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VANCOUVER, Dec. 10, 2013 /CNW/ - Western Pacific Resources Corp. ("Western Pacific" or the "Company") (WRP - TSXV) is pleased to announce that it has entered into an investment agreement (the "Investment Agreement") with Quintana WRP Holding Company LLC ("Quintana WRP"), an affiliate of Quintana Minerals Corporation ("Quintana"), for a private placement of secured and unsecured convertible notes (the "Financing") in the principal amount of up to $10 million. In addition, the Company announces that its wholly-owned subsidiary, Western Pacific Resources (U.S.) Corp. (the "Subsidiary"), has concurrently entered into a base metals purchase agreement (the "BMPA") with Quintana Deer Trail Streaming Company LLC ("Quintana DTS"), an affiliate of Quintana, for the purchase of certain percentages of base metals that are produced from the Deer Trail Mine (the "DTM Project") by the Company (the "Streaming Transaction").
This is a very exciting transaction as it allows the Company to move forward with its plans at Deer Trail Mine and demonstrates the potential that both companies see in the project. "We are pleased to be partnering with Western Pacific. We see great opportunity at the Deer Trail Mine and with the expertise of the management team in place," commented Oliver Rodz, Managing Director of Quintana Minerals Corporation. "We look forward to supporting Western Pacific in bringing the Deer Trail Mine profitably back into production in the near term and in making its compelling growth strategy beyond Deer Trail a reality."
Warwick Smith, CEO of Western Pacific, comments: "I am extremely pleased to announce this partnership with Quintana. Not only were we able to arrange a $10 million convertible debt financing, but we were also able to enter into an $8.5 million base metal streaming transaction. We will now aggressively pursue our development plans at the Deer Trail Mine in Utah and look for new growth opportunities. Both Western Pacific and Quintana envision building the Company into a multi-asset production company by acquiring other advanced, production-ready assets. Gaining a financial partner such as Quintana will help to attract a larger audience of investors and analysts in the equity markets. This is just the beginning."
The development phase at the Deer Trail Mine is expected to be comparatively rapid, and the ability to proceed quickly to the production stage will highlight the stock for investors over the near term. The proceeds from the Financing will be used primarily to complete the Company's previously announced acquisition of the DTM Project (the "DTM Acquisition"), to fund exploration work such as sampling and drilling, to develop an initial mine plan and to perform permitting work on the DTM Project. The proceeds from the Streaming Transaction will thereafter be used by the Company to complete the necessary development to advance the Mine to the production stage.
Pursuant to the Investment Agreement, Quintana WRP will purchase secured convertible notes of the Company ("Secured Notes") in the principal amount of US$2,500,000 on the closing date for the initial advance under the Financing (the "Closing Date") and will make subsequent advances of US$2,500,000 to purchase additional Secured Notes upon the occurrence of certain milestones.
The Secured Notes will be secured by a guarantee from the Subsidiary and, subject to certain exceptions, first ranking charges and security interests over all of the present and future assets of the Company and the Subsidiary, including assets relating to the DTM Project to be acquired by the Subsidiary pursuant to the DTM Acquisition. The Secured Notes will mature three years from the Closing Date and will bear annual compounded interest at a rate of 8%.
In addition to the Secured Notes, the Investment Agreement provides that Quintana WRP may elect to make available to the Company up to US$5 million of unsecured notes (the "Unsecured Notes" and together with the Secured Notes, the "Convertible Notes") at any time prior to the third anniversary of the Closing Date. The Unsecured Notes may be offered in an amount up to the principal amount of Secured Notes that have been advanced by Quintana WRP to the Company (up to US$5 million aggregate principal amount). The Unsecured Notes will be interest free and mature three years from the Closing Date.
The Convertible Notes will, subject to the approval of the TSX Venture Exchange ("TSXV"), be convertible at any time at the option of Quintana WRP, and in the case of the Unsecured Notes also at the option of the Company, in whole or in part, into common shares of the Company (each a "Share") at a price of CAD$0.1328 per Share, subject to adjustment as provided in the Investment Agreement. Quintana WRP may also elect to convert all or part of any accrued interest on the Convertible Notes into Shares at a price equal to the greater of (a) CAD$0.1328 per Share, and (b) the closing price of the Shares on the TSXV (or such other Canadian stock exchange on which the Shares are listed for trading) on the trading day immediately preceding the date of conversion. The Convertible Notes and any Shares issued on conversion of the Convertible Notes will be subject to a four month hold period from their date of issue under applicable securities laws and the policies of the TSXV.
As long as Quintana WRP and its affiliates hold at least 20% of the Company's Shares (assuming conversion of the Convertible Notes), Quintana WRP will be entitled to certain additional investor rights under the Investment Agreement, including the following:
|(a)||in the event that the Company completes a public or private offering of Shares, Quintana WRP will have the right to participate in such offering in order to maintain its percentage interest in the Company's Shares (assuming conversion of the Convertible Notes);|
|(b)||following the Closing Date, in certain circumstances where Western proposes to file a registration statement in the United States or prospectus in a Canadian jurisdiction with respect to an offering of equity securities, then Western shall provide Quintana WRP piggyback rights to have its securities registered or qualified under such registration statement or prospectus, as applicable;|
|(c)||on the Closing Date the board of directors of the Company will be reconstituted to be comprised of six directors, including three nominees provided by the management of the Company and three nominees provided by Quintana WRP. In addition, after the first anniversary of the Closing Date and for as long as Quintana WRP, together with its affiliates, holds at least 40% of the outstanding Shares, Quintana WRP will be entitled to nominate the greater of a proportion of the total number of directors equal to its shareholding percentage or one-half of the total number of directors for appointment or election as directors of the Company. For as long as Quintana WRP, together with its affiliates, holds at least 10% of the outstanding Shares, Quintana WRP will be entitled to nominate a proportion of the total number of directors equal to its shareholding percentage at the relevant time, and in any event at least one director; and|
|(d)||Western will, prior to completing any significant acquisition, provide Quintana WRP with a copy of all materials relating to the proposed acquisition and provide Quintana WRP with a reasonable opportunity to present its views and recommendations and notify Quintana WRP of certain extraordinary transactions, including any third party proposal involving a sale of all or substantially all of the assets of the Company, a transaction involving more than 10% of the Shares or a change of control of the Company.|
Western also agrees, pursuant to the Investment Agreement, to use commercially reasonable efforts to cause certain of the Company's directors and officers to enter into lock-up agreements with Quintana WRP with respect to their Shares on the Closing Date.
Assuming that Quintana WRP subscribes for US$10 million of Convertible Notes, excluding any Shares acquired on conversion of accrued interest and subject to adjustment as provided in the Investment Agreement, Quintana WRP may acquire up to approximately 80,406,600 Shares (not including any interest that may be converted), or approximately 69% of the Company's Shares (based on the Bank of Canada USD/CAD closing exchange rate and the number of issued and outstanding Shares outstanding on December 4, 2013). Based on Quintana WRP's potential shareholding position and the board nomination and other investor rights provided to Quintana WRP under the Investment Agreement, the Financing may result in Quintana becoming a Control Person of the Company (as such term is defined in the TSXV's Corporate Finance Manual). As such, the Company will be seeking disinterested shareholder approval of the Financing and the creation of a new Control Person at the Company's annual general and special meeting of shareholders to be held on January 14, 2014.
The Financing is subject to the approval of the TSXV.
The Streaming Transaction
Concurrent with the Investment Agreement, the Subsidiary entered into the BMPA with Quintana DTS whereby it has agreed to sell and Quintana DTS has agreed to purchase the Base Metals, as follows:
- In the case of lead, 100% of the lead produced from the DTM Project until 18,500,000 pounds of lead are delivered to Quintana DTS in accordance with the terms of the BMPA (the "Lead Delivery Hurdle"), and 60% thereafter;
- In the case of zinc, 100% of the zinc produced from the DTM Project until 41,000,000 pounds of zinc are delivered to Quintana DTS in accordance with the terms of the BMPA (the "Zinc Delivery Hurdle"), and 60% thereafter; and
- In the case of any other base metal, 20% of the amount of such base metal produced from the DTM Project.
Pursuant to the BMPA, the Subsidiary will receive an upfront deposit payment of US$8,500,000 against the purchase price for the Base Metals (the "Upfront Payment"), payable in installments in accordance with the terms of the BMPA. An initial portion of the Upfront Payment will be payable within five days of the date of the fulfillment of certain conditions set out in the BMPA (the "Commencement Date"), including receipt by Quintana DTS of a satisfactory development plan and other documents relating to the DTM Project, all applicable permits, licenses and other authorizations having been obtained or likely to be obtained, delivery of security documents from the Company and the Subsidiary and construction of the DTM Mine being ongoing or completed. The initial portion of the Upfront Payment will be in an amount equal to the project costs expected to be incurred during the first 60 days after the Commencement Date. Subject to the Subsidiary meeting certain conditions set out in the BMPA, subsequent advances of the Upfront Payment will be payable every 60 days from the payment of the initial portion of the Upfront Payment in amounts equal to the project costs expected to be incurred during the 60 day period following each such advance.
Quintana DTS will pay the Subsidiary a fixed purchase price for the Base Metals sold and delivered under the BMPA, calculated as follows and subject to adjustment in accordance with the terms of the BMPA:
- In the case of lead, the lesser of market price and the fixed price of $0.24 per pound until the Lead Delivery Hurdle is met, and then $0.36 per pound thereafter;
- In the case of zinc, the lesser of market price and the fixed price of $0.22 per pound until the Zinc Delivery Hurdle is met, and then $0.33 per pound thereafter; and
- In the case of any other Base Metal, 50% of the average daily market price for such Base Metal in the three months immediately preceding the commencement date.
Pursuant to the BMPA, the Subsidiary has granted Quintana DTS a right of first refusal with respect to any future streaming transactions relating to the DTM Project.
About Quintana Minerals Corporation
Quintana Minerals Corporation ("QMC") is the management company for a portfolio of energy and natural resources-based private and publicly-traded companies controlled and/or operated by the Corbin J. Robertson Jr. family. The company was formed in 1963 as a division of Quintana Petroleum Corp. and has actively developed and operated precious and industrial metals/minerals projects throughout the Americas. The following are examples of some the group's on-going ventures: Natural Resource Partners L.P., a publicly traded MLP (NYSE: NRP); Great Northern Properties L.P., a private company that holds over 22 billion tons of coal reserves; Corsa Coal Corp., a publicly traded junior mining company (TSXV: CSO); Quintana Energy Partners, L.P., an energy-focused private equity fund; and Quintana Shipping Ltd., the group's 2nd dry bulk shipping venture. For more information please contact Oliver Rodz, Managing Director of QMC, 601 Jefferson Street, Suite 3600, Houston, Texas 77002 (tel: 713-751-7500).
About Western Pacific Resources Corp.
Western Pacific is focused on advancing a strong portfolio of projects in the Western United States, including the Deer Trail Mine in Piute County, Utah. Western Pacific's team is led by technical and financial experts who aim to succeed in creating shareholder value. For more information, please visit our website at www.westernpacificresources.com.
ON BEHALF OF THE BOARD
Warwick Smith, Chief Executive Officer
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.
The Company has not established a National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") mineral resource estimate for the DTM Project nor has it made a production decision with respect to such project. Further, the Company has not based its decision to enter into the Streaming Transaction on a feasibility study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any particular level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that production will begin as anticipated or at all.
Eric Saderholm, P. Geo, is the Company's Qualified Person (as such term is defined by NI 43-101) and has reviewed and approved the technical disclosure contained in this news release. Mr. Saderholm is also the Company's Vice President of Exploration.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements within the meaning of Canadian securities legislation. Forward-looking statements contained in this news release include, without limitation, statements in respect of the closing of the DTM Acquisition, the closing of the proposed Financing and future payments and purchases of Base Metals pursuant to the Streaming Transaction with Quintana. These statements relate to future events, business prospects or opportunities and product development. All such statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect, "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Actual results and developments may differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions of management and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statement, including but not limited to: (a) the conditions to closing of the DTM Acquisition not being met; (b) the Company being unable to meet the milestones for purchases of Secured Notes under the Investment Agreement; (c) the company being unable to obtain TSXV or disinterested shareholder approval of the Financing or Streaming Transaction; (d) the Company being unable to raise additional fund to finance the development of the DTM Project; (e) the Company being unable to comply with the conditions to advances to the Upfront Payment under the BMPA; (f) risks associated with the results of exploration activities, the interpretation of drilling results and other geological risks, estimation of mineral resources and the geology, grade and continuity of mineral deposits, project cost overruns or unanticipated costs and expenses; and (g) such other risks detailed from time-to-time in the Company's quarterly and annual filings with securities regulators and available under the Company's profile on SEDAR at www.sedar.com.
Although the Company believes that the expectations conveyed by the forward-looking statements are reasonable based on the information available to it on the date such statements were made, no assurances can be given as to future results, approvals or achievements. Such forward-looking statements have been made for the purpose of assisting investors in understanding the Company's business, financial and operational performance and plans and may not be appropriate for other purposes. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The Company disclaims any duty to update any of the forward-looking statements after the date of this news release to conform such statements to actual results or to changes in the Company's expectations except as otherwise required by applicable law.
SOURCE: Western Pacific Resources Corp.
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