42%
of the total number of issued and outstanding voting shares of TVIRD,
while TVI will indirectly own approximately 30.66% of the issued and
outstanding voting shares of TVIRD through TVIIM. The remaining 0.92%
of the outstanding shares of TVIRD will be held by other current Class
TVI will continue to hold 100% of its investment in the shares of
Mindoro Resources Ltd. and an indirect investment in the Agata and Pan
de Azucar joint ventures in which TVIRD will continue to be operator.
TVI will also continue to hold 100% of its investment in the shares of
Foyson Resources Limited and its earning right in Amazon Bay, as well
as 100% of TG World Energy Corp.
Upon settlement of various intercompany advances as a result of the
Transactions, the Transactions are expected to provide U.S. $10.650
million to TVI and U.S. $11.850 million to TVIRD and various
subsidiaries, each before tax and related fees, while a net U.S.
$350,000 will be used to repurchase all of the outstanding TVIRD Class
A shares. The funds received from the Transactions are expected to be
used for working capital and to advance various other projects.
Rationale for the Transaction
There are a number of additional steps to be taken before TVI expects
the mining industry in the Philippines will be capable of operating in
a more normalized environment. Definition and implementation of
Executive Order 79, released in August 2012, continues at a slow pace
and, as a result, the issuance of necessary permits to mining companies
remains slow as well. While TVIRD recently received the Environmental
Compliance Certificate for its proposed Balabag Gold-Silver project,
Declaration of Mining Project Feasibility ("DMPF") approval is still required to allow development to commence, and
there is no certainty as to when this may be provided. Similarly,
TVIRD is awaiting DMPF approval for its proposed Agata DSO project.
While TVIRD management remains confident these permits will be issued,
TVIRD cannot estimate with any certainty the date by which they may be
issued. TVIRD had anticipated these projects would commence much
sooner - contemporaneously with the wind down of the Canatuan mine
(which is approaching the end of its mine life). Delays in the
start-up of these projects and approvals of possible extensions to the
Canatuan mine have caused TVIRD to limit its expenditures in an effort
to conserve available cash. It is with these concerns in mind that
management and the directors of TVI believe it is important to
establish a relationship with a significant Philippine organization
that, combined with the very positive reputation established by TVI in
the Philippine mining industry, will be in a position to help advance
the business and affairs of TVIRD and provide financing for its
projects, all of which is expected, in turn, to work to the benefit of
TVI believes itself to be undervalued as a result of various factors,
including delays in the granting of permits to allow new projects to
move to development in place of Canatuan, the status of financing, and
lack of recognition of TVI as a significant player in the Philippines.
It is hoped that, with the establishment of a relationship with PRHI
and advancement of all of TVIRD's projects, this condition relative to
TVI's investments in the Philippines will be addressed.
Mr. Clifford M. James, TVI's President and CEO and Chairman of TVIRD
noted: "The Company expects the Transactions to generate value for TVI
shareholders. It is anticipated that PRHI will be able to assist in
moving new projects forward and that the involvement of PRHI will bring
strength to our Philippine assets."
Conflicts of Interest
As disclosed in the Company's October 21, 2013 news release, a finder's
fee and a success fee are expected to be paid in the event the
Transactions are completed. The Finder's Fee would be payable to
Argosy Advisors, Inc. ("Argosy") for its role in identifying PAVI and helping to negotiate the initial
terms of the proposal between PAVI and TVI. Mr. Aloysius Colayco, a
TVI director, is also a director and principal of Argosy and therefore
has been excluded from participation in the Special Committee formed to
consider the initial proposal and the Transactions contemplated thereby
and from all Board meetings and other discussions related to the
Transactions and alternative financing opportunities available to TVI.
Argosy is expected to receive a finder's fee in an amount of up to 3%
of the value of the Transactions. In addition, Arch Advisory Limited,
a non-related party, is expected to receive a success fee of up to 2%
of the value of the Transactions for its role in assisting TVI to
negotiate and complete the Transactions.
Mr. Clifford James, TVI President and CEO, and Chairman of the TVI
Pacific Board, is also considered to be in a conflicted position with
respect to the Transactions as he is a significant shareholder of TVI,
a director and officer of TVI and he is expected to have an ongoing
significant role in TVIRD as its Chairman. As such, Mr. James has also
been excluded from participation in the Special Committee and from all
voting related to the Transactions.
Conditions, Security and Liquidated Damages
Completion of the Initial Closing and the Subsequent Closings of the
Transactions remain subject to the satisfaction or waiver of various
conditions, including PSEC approval of certain matters related to the
Transactions ("PSEC Approval"), certain corporate actions being completed and the release of certain
funds from escrow. Should PSEC Approval not be obtained by the outside
date stipulated in the Investment Agreement (June 30, 2014), PRHI will
be entitled to liquidated damages in the amount of U.S. $3.545 million
and will have the right to enforce security granted by TVI Limited, a
wholly-owned subsidiary of TVI, being 50% of the outstanding shares of
TVIIM. In addition, PRHI will be entitled to additional liquidated
damages of U.S. $200,000 if PSEC Approval is not obtained as a result
of the wilful act or gross negligence of any TVI entity.
About TVI Pacific Inc.
TVI Pacific Inc. is a Canadian resource company focused on the
production, development, exploration and acquisition of resource
projects in the Philippines and Southeast Asia. TVI's affiliate,
TVIRD, produces copper and zinc concentrates from its Canatuan mine and
is advancing its Balabag Gold-Silver project. TVI is a direct or
indirect participant/operator in several joint venture projects in the
Philippines and Papua New Guinea and also has an interest in an
offshore Philippine oil property.
TVIRD was recently recognized as the most-awarded mining company by the
Philippine Mine Safety and Environment Association (PMSEA). For the
second year, TVIRD was awarded the top level Titanium Award in the
surface mining category, recognizing TVIRD's implementation of its
environmental management, safety and health, and social development
programs at its Canatuan project site. This follows on from TVIRD
having received, in 2011 and 2012, the Safest Mining Operations Award
and the Platinum Award for Excellence in environmental management. For
the second consecutive year also, TVIRD received the Safest Mineral
Processing Award in the concentrator category and moved to second
runner-up for the Best Mining Forest Award from third runner-up in
About Prime Resources Holdings, Inc.
PRHI is a wholly-owned subsidiary of Prime Asset Ventures, Inc.
("PAVI"). PAVI is a holding corporation of utilities engaged in
various industries which include water distribution infrastructure,
energy and power generation as well as retail distribution, cable and
antennae television, and telecommunications.
The Toronto Stock Exchange has neither approved nor disapproved of the
information contained herein.
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking information (referred
to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws.
Forward-looking statements are often, but not always, identified by the
use of words such as "anticipate", "plan", "intend", "estimate",
"scheduled", "expect", "may", "will", "should", or similar words
suggesting future activities or outcomes. In particular, this news
release includes forward-looking statements respecting the Transactions
and the anticipated timing of completion of the various Transactions
and uses of proceeds from sales of securities associated with the
Transactions and anticipated benefits the Company expects to derive
from the Transactions. Forward-looking statements relating to the
Transactions are based upon the terms set out in the Investment
Agreement. Forward-looking statements respecting use of proceeds are
based upon various assumptions and factors, including, but not limited
to, the terms of the Transactions, discussions between representatives
of the Company and representatives of PRHI and the current business
plan, budget and strategy of the Company, its subsidiaries and
affiliates, all of which are subject to change.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual events or outcomes to differ
materially from those anticipated or implied by such forward-looking
statements. With respect to the Transactions, those risks and
uncertainties include a failure to close one or more of the
Transactions on the terms outlined in the Investment Agreement and this
news release due to the failure to receive PSEC Approval or a failure
to satisfy one or more conditions, such as conditions relating to the
receipt of any necessary corporate or regulatory approvals. There is a
specific risk that the Company, even if it is able to complete the
Transactions contemplated by the Investment Agreement, may not
experience the anticipated benefits of the Transactions and the Company
could lose some or all of its interests in certain assets in the
Philippines. Accordingly, readers should not place undue reliance upon the
forward-looking statements contained in this news release and such
forward-looking statements should not be interpreted or regarded as
guarantees of future outcomes.
The forward-looking statements contained in this news release are made
as of the date hereof and TVI does not undertake any obligation to
update publicly or to revise any of the included forward-looking
statements, except as required by applicable Canadian securities law. The forward-looking statements of the Company contained in this news
release are expressly qualified, in their entirety, by this cautionary
statement. Various risks to which TVI, its subsidiaries and affiliates are exposed
in the conduct of their business are described in detail in the
Company's Annual Information Form for the year ended December 31, 2012,
which was filed on SEDAR on March 19, 2013, and is available at www.SEDAR.com.
SOURCE: TVI Pacific Inc.
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