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TORONTO, Nov. 26 /CNW/ - Intuitivo Capital Corporation ("Intuitivo") (TSXV: ITU.P), a capital pool company, is pleased to announce that, further to its press release dated November 17, 2009, it has today entered into a definitive qualifying transaction agreement dated November 24, 2009 (the "Definitive Agreement") with Argonaut Gold Inc. ("Argo"), in connection with a proposed "Qualifying Transaction" (within the meaning of the policies of the TSX Venture Exchange (the "Exchange")).
The Definitive Agreement provides for, among other things, the three-cornered amalgamation (the "Amalgamation") of Argo with a wholly-owned subsidiary of Intuitivo to be incorporated for the purposes of the Amalgamation ("Subco"). On completion of the Amalgamation, among other things: (i) the amalgamated company will become a wholly-owned subsidiary of Intuitivo; and (ii) all of the outstanding common shares of Argo will be cancelled and exchanged for post-consolidation (as described below) common shares of Intuitivo on a share for share basis. After giving effect to the amalgamation, the shareholders of Argo will collectively exercise control over Intuitivo. The Intuitivo private placement contemplated in the company's November 17, 2009 press release will no longer be proceeded with and has resulted in a reduction of the consolidation ratio to 1 new consolidated common share for 30 old common shares, from the originally contemplated 1 for 36 ratio.
Upon the closing of the Qualifying Transaction, it is intended that Intuitivo will change its name to "Argonaut Gold Inc." or such other name as determined by Argo and accepted by the applicable regulatory authorities. Completion of the proposed Qualifying Transaction is subject to, among other things, receipt of all necessary regulatory and shareholder approvals.
Argo is a Yukon corporation which was incorporated on September 25, 2008 by Brian Kennedy, Peter Dougherty and Edgar Smith, former senior executive leadership of Meridian Gold Inc. Argo was formed with the goal of creating the next quality mid-tier gold company.
Prior to the completion of the Qualifying Transaction, Argo plans to acquire all of the issued and outstanding common shares of Castle Gold Corp. (("Castle"), a federally incorporated gold company engaged in exploration, mine development and production activities on gold-bearing properties in Mexico and Guatemala, by way of a take-over bid (the ("Castle Bid"). The Castle Bid is described in further detail under the heading "Castle Gold Bid" below.
Assuming the successful completion of the Castle Bid, Argonaut will hold a 100% interest in the production-stage El Castillo Project and the exploration-stage La Fortuna Project, located in the State of Durango, Mexico. The El Castillo mine produced 7,655 ounces of gold in the third quarter of 2009 and Phase 1 of a reverse circulation drill program has been completed to demonstrate the potential to expand gold oxide mineralization to the south of the current El Castillo pit. The La Fortuna Project has a resource (measured and indicated) of 308,000 ounces of gold assuming a 0.5 g/t cut-off (4,826,000 tonnes at a grade of 1.99 g/t). First phase reconnaissance exploration work performed on the La Fortuna Project earlier this year identified a number of zones of potential mineralization surrounding the known La Fortuna deposit.
As of the date hereof, there are 4,000,000 common shares of Argo outstanding. The following persons own, control or direct 10% or more of the outstanding common shares of Argo:
Number of Common Shares Percentage of Outstanding
Name of Argo Common Shares of Argo
---- ----------------------- -------------------------
Brian J. Kennedy 1,548,460 39%
Peter C. Dougherty 1,445,896 36%
Edgar A. Smith 1,005,644 25%
Terms of the Proposed Qualifying Transaction
Prior to the completion of the proposed Qualifying Transaction, it is intended that Intuitivo will effect a consolidation of its outstanding common shares on the basis of one post-consolidation share for every 30 pre-consolidation shares (the "Consolidation"). The Consolidation and the proposed change of name of Intuitivo, as described above, will require the approval of Intuitivo's shareholders by special resolution at a meeting of its shareholders to be held on December 23, 2009, prior to the completion of the proposed Qualifying Transaction. As the proposed Qualifying Transaction is not a "Non Arm's Length Qualifying Transaction" (within the meaning of the policies of the Exchange), the Amalgamation contemplated by the Definitive Agreement does not require approval of the shareholders of Intuitivo.
Pursuant to the Amalgamation, among other things, holders of Argo common shares will receive one post-Consolidation common shares of Intuitivo for each one Argo common share held immediately prior to the Amalgamation (the "Exchange Ratio").
In addition, holders of options and warrants to purchase common shares of Argo will receive from Intuitivo, an option or warrant, as applicable, to purchase the same number of post-Consolidation common shares of Intuitivo at the same exercise price per share as previously provided for in former Argo securities, reflecting the one for one Exchange Ratio. As of the date hereof, Intuitivo has 7,500,000 common shares outstanding.
Upon completion of the Qualifying Transaction, it is expected that Intuitivo will be a Tier 1 issuer pursuant to the policies of the Exchange. Based on the number of Argo common shares outstanding as of the date hereof, and assuming the exchange of each Argo Subscription Receipt (as defined below) for one Argo common share and one-half of one Argo share purchase warrant prior to the Amalgamation, there would be approximately 55,750,000 post-Consolidation Intuitivo common shares outstanding upon completion of the Qualifying Transaction, on a non-diluted basis. On completion of the Qualifying Transaction, the current shareholders would hold an aggregate of approximately 250,000 post-Consolidation common shares, or approximately 0.45% of the outstanding common shares, the current shareholders of Argo would hold an aggregate of 4,000,000 post-Consolidation common shares of Intuitivo, or approximately 7.2%, and investors in the Argo Private Placement (as defined below) would hold an aggregate of 51,500,000 post-Consolidation common shares, or approximately 92.4%.
Florence R. Unger, the Corporate Secretary of Intuitivo and holder of 400,000 Intuitivo common shares and options to acquire a further 150,000 Intuitivo common shares, holds 20,000 Subscription Receipts of Argo. Upon the exchange of the Subscription Receipts, Ms. Unger would own approximately 0.03% of the outstanding Argo common shares, and warrants to acquire a further 10,000 Argo common shares. There are no other known interests of insiders of Intuitivo or Argo in the other party.
Castle Gold Bid
Argo commenced the Castle Bid on November 23, 2009. The Castle Bid is open for acceptance until December 29, 2009 and is conditional upon no less than 66?% of the common shares of Castle being tendered to the Castle Bid. Argonaut has entered into lock-up agreements with shareholders of Castle representing 54% of the outstanding Castle common shares, who have agreed to tender to the Castle Bid. The acquisition by Argo of no less than 66?% of the common shares of Castle pursuant to the Castle Bid is a condition to the completion of the Qualifying Transaction.
Argo Private Placement
On November 20, 2009 Argo completed a brokered private placement through GMP Securities L.P. as agent (the "Agent") of 50 million subscription receipts (the "Subscription Receipts") at a price C$3.00 per receipt raising gross proceeds of Cdn$150 million (the "Argo Private Placement"). Each Subscription Receipt will be automatically exercised, without any further action by the holder (and for no additional consideration), for one unit comprised of one common share of Argo and one-half of one common share purchase warrant of Argo (each whole common share purchase warrant, an "Argo Warrant"), subject to adjustment in certain events, upon the earlier of: (i) the satisfaction of the Liquidity Conditions (as defined and which includes the completion of the Qualifying Transaction and listing on the Toronto Stock Exchange) and the Escrow Release Conditions (as defined and which principally requires that all conditions to the Castle Bid other than the payment of the purchase price shall have been satisfied to permit Argo to acquire not less than 66?% of the common shares of Castle); and (ii) 5:00 p.m. (EST) on the date that is four months and one day following the closing date. Each Warrant will be exercisable to acquire one common share of Argo for a period of three years following the issuance thereof upon the exercise of the Subscription Receipts at an exercise price of Cdn$4.50 per Argo common share, subject to adjustment in certain events. In the event that Argo has not satisfied the Liquidity Conditions prior to 5:00 p.m. (EST) on December 31, 2009, each of the then issued and outstanding Subscription Receipts shall thereafter be automatically exercisable, for no further consideration and with no further action of the part of the holder, to acquire 1.1 Argo common shares and 0.50 Warrants (in lieu of one common share and one-half of one Warrant).
The proceeds of the Argo Private Placement, less the estimated costs and expenses of the Agent, have been placed in escrow and are held by a third party trustee pending completion of the Escrow Release Conditions. Unless the consent of holders of not less than 66?% of the then outstanding Subscription Receipts is obtained, in the event that the Escrow Release Conditions are not satisfied prior to the date that is 90 days following the closing date, the escrowed funds shall be used by Argo to repurchase the then issued and outstanding Subscription Receipts for cancellation at a redemption price per Subscription Receipt equal to the issue price thereof. To the extent that the escrowed funds are not sufficient to purchase all of the Subscription Receipts, Argo is required to contribute such amounts as are necessary to satisfy any shortfall.
In consideration for their services in connection with the Argo Private Placement, Argo is required to pay the Agent a commission equal to 3.0% of the gross proceeds from the sale of the Subscription Receipts, which commission has been deposited in escrow, and has issued to the Agent 1,500,000 Subscription Receipts. As additional consideration for the services of the Agent, the Agent has been granted compensation options (the "Broker Options") entitling the Agent to subscribe for 1,500,000 common shares of Argo. Each Broker Option is exercisable to acquire one common share of Argo for a period of three years following the exercise of the Subscription Receipts at an exercise price of Cdn$4.50 per share.
It is intended that the net proceeds from the Argo Private Placement will be used to complete the Castle Bid, for other acquisitions and for working capital and general corporate purposes. Upon completion of the Qualifying Transaction, it is anticipated that the resulting issuer will have sufficient financial resources to carry on its business plan for a period of at least 18 months.
Intuitivo intends to apply to the Exchange for a waiver of the sponsorship requirements for the Qualifying Transaction based upon the Argo Private Placement and/or other exemptions available in Exchange policies.
Proposed Directors and Senior Management Team
Upon the closing of the Qualifying Transaction, it is anticipated that Peter Dougherty, Brian Kennedy, Christopher R. Lattanzi and Dale Peniuk will be the nominees of Argo to be elected to the Board of Directors of Intuitivo. It is also anticipated that the new senior management team of the resulting issuer will be comprised of Peter Dougherty (President and Chief Executive Officer) and Edgar Smith (Chief Operating Officer).
The following are brief resumes of the currently proposed directors and senior officers of the resulting issuer following the Qualifying Transaction:
Peter Dougherty, President, Chief Executive Officer and Director:
Mr.Dougherty is currently the Chief Executive Officer Argonaut Gold Inc. and served as the Vice President of Finance and Chief Financial Officer of Meridian from 2002 to 2007. Mr. Dougherty has also served as: Chief Accounting Officer and Corporate Controller of Meridian from 1997-2002; IBS Financial Manager of FMC Chemicals Group from 1994 to 1997; Group Financial Analyst of FMC Chemicals Group from 1993 to 1994 and the Controller of Paradise Peak Mine, FMC Gold from 1990 to 1993. Mr. Dougherty holds a B.S. in Accounting from Southern Oregon State College and M.B.A. from Drexel University. It is expected that Mr. Dougherty will serve in a full-time capacity as the President and Chief Executive Officer of the resulting issuer.
Edgar Smith, Chief Operating Officer:
Mr. Smith is currently the Chief Operating Officer of Argonaut Gold Inc. and served as the Vice President of Operations for Meridian for 2003-2007. Mr. Smith has also served as: Vice-President and General Manager of Minera Meridian Chile and Vice-President of Operations of Meridian North America from 1998 to 1999; Vice-President and General Manager of Coeur Rochester, Inc. from 1996 to 1998; and General Manager, Royal Mountain King Mine of FMC Gold from 1988 to 1996. Mr. Smith holds a B.S. in Biology from Creighton University.
Brian Kennedy, Chairman:
Mr. Kennedy was President and Chief Executive Officer of Meridian from June 1996 to December 2006. He was President of FMC Gold Company, a predecessor of Meridian, from May 1987 until June 1996. Mr. Kennedy holds a BS degree from the US Naval Academy and an MBA from Harvard University. He also serves of the board of NV Energy Inc.
Christopher R.. Lattanzi, Director:
Christopher Lattanzi is a mining engineer with nearly 50 years of experience in the mineral industry, initially in the planning and supervision of mining operations and, since 1969, as a consultant. He was president of Micon International Limited, an independent mineral consultancy , from its founding in 1988 until 2005. He was a director of Meridian Gold Inc. from 1999 to 2007 and , from 2004 to 2006, served as chairman of that company. He is presently a director of Skygold Ventures Ltd., a Canadian junior exploration company. He continues to maintain an active consulting practice.
Dale Peniuk, Director:
Dale Peniuk is a chartered accountant that provides financial consulting services to a number of mining companies and currently serves on the Board and as Audit Committee Chair of Lundin Mining Corporation (TSX; OMX), Capstone Mining Corp. (TSX), Corriente Resources Inc. (TSX; AMEX), Quest Capital Corp. (TSX; AMEX), Rainy River Resources Ltd. (TSX-V), Reservoir Capital Corp. (TSX-V) and Q2 Gold Resources Inc. (not yet listed). Mr. Peniuk also served on the Board and as Audit Committee Chair of EuroZinc Mining Corporation (TSX; AMEX) until completion of its merger with Lundin Mining, and Rio Narcea Gold Mines, Ltd. (TSX; AMEX) following the acquisition of a controlling interest in the company by Lundin Mining until the takeover of Rio Narcea was completed. Mr. Peniuk obtained a B.Comm from the University of British Columbia in 1982 and his CA designation from the Institute of Chartered Accountants of British Columbia ("ICABC") in 1986. Mr. Peniuk spent more than 20 years with KPMG LLP, Chartered Accountants and predecessor firms, including being an assurance partner from 1996 to 2006 and was the leader of KPMG's British Columbia mining practice. Mr. Peniuk has also served on the ICABC's Public Company Technical Forum since 2000 and is currently the Chair of that Forum.
Conditions to Completion of the Qualifying Transaction
Completion of the proposed Qualifying Transaction is subject to a number of conditions precedent, including, but not limited to, the completion of the Castle Bid, acceptance by the Exchange and other applicable regulatory approvals and the approval of shareholders of Argo. There can be no assurance that the Qualifying Transaction will be completed as proposed or at all.
This press release has been reviewed by Mr. Darren Koningen, P.Eng., Castle Gold's Vice President Project Development. Mr. Koningen is a Qualified Person under National Instrument 43-101.
Cautionary Note Regarding Forward-looking Statements
This news release contains forward-looking statements (including, without limitation, information regarding the proposed Qualifying Transaction and the business opportunities of the resulting issuer after giving effect to the Qualifying Transaction) that involve risks and uncertainties that could cause results to differ materially from management's current expectations. Actual results may differ materially due to a number of factors including, among others: the Qualifying Transaction may not be completed; any significant disruptions affecting operations at the Castle Gold Projects, whether due to labour disruptions, supply disruptions, damage to equipment or otherwise; the exchange rate between the Canadian dollar, the Mexican peso and the U.S. dollar may not remain consistent with current levels; certain price assumptions for gold; the prices for energy and other key supplies may not remain consistent with current levels; production forecasts may fail to meet expectations; the current mineral reserve and resource estimates of the Castle Gold Projects could be inaccurate. The matters discussed in this news release also involve risks and uncertainties described in Intuitivo's continuous disclosure documents filed from time to time with the Canadian securities regulatory authorities. Except as required by law, Intuitivo assumes no obligation to update the forward-looking information contained in this new release.
Investors are cautioned that, except as disclosed in the Filing Statement to be prepared in connection with the proposed Qualifying Transaction, any information released or received with respect to the Qualifying Transaction, including the information contained in this news release, 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 or disapproved the contents of this press release.
Neither 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 INTUITIVO CAPITAL CORPORATION
For further information: For further information: Mark Wilder, President & CEO, Intuitivo Capital Corporation, Tel: (416) 928-1800, E-mail: email@example.com; or Peter C. Dougherty, President & CEO, Argonaut Gold Inc., Tel: (775) 852-9432, E-mail: firstname.lastname@example.org