Zara offer is opportunistic and under-values Visible Gold Mines
Zara has no significant assets and limited cash, and its stock is
Zara has no track record of mine development
ROUYN-NORANDA, QC, June 25, 2013 /CNW Telbec/ - Visible Gold Mines Inc. (TSXV: VGD) (Frankfurt: 3V4) recommends that shareholders NOT tender their shares in response to the unsolicited mini-tender offer by
Zara Resources Inc. (CNSX: ZRI).
The Board of Directors of Visible Gold Mines believes that the Zara
offer fails to provide full value for Visible Gold Mines' assets and
shares and is an attempt by Zara to acquire de facto control of Visible Gold Mines without offering adequate consideration
to Visible Gold Mines shareholders.
"We believe that Zara's offer is inadequate, opportunistic, coercive and
fails to recognize the strategic value of Visible Gold Mines' assets
and our future value-creation potential," said Martin Dallaire,
President, Chief Executive Officer and a director of Visible Gold
Mines. Mr. Dallaire added, "The Board of Directors fails to see how the
Zara offer serves the interests of Visible Gold Mines shareholders.
Zara is in financial difficulty, has no track record of mine
development and its stock is illiquid. We see no reason why Visible
Gold Mines shareholders should give control of our company to Zara."
Reasons why shareholders should NOT tender their shares in response to
Zara's mini-tender offer
The following are reasons why Visible Gold Mines shareholders should NOT
tender their shares in response to Zara's mini-tender offer:
Zara has no significant assets. According to Zara's interim financial
statements for the period ended January 31, 2013, it had only $99,011
in cash and $983 in tax receivable. In comparison, Visible Gold Mines
had, as of that same date, $14 million in assets, including $524,375 in
cash and cash equivalents, $500,000 in marketable securities, $148,548
in goods and services tax receivable, $913,925 in tax credits and
credits on duties receivable and $23,340 in prepaid expenses.
Visible Gold Mines is in a much better financial position than Zara.
Shareholders who accept the offer will receive shares of a company
(Zara) with virtually no cash.
The two most recent press releases issued by Zara prior to the
announcement of its mini-tender offer for Visible Gold Mines announced
settlements of debt for an aggregate amount of $30,000 through the
issuance of Zara shares. On June 24, 2013, Zara again announced another
settlement of debt for an amount of $41,250 through the issuance of
Zara shares. This pattern of issuing "shares for debt" is of serious
concern, as it demonstrates that Zara lacks adequate working capital.
Even after a recent private placement of $100,000 to a new director,
Zara has limited working capital. Visible Gold Mines also notes that
Zara's new director subscribed for shares at a price of $0.12 per
share, the current market price for Zara's shares, and that each share
was accompanied by TWO common share purchase warrants, also with an
exercise price of $0.12. This runs contrary to market practice, which
is to issue no more than one warrant per share. It is also market
practice to set the exercise price for warrants at a premium to current
market price. Zara has priced its warrants at current market price
($0.12). Zara's private placement to its new director puts into
question Zara's corporate finance practices.
Zara recently announced a restructuring by way of a plan of arrangement
with a wholly-owned subsidiary, Leo Resources Inc., pursuant to which
Zara will transfer one of its key properties (the Riverbank
nickel-copper project) to Leo and distribute all of Leo's shares to
Zara's shareholders. Visible Gold Mines caution shareholders who tender
their shares to Zara that they will not be entitled to receive Leo
shares as the record date for the distribution of the shares was
April 4, 2013.
Illiquid currency / shares
The Zara shares to be issued in exchange for Visible Gold Mines shares
will not immediately be freely tradeable as they will be subject to
resale restrictions for four months under applicable Canadian
The value of the consideration offered under Zara's offer is uncertain
and entirely dependent on the future value of Zara's shares. Zara
cannot guarantee that its shares will maintain their current trading
price of $0.12 on the Canadian National Stock Exchange (CNSX). Visible
Gold Mines shareholders are cautioned that Zara's shares are
speculative in nature.
Zara's shares have been listed on CNSX since only December 2012, very
little historical trading volume. It may be difficult for Visible Gold
Mines shareholders to dispose of Zara shares. To date in the month of June, only 15,675 Zara shares have traded on
Zara has stated its intention to transfer listing of Visible Gold Mines
from the TSX Venture Exchange to CNSX, which offers less protection to
Visible Gold Mines shareholders as it is less regulated.
No Track Record
Zara does not have any history of mine development and most of its
directors and all of its officers do not appear to have experience or
expertise in mining exploration and development. Rather, the experience
of Zara's senior management appears to be primarily with "capital pool
companies" and reverse take-overs. There is no reason to believe that
Zara or its management will be able to develop Visible Gold Mines'
properties or create value for Visible Gold Mines shareholders.
Discriminatory and Opportunistic Offer
The timing of the Zara offer is opportunistic and disadvantageous to
Visible Gold Mines shareholders.
The Zara mini-tender offer fails to adequately compensate Visible Gold
Mines shareholders for the strategic value of Visible Gold Mines'
The purpose of the mini-tender offer is to allow Zara to acquire a
substantial position in Visible Gold Mines in order for Zara to
exercise de facto control or significant influence over Visible Gold Mines, without
incurring the cost of purchasing all of the shares of Visible Gold
The Zara offer does not reflect an adequate premium for acquiring de facto control of Visible Gold Mines.
Zara's mini-tender offer is made ONLY to "accredited investors" and
unfairly discriminates among Visible Gold Mines shareholders. Visible
Gold Mines shareholders who are NOT "accredited investors" under
applicable Canadian securities laws will NOT have the right to accept
the offer. In order for an individual to be an "accredited investor"
under Canadian securities laws, the individual must have an annual
income of at least $200,000 in each of the two most recent calendar
years (or at least $300,000 together with the individual's spouse) or
financial assets, either alone or with the individual's spouse, having
an aggregate realizable value before taxes, but net of any related
liabilities of at least $1 million. Visible Gold Mines believes that
this will exclude a substantial number of its shareholders from the
mini-tender offer, confirming its discriminatory nature.
Visible Gold Mines shareholders who deposit their shares to Zara's offer
are not entitled to withdraw them, which is a fundamental protection
afforded to shareholders under applicable Canadian securities laws.
Concerns of Securities Authorities Regarding "Mini-Tender Offers"
Visible Gold Mines cautions its shareholders that mini-tender offers,
such as the one made by Zara, circumvent many of the investor
protections afforded for take-over bids by applicable Canadian
securities laws, including the filing of disclosure and other offer
documents with the Canadian Securities Administrators (in particular, a
detailed take-over bid circular in French and English) and other
The Canadian Securities Administrators have expressed serious concerns
about mini-tender offers, such as the one made by Zara. Comments from
the CSA on mini-tenders can be found on the Ontario Securities
Commission website at: Staff Guidance on the Practice of "Mini-Tenders"
The U.S. Securities and Exchange Commission has also published investor
tips regarding mini-tender offers on its website at: http://www.sec.gov/investor/pubs/minitend.htm
Visible Gold Mines does not endorse Zara's unsolicited mini-tender offer
and is in no way associated with Zara, its mini-tender offer or the
About Visible Gold Mines
Visible Gold Mines Inc. is a dynamic company aggressively searching for
the next important gold deposit in northwestern Québec, an area
consistently ranked as one of the world's best jurisdictions for mining
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 the release.
SOURCE: Visible Gold Mines Inc.
For further information:
Martin Dallaire, President and Chief Executive Officer
Telephone: 819-762-0609, Fax: 819-762-0097