UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
x
Filed by a Party other than the Registrant
¨
Check the appropriate box:
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Preliminary Proxy Statement
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¨
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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¨
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Definitive Additional Materials
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¨
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Soliciting Material Pursuant to §240.14a-12
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PARAMOUNT GOLD NEVADA CORP.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
¨
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1)
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Title of each class of securities to which transaction applies:
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2)
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Aggregate number of securities to which transaction applies:
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3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it was determined):
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4)
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Proposed maximum aggregate value of transaction:
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x
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Fee paid previously with preliminary materials.
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¨
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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PARAMOUNT GOLD NEVADA CORP.
665 Anderson Street
Winnemucca,
Nevada
Notice of Special Meeting of Stockholders
June 29, 2016
To all Stockholders of Paramount Gold Nevada Corp.:
You are invited to attend the Special Meeting (the
Meeting
) of Stockholders (
Stockholders
or
Paramount Stockholders
) of Paramount Gold Nevada Corp. (the
Company
or
Paramount
). The Meeting will be held at 10:00 a.m. local time on June 29, 2016, at
Paramounts corporate office, 665 Anderson Street, Winnemucca, Nevada. At the Meeting, you will be asked to consider and vote upon the issuance of shares of Paramount common stock as consideration for a proposed arrangement (the
Arrangement
) with Calico Resources Corp. (
Calico
) pursuant to which Paramount will acquire Calico. Stockholder approval in connection with the Arrangement is required to comply with the rules of
the NYSE MKT LLC (the
NYSE MKT
).
Accordingly, the purposes of the Meeting are:
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1.
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To approve the issuance of up to 7,400,000 Paramount Shares (the
Paramount Arrangement
Shares
) to Calico Shareholders as consideration for the Arrangement; and
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2.
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Any other business that may properly come before the Meeting.
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In order to approve the
Arrangement, NYSE MKT rules require that a majority of the votes cast by the stockholders vote in favor of the issuance of the Paramount Arrangement Shares.
Calico will also be holding a meeting of its shareholders (
Calico Shareholders
) to approve the Arrangement (the
Calico Meeting
), and Calico Shareholders representing approximately 37.8% of the issued and outstanding Calico common shares of Calico (the
Calico Shares
) (including FCMI Parent Co. (approximately
19.6%), Seabridge Gold Inc. (approximately 13.5%) and the directors and officers of Calico (approximately 4.7%)) have entered into voting and support agreements with Paramount to vote their Calico Shares at the Calico Meeting in favor of the
Arrangement, provided that the Arrangement Agreement, dated March 14, 2016, by and between Paramount and Calico (the
Arrangement Agreement
), has not been terminated, on or before the date of the Calico Meeting.
The Paramount Board has unanimously concluded that the Arrangement is in the best interests of Paramount and its Stockholders and has
approved and authorized the Arrangement.
The Paramount Board unanimously recommends that the Stockholders vote
FOR
the issuance of the Paramount Arrangement Shares.
The Paramount Board has fixed May 23, 2016 as the record date for the Meeting. Only Stockholders of record at the close of business on that
date will be entitled to notice of, and to vote at, the Meeting. A list of Stockholders as of May 23, 2016, will be available at the Meeting for inspection by a Stockholder. Stockholders will need to register at the Meeting to attend the Meeting. If
your Paramount Shares are not registered in your name, you will need to bring proof of your ownership of those Paramount Shares to the meeting in order to register to attend and vote. You should ask the broker, bank or other institution that holds
your Paramount Shares to provide you with proper proxy documentation that shows your ownership of Paramount Shares as of May 23, 2016 and your right to vote such Paramount Shares at the Meeting. Please bring that documentation to the Meeting.
IMPORTANT
Whether or
not you expect to attend the Meeting, please sign and return the enclosed proxy promptly. If you decide to attend the meeting, you may, if you wish, revoke the proxy and vote your Paramount Shares in person.
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By Order of the Board of Directors
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/s/ Carlo Buffone
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Carlo Buffone, Chief Financial Officer
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Dated: May
27, 2016
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PARAMOUNT GOLD NEVADA CORP.
665 Anderson Street
Winnemucca,
Nevada
Proxy Statement
for
Special Meeting of
Stockholders
To Be Held June 29, 2016, 10:00AM Local Time
Paramount Gold Nevada Corporate Office
665 Anderson Street, Winnemucca, Nevada
Unless the context requires otherwise,
references in this Proxy Statement to
Paramount Gold Nevada
Paramount
,
we
,
us
or
our
refers to Paramount Gold Nevada
Corp.
The Special Meeting (the
Meeting
) of Stockholders of Paramount Gold Nevada (the
Stockholders,
stockholders
or
Paramount Stockholders
) will be held on June 29, 2016, at Paramounts corporate office, 665 Anderson Street, Winnemucca, Nevada, at 10
a.m. local time. The purposes of the Meeting are:
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1.
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To approve the issuance of up to 7,400,000 Paramount Shares (the
Paramount Arrangement
Shares
) to existing shareholders of Calico Resources Corp. (
Calico
) as consideration for a proposed arrangement (the
Arrangement
) with Calico pursuant to which Paramount will acquire
Calico;
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2.
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Any other business that may properly come before the Meeting.
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We are providing the enclosed proxy materials and form of proxy in connection with the solicitation by the Board of Directors of proxies for
the Meeting. Paramount anticipates that this Proxy Statement and the form of proxy, attached to this Proxy Statement as
Appendix A,
will first be mailed to holders of Paramount Shares on or before May 27, 2016.
You are invited to attend the Meeting at the above stated time and location. If you plan to attend and your Paramount Shares are held in
street name - in an account with a bank, broker, or other nominee - you must obtain a proxy issued in your name from such broker, bank or other nominee.
You can vote your shares by completing a proxy card online, completing and returning a proxy card provided to you by mail or e-mail or, if you
hold shares in street name, by completing the voting form provided by the broker, bank or other nominee.
The Paramount Shares
are the only type of security entitled to vote at the Meeting. Our corporate bylaws define a quorum as the presence in person or by proxy of at least one-third of the issued and outstanding Paramount Shares. The approval of a majority of the voting
power of the voting shares present at the Meeting, whether in person or by proxy, is required to approve the issuance of the Paramount Arrangement Shares.
Proxy Solicitation
The proxy
solicitation is being made primarily by mail, although proxies may be solicited by personal interview, telephone, internet, letter, e-mail or otherwise. Certain of our directors, officers and other employees, without additional compensation, may
participate in the solicitation of proxies. We will pay the cost of this solicitation, including the reasonable charges and expenses of brokerage firms and others who forward solicitation materials to beneficial owners of Paramount Shares. We
anticipate engaging a proxy solicitor at an initial anticipated cost of approximately $30,000.
Important Notice Regarding the
Availability of Proxy Materials for the Shareholder Meeting to Be Held at 665 Anderson Street, Winnemucca, Nevada on June 29, 2016
Our proxy statement for the Meeting, form of proxy card and 2015 Annual Report is available at http://www.paramountnevada.com.
TABLE OF CONTENTS
Contents
1
INFORMATION CONTAINED IN THIS PROXY STATEMENT
The information contained in this Proxy Statement, unless otherwise indicated, is given as of May 26, 2016.
No person has been authorized to give any information or to make any representation in connection with the matters being considered herein on
behalf of Paramount other than those contained in this Proxy Statement and, if given or made, such information or representation should not be considered or relied upon as having been authorized. This proxy statement does not constitute an offer to
sell, or a solicitation of an offer to acquire, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or permitted or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or proxy solicitation. Neither the delivery of this Proxy Statement nor any distribution of securities referred to herein should, under any
circumstances, create any implication that there has been no change in the information set forth herein since the date of this Proxy Statement.
Information contained in this Proxy Statement should not be construed as legal, tax or financial advice and Paramount Stockholders are urged
to consult their own professional advisors in connection with the matters considered in this Proxy Statement.
THE ARRANGEMENT HAS NOT
BEEN RECOMMENDED BY, OR APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AN EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITY OF ANY U.S. STATE OR CANADIAN PROVINCE OR TERRITORY NOR HAS ANY OF THEM PASSED UPON THE FAIRNESS OR MERITS
OF THE ARRANGEMENT OR THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Information in this
Proxy Statement regarding Calico:
The information concerning Calico contained in this Proxy Statement has been provided by Calico for
inclusion in this Proxy Statement. In the Arrangement Agreement, Calico provided a covenant to Paramount that it would ensure that the information related to Calico and provided by it for the preparation of this Proxy Statement would be true,
correct and complete in all material respects as they relate to Calico and, without limiting the generality of the foregoing, would not contain any misrepresentation concerning Calico. Paramount is responsible for the accuracy or completeness of the
information in this Proxy Statement relating to Calico.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, as amended and forward-looking information within the meaning of the applicable Canadian securities laws (forward-looking information and forward-looking statements being collectively herein after referred to as
forward-looking statements) that are based on expectations, estimates and projections as the date of this Proxy Statement. These forward-looking statements include but are not limited to statements and information concerning: the
Arrangement; covenants of Calico and Paramount; the timing for the implementation of the Arrangement and the potential benefits of the Arrangement; the likelihood of the Arrangement being completed; principal steps of the Arrangement; statements
made in, and based upon, the Fairness Opinions; statements relating to the business and future activities of, and developments related, to Calico and Paramount after the date this Proxy Statement and before the Effective Time and to and of Paramount
after the Effective Time; Paramount Stockholder approval and Calico shareholder approval and Court approval of the Arrangement; regulatory approval of the Arrangement; the market position and future financial or operating performance of Paramount;
and statements based on the unaudited
pro forma
condensed consolidated financial statements attached as
Appendix F.
Statements concerning proven and probable mineral reserves and mineral resource estimates may also be deemed to constitute forward-looking
statements to the extent that they involve estimates of the mineralization that will be encountered as and if a property is developed, and in the case of mineral resources or proven and probable mineral reserves, such statements reflect the
conclusion based on certain assumptions that the mineral deposit can be economically exploited.
2
Any statements that involve discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or performance (often but not always using phrases such as expects or does not expect, is expected, anticipates or does not
anticipate, plans, budget, scheduled, forecasts, estimates, believes or intends or variations of such words and phrases or stating that certain actions, events
or results may, could, would, might or will be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify
forward-looking statements.
These forward-looking statements are based on the beliefs of the management of Calico or Paramount, as the
case may be, as well as on assumptions which such management believes to be reasonable, based on information currently available at the time such statements were made However, there can be no assurance that forward-looking statements will prove to
be accurate. Such assumptions and factors include, among other things, the satisfaction of the terms and conditions of the Arrangement, including the approval of the Arrangement by the Paramount Stockholders and the Calico Shareholders and the
approval of the Arrangement and its fairness by the Court; the receipt of any required governmental and regulatory approvals and consents, and the timing of the receipt thereof; general business and economic conditions; that the businesses of Calico
and Paramount will successfully integrate and the anticipated benefits of the Arrangement will be achieved; market competition; and tax benefits and tax rates.
By their nature, forward-looking statements are based on assumptions and involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Calico or Paramount to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements
are subject to a variety of risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation: the Arrangement Agreement may
be terminated in certain circumstances; general business, economic, competitive, political, regulatory and social uncertainties; risks associated with a fixed exchange ratio; mineral and gold price volatility; risks related to competition; risks
related to facto beyond the control of Calico, Paramount, or the resulting issuers; risks and uncertainties associated with exploration, development and mining operations; title risks; environmental risks and risks relating to environmental
permitting and licenses; risks related to directors and officers of Paramount possibly having interests in the Arrangement that are different from other Paramount Stockholders; the global economic climate; the execution of strategic growth plans;
risks relating to the lack of hedging policies; dilution; market reaction to the Arrangement; risks relating to the integration of Calico and Paramounts operations; insurance risks; litigation; and risks relating to the ability to complete
acquisitions.
This list is not exhaustive of the factors that may affect any of the forward-looking statements of Calico or Paramount.
Forward-looking statements are statements about the future and are inherently uncertain. Actual results could differ materially from those projected in the forward-looking statements as a result of the matters set out or incorporated by reference in
this Proxy Statement generally and certain economic and business factors, some of which may be beyond the control of Calico and Paramount. Some of the important risks and uncertainties that could affect forward-looking statements are described
further under the headings The Arrangement - Risk Factors Related to Arrangement. Calico and Paramount do not intend, and do not assume, any obligation to update any forward-looking statements, other than as required by applicable law.
For all of these reasons, Paramount Stockholders should not place undue reliance on forward-looking statements.
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING MINERAL RESERVE
AND RESOURCE ESTIMATES
Certain of the technical information contained or incorporated by reference in, and the technical reports referenced in, this Proxy Statement
use the terms mineral resource, measured mineral resource, indicated mineral resource and inferred mineral resource. We advise investors that these terms are defined in and required to be disclosed in
accordance with Canadian National Instrument 43-101 -
Standards of Disclosure for Mineral Projects
(
NI 43-101
) and the Canadian Institute of Mining, Metallurgy and Petroleum (the
CIM
) -
CIM Definition Standards on Mineral Resources and Mineral Reserves
, adopted by the CIM Council, as amended; however, these terms are not defined terms under the United State Securities and Exchange Commissions (the
SEC
) Industry Guide 7 (
Guide 7
) and are normally not permitted to be used in reports and registration statements filed with the SEC. Under Guide 7 standards, a final or
bankable feasibility
3
study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to designate reserves, and the primary environmental analysis or report
must be filed with the appropriate governmental authority. Disclosure of contained ounces in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does
not constitute reserves by Guide 7 standards as in place tonnage and grade without reference to unit measures. Inferred mineral resources have a great amount of uncertainty as to their existence, and great uncertainty as to
their 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, except in rare cases Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.
Investors are cautioned not to assume that any
part or all of mineral deposits in the above categories will ever be converted into Guide 7 compliant reserves.
CURRENCY AND EXCHANGE RATES
Unless otherwise indicated herein, references to $, US$ or United
States dollars are to United States dollars, and references to Cdn$ or Canadian dollars are to Canadian dollars.
REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES
The historical financial statements of Calico included in this Proxy Statement is prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board and are reported in Canadian dollars. The
pro forma
unaudited condensed financial statement of Paramount included in this Proxy Statement are reported in United
States dollars and have been prepared in accordance with United States generally accepted accounting principles.
4
GLOSSARY OF TERMS
In this Proxy Statement, unless otherwise defined herein or unless there is something in the subject matter inconsistent therewith, the
following terms have the respective meanings set out below, words importing the singular number include the plural and vice versa and words importing any gender include all genders.
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Acquisition Proposal
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means, other than the transactions contemplated by the Arrangement Agreement and other than any transaction involving only
a Party and/or one or more of its wholly-owned Subsidiaries, any offer, or public announcement of an intention to make a proposal or offer, from any Person or group of Persons, after the date hereof for: (i) any acquisition or purchase, direct or
indirect, of (A) the assets of that Party and/or one or more of its Subsidiaries that, individually or in the aggregate, constitute 20% or more of the consolidated assets of that Party and its Subsidiaries, taken as a whole, or which contribute 20%
or more of the consolidated revenue of a Party and its Subsidiaries, taken as a whole, or (B) 20% or more of any voting or equity securities of that Party or any one or more of its Subsidiaries that, individually or in the aggregate, contribute 20%
or more of the consolidated revenues or constitute 20% or more of the consolidated assets of that Party and its Subsidiaries, taken as a whole; (ii) any take-over bid, tender offer or exchange offer that, if consummated, would result in such Person
or group of Persons beneficially owning 20% or more of any class of voting or equity securities of that Party; or (iii) a plan of arrangement, merger, amalgamation, consolidation, share exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or other similar transaction involving that Party and/or any of its Subsidiaries whose assets or revenues, individually or in the aggregate, constitute 20% or more of the consolidated assets or revenues, as
applicable, of that Party and its Subsidiaries, taken as a whole.
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Arrangement
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means the arrangement under the provisions of Division 5 of Part 9 of the BCBCA on the terms and conditions set out in the
Plan of Arrangement, subject to any amendments or variations thereto made in accordance therewith or in accordance with the Arrangement Agreement or made at the direction of the Court in the Final Order.
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Arrangement Agreement
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means the Arrangement Agreement dated March 14, 2016 between Calico and Paramount.
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Arrangement Consideration
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means up to 7,400,000 Paramount Shares.
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Arrangement Resolution
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means the special resolution of the Calico Shareholders approving the Arrangement, the Plan of Arrangement and the
Arrangement Agreement, substantially in the form set out in Schedule B to the Arrangement Agreement.
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Articles of Incorporation
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means the Amended and Restated Articles of Incorporation of Paramount on file with the Secretary of State of the State of
Nevada.
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BCBCA
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means the
Business Corporations Act
(British Columbia) and the regulations made thereunder, as
amended.
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Business Day
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means a day that is not a Saturday, Sunday or civic or statutory holiday in Vancouver, British Columbia or Winnemucca,
Nevada.
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Calico
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means Calico Resources Corp., a corporation existing under the BCBCA.
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Calico Board
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means the board of directors of Calico, as constituted from time-to-time.
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Calico Material Adverse Change
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has the meaning ascribed to such term in the Arrangement Agreement.
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Calico Material Adverse Effect
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means any one or more changes, effects, events, occurrences or states of fact, either individually or in the aggregate,
that is, or would reasonably be expected to be, material and adverse to the assets, liabilities (including any contingent liabilities that may arise through outstanding, pending or threatened litigation or otherwise), business, operations, results
of operations, capital, property, obligations (whether absolute, accrued, conditional or otherwise) or financial condition of Calico and its Subsidiaries taken as a whole, other than changes, effects, events, occurrences or states of fact resulting
from: (i) a change in the market price of the Calico Shares following and reasonably attributable to the public announcement of the execution of the Arrangement Agreement and the transactions contemplated hereby; (ii) any changes affecting the
global gold mining industry generally; (iii) any change in the market prices of gold; (iv) general economic, financial, currency exchange, securities or commodity market conditions in Canada or the United States; (v) any change in IFRS occurring
after the date hereof; (vi) any change in applicable Laws or in the interpretation thereof by any Governmental Entity occurring after the date of the Arrangement Agreement; (vii) the commencement, occurrence or continuation of any war, armed
hostilities or acts of terrorism; or (viii) any natural disaster; provided, however, that with respect to clauses (ii) to (viii), such changes do not relate primarily to Calico and its Subsidiaries, taken as a whole, or does not have a
disproportionate effect on Calico and its Subsidiaries, taken as a whole, compared to other companies of similar size operating in the gold exploration industry and references in the Arrangement Agreement to dollar amounts are not intended to be and
shall not be deemed to be illustrative or interpretative for purposes of determining whether a Calico Material Adverse Effect has occurred.
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Calico Material Subsidiaries
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means Calico Resources USA Corp.
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Calico Meeting
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means the special meeting, including any adjournments or postponements thereof, of the Calico Shareholders to be held,
among other things, to consider and, if deemed advisable, to approve the Calico Arrangement Resolution.
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Calico Shareholder
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means a holder of Calico Shares.
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Calico Shares
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means the common shares without par value in the capital of Calico.
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Calico Support Agreements
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means the voting and support agreements dated March 14, 2016 and entered into between Paramount and the Supporting Calico
Shareholders.
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Calico Termination Fee
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means $300,000.
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CIM
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means the Canadian Institute of Mining, Metallurgy and Petroleum.
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Common Stock or common stock
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means the Paramount Shares.
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Confidentiality Agreement
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means that certain confidentiality agreement dated June 26, 2015, entered into between Paramount and Calico.
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Court
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means the Supreme Court of British Columbia.
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Dissent Procedures
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has the meaning ascribed thereto in the Plan of Arrangement.
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Dissent Rights
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means the rights of dissent of Registered Calico Shareholders in respect of the Arrangement as described in the Plan of
Arrangement.
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Dissenting Shareholder
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means a Registered Calico Shareholder who dissents in respect of the Arrangement in strict compliance with the Dissent
Procedures.
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Dissenting Shares
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means the Calico Shares with respect to which Registered Calico Shareholders have exercised Dissent Rights.
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Effective Date
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means the date that is five Business Days after the last of the conditions precedent to the completion of the Arrangement
contained in Section 5 of the Arrangement Agreement has been satisfied or waived (other than those conditions which cannot, by their terms, be satisfied until the Effective Date, but subject to satisfaction or waiver of such conditions as of the
Effective Date) or such earlier or later date as is agreed to in writing by the Parties.
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Effective Time
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means the beginning of the day, which will be designated as 12:01 a.m. (Vancouver Time) on the Effective Date, or such
other time on the Effective Date as the Parties agree to in writing.
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Exchange Act
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means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder
from time to time.
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Fairness Opinion
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means the written opinion dated March 11, 2016 from the Financial Advisor delivered to the Paramount Special Committee in
connection with the Arrangement, a copy of which is attached as
Appendix C
to this Proxy Statement.
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Financial Advisor
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means ROTH Capital Partners, LLC.
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Final Order
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means the final order of the Court approving the Arrangement as such order may be amended by the Court at any time before
the Effective Date or, if appealed, then, unless such appeal is abandoned or denied, as affirmed.
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Governmental Entity
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means any (i) multinational, federal, provincial, territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign (ii) subdivision, agent, commission, board, or authority of any of the foregoing, or (iii) quasi-governmental
or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing.
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Guide 7
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means the SECs Industry Guide 7.
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IFRS
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means International Financial Reporting Standards as issued by the International Accounting Standard Board.
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Interim Financing
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means the debt financing of up to $800,000 to be provided by Paramount to Calico.
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Interim Order
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means the interim order of the Court, providing for, among other things, the calling and holding of the Calico Meeting, as
such order may be amended, supplemented or varied by the Court.
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Laws
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means all statutes, regulations, statutory rules, policies, orders, and terms and conditions of any grant approval,
permission, authority or license of any court, Governmental Entity, statutory body or regulatory authority (including the SEC, NYSE MKT and TSXV), and the term applicable with respect to such Law and in the context that refers to one or
more Persons means that such Law applies to such Person or Persons or its or their business, undertaking, property or securities and emanates from a Governmental Entity, statutory body or regulatory authority having jurisdiction over the Person or
Persons or its or their business, undertaking, property or securities.
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Material Adverse Change
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means a Calico Material Adverse Change or a Paramount Material Adverse Change.
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Material Adverse Effect
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means a Calico Material Adverse Effect or a Paramount Material Adverse Effect.
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NI 43-101
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means National Instrument 43-101 -
Standards of Disclosure for Mineral Projects.
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NYSE MKT
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means the NYSE MKT LLC.
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NYSE MKT Company Guide
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means the listing regulations of companies listed on the NYSE MKT.
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Paramount
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means Paramount Gold Nevada Corp., a company existing under the laws of the State of Nevada.
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Paramount Arrangement Shares
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means up to 7,400,000 Paramount Shares to be issued in connection with the Arrangement.
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Paramount Board
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means the board of directors of Paramount, as constituted from time-to-time.
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Paramount Material Adverse Effect
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means any one or more changes, effects, events, occurrences or states of fact, either individually or in the aggregate,
that is, or would reasonably be expected to be, material and adverse to the assets, liabilities (including any contingent liabilities that may arise through outstanding, pending or threatened litigation or otherwise), business, operations, results
of operations, capital, property, obligations (whether absolute, accrued, conditional or otherwise) or financial condition of Paramount and its Subsidiaries taken as a whole, other than changes, effects, events, occurrences or states of fact
resulting from: (i) a change in the market price of the Paramount Shares following and reasonably attributable to the public announcement of the execution of the Arrangement Agreement and the transactions contemplated hereby; (ii) any changes
affecting the global gold mining industry generally; (iii) any change in the market prices of gold; (iv) general economic, financial, currency exchange, securities or commodity market conditions in Canada or the United States; (v) any change in U.S.
GAAP occurring after the date hereof; (vi) any change in applicable Laws or in the interpretation thereof by any Governmental Entity occurring after the date hereof; (vii) the commencement, occurrence or continuation of any war, armed hostilities or
acts of terrorism; or (viii) any natural disaster; provided, however, that with respect to clauses (ii) to (viii), such changes do not relate primarily to Paramount and its Subsidiaries, taken as a whole, or does not have a disproportionate effect
on Paramount and its Subsidiaries, taken as a whole, compared to other companies of similar size operating in the gold exploration industry; and references in the Arrangement Agreement to dollar amounts are not intended to be and shall not be deemed
to be illustrative or interpretative for purposes of determining whether a Paramount Material Adverse Effect has occurred.
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8
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Paramount Material Adverse Change
|
|
has the meaning ascribed to such term in the Arrangement Agreement.
|
Paramount Special Committee
|
|
means the special committee formed by the Paramount Board to, among other things, consider a transaction with
Calico.
|
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|
Paramount Meeting
|
|
means the special meeting of Paramount Stockholders to be held to consider the Arrangement, including any adjournment or
adjournments thereof.
|
|
|
Paramount Stockholder
|
|
means a holder of Paramount Shares.
|
|
|
Paramount Shares
|
|
means the common stock in the authorized share structure of Paramount.
|
|
|
Paramount Termination Fee
|
|
means $300,000.
|
|
|
Parties
|
|
means Calico and Paramount and
Party
means any one of them.
|
|
|
Person
|
|
includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor,
administrator, legal personal representative, estate, group, body corporate, corporation company, unincorporated association or organization, Governmental Entity, syndicate or other entity whether or not having legal status.
|
|
|
Plan of Arrangement
|
|
means the Plan of Arrangement in the form and content set out in Appendix B to this Proxy Statement, and any amendment
thereto or variation thereof made in accordance with the Arrangement Agreement or the Plan of Arrangement or made at the direction of the Court in the Final Order.
|
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Registered Calico Shareholder
|
|
means a registered holder of Calico Shares.
|
|
|
SEC
|
|
means the United States Securities and Exchange Commission.
|
|
|
Securities Act
|
|
means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder from time
to time.
|
|
|
stockholder
|
|
means the holder of Paramount Shares.
|
|
|
subsidiary or Subsidiary
|
|
means, with respect to a specified body corporate, any body corporate of which the specified body corporate is entitled to
elect a majority of the directors thereof and shall include any body corporate, partnership, joint venture or other entity over which such specified body corporate exercises direction or control or which is in a like relation to such a body
corporate, excluding any body corporate in respect of which such direction or control is not exercised by the specified body corporate as a result of any existing contract, agreement or commitment.
|
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Superior Proposal
|
|
means an unsolicited
bona fide
Acquisition Proposal (provided that references in the definition thereof to
20% shall be deemed to be references to 100%) made by a third party to a Party or its shareholders in writing after the date hereof: (i) that is reasonably capable of being completed without undue delay, taking into account
all legal, financial, regulatory and other aspects of such proposal and the party making such proposal; (ii) that is not subject to any financing condition beyond what would be permitted by Multilateral Instrument 62-104
Take-Over Bids and
Issuer Bids
in respect of a formal take-over bid (whether or not such transaction is a formal take-over bid); (iii) which is not subject to a due diligence and/or access condition; (iv) that did not result from a breach of Article 7 of the
Arrangement Agreement, by the receiving Party or its representatives; (v) is made available to all Calico Shareholders or Paramount Shareholders, as the case may be, on the same terms and conditions; (vi) in respect of which the board of directors
of such Party determines in good faith (after receipt of advice from its outside legal counsel and financial advisors) that (A) failure to recommend such Acquisition Proposal to its shareholders would be inconsistent with its fiduciary duties, and
(B) which would, taking into account all of the terms and conditions of such Acquisition Proposal, if consummated in accordance with its terms (but not assuming away any risk of non-completion), result in a transaction more favorable to its
shareholders from a financial point of view than the Arrangement (including any adjustment to the terms and conditions of the Arrangement proposed by Paramount pursuant to Subsection 7.1(f)) of the Arrangement
Agreement.
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9
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Supporting Calico Shareholders
|
|
means the Persons who are party to the Calico Support Agreements.
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TSXV
|
|
means the TSX Venture Exchange.
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|
U.S. GAAP
|
|
means accounting principles generally accepted in the United States of America from time to time and which meet the
standards established by the Public Company Accounting Oversight Board (United States).
|
QUESTIONS AND ANSWERS ABOUT PROXY MATERIALS AND VOTING
Why am I receiving this Proxy Statement and proxy card?
You are receiving this Proxy Statement and proxy card because you were a Stockholder of record at the close of business on May 23, 2016
and are entitled to vote at the Meeting. This Proxy Statement describes issues on which Paramount would like you, as a Stockholder, to vote. It provides information on these issues so that you can make an informed decision. You do not need to attend
the Meeting to vote your Paramount Shares.
When you sign the proxy card you appoint Glen Van Treek, Chief Executive Officer to
Paramount and Carlo Buffone, Chief Financial Officer to Paramount, as your representatives at the Meeting. As your representatives, they will vote your Paramount Shares at the Meeting (or any adjournments or postponements) as you have instructed on
your proxy card. With proxy voting, your Paramount Shares will be voted whether or not you attend the Meeting. Even if you plan to attend the Meeting, it is a good idea to complete, sign and return your proxy card in advance of the Meeting, just in
case your plans change.
If an issue comes up for vote at the Meeting (or any adjournments or postponements) that is not described in this
Proxy Statement, your representatives will vote your Paramount Shares, under your proxy, at their discretion, subject to any limitations imposed by law.
When is the record date
?
The
Paramount Board has fixed May 23, 2016 as the record date for the Meeting. Only holders of Paramount Shares as of the close of business on that date will be entitled to vote at the Meeting.
How many Paramount Shares are outstanding?
As of
May 23, 2016, Paramount had 8,518,791 Paramount Shares issued and outstanding.
10
What am I voting on?
You are being asked to vote on the following:
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1.
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The approval of the issuance of the Paramount Arrangement Shares; and
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2.
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Any other business that may properly come before the Meeting.
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How many votes do I get?
Each Paramount
Share is entitled to one vote. Dissenters rights are not applicable to any of the matters being voted upon.
The Board recommends a vote
FOR
the approval of the issuance of the Paramount Arrangement Shares.
How do I vote?
You have several voting options. You may vote:
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●
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In person.
If you are a beneficial owner of stock held in street name and you wish to vote in person at the Meeting, you must obtain a legal proxy from the organization that holds your shares. Please contact that organization for
instructions regarding obtaining a legal proxy.
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●
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Via the Internet.
You may vote by proxy via the Internet by visiting www.proxyvote.com and entering the control number found on the ballot.
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●
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By Telephone.
With your proxy card in hand, you may vote by proxy by calling the toll free number found on the ballot.
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●
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By Mail.
You may vote by proxy by filling out the proxy card and sending it back in the envelope provided.
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If your Paramount Shares are held in an account with a brokerage firm, bank, dealer, or other similar organization, then you are the
beneficial owner of Paramount Shares held in a street name and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at
the Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote the Paramount Shares in your account. You are also invited to attend the Meeting. However, since you are not the stockholder of
record, you may not vote your Paramount Shares in person at the Meeting unless you request and obtain a valid proxy card from your broker, bank, or other nominee.
Can Stockholders vote in person at the Meeting?
Paramount will pass out written ballots to anyone who wants to vote at the Meeting. If you hold your Paramount Shares through a brokerage
account but do not have a physical share certificate, or the Paramount Shares are registered in someone elses name, you must request a legal proxy from your stockbroker or the registered owner to vote at the Meeting.
What if I want a paper copy of these proxy materials?
Please send a written request to our offices at the address below, email us at info@paramountnevada.com or call us toll free at 866-481-2233
to request a copy of the proxy materials.
11
Send requests to:
Paramount Gold Nevada Corp.
665 Anderson Street
Winnemucca, Nevada
Attention:
Carlo Buffone
Chief Financial Officer
What if I change my mind after I return my proxy?
You may revoke your proxy and change your vote at any time before the polls close at the Meeting. You may do this by:
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●
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Signing another proxy with a later date and mailing it to the attention of: Carlo Buffone, Chief Financial
Officer, at 665 Anderson Street, Winnemucca, Nevada, so long as it is received prior to 2:00PM Pacific daylight time on June 28, 2016;
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●
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Delivering a written notice of the revocation of your proxy to the attention of: Carlo Buffone, Chief
Financial Officer, at 665 Anderson Street, Winnemucca, Nevada, so long as it is received prior to 2:00PM Pacific daylight time on June 28, 2016; or
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●
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Voting in person at the Meeting.
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Beneficial stockholders should refer to the instructions received from their stockbroker or the registered holder of the Paramount Shares if
they wish to change their vote.
How many votes do you need to hold the Meeting?
To conduct the Meeting, Paramount must have a quorum, which means that a one-third of the outstanding Paramount Shares as of the record date
must be present at the Meeting. Paramount Shares are the only type of security entitled to vote at the Meeting. Based on 8,518,791 Paramount Shares outstanding as of the record date of May 23, 2016, 2,839,597 Paramount Shares must be present at the
Meeting, in person or by proxy, for there to be a quorum. Your Paramount Shares will be counted as present at the Meeting if you:
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●
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Submit a properly executed proxy card (even if you do not provide voting instructions); or
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●
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Attend the Meeting and vote in person.
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What if I abstain from voting?
Abstentions with respect to a proposal are counted for the purposes of establishing a quorum. Since Paramounts bylaws state that matters
presented at a meeting of Stockholders must be approved by the majority of the Paramount Shares present at the meeting, a properly executed proxy card marked
ABSTAIN
with respect to a proposal will have the same effect as voting
AGAINST
that proposal.
What effect does a broker non-vote have?
Brokers and other intermediaries, holding Paramount Shares in street name for their customers, are generally required to vote the Paramount
Shares in the manner directed by their customers. If their customers do not give any direction, brokers may vote the Paramount Shares on routine matters but not on non-routine matters. The issuance of the Paramount Arrangement Shares is a
non-routine matter. Consequently, if customers do not give any direction, brokers will not be permitted to vote such Paramount Shares at the Meeting in relation to this matter.
The absence of a vote on a non-routine matter is referred to as a broker non-vote. Any Paramount Shares represented at the Meeting but not
voted (whether by abstention, broker non-vote or otherwise) with respect to
12
the proposal to approve the issuance of the Paramount Arrangement Shares will have the same effect as a vote
AGAINST
such proposal.
How many votes are needed to approve the issuance of the Paramount Arrangement Shares?
The issuance of the Paramount Arrangement Shares will be approved if a majority of the Paramount Shares present at the Meeting votes
FOR
the proposal. A properly executed proxy card marked
ABSTAIN
with respect to this proposal will have the same effect as voting
AGAINST
this proposal. We encourage you to vote
FOR
this proposal.
Will my Paramount Shares be voted if I do not sign and return my Proxy Card?
If your Paramount Shares are held through a brokerage account, your brokerage firm, under certain circumstances, may vote your shares;
otherwise your Paramount Shares will not be voted at the meeting. See What effect does a broker non-vote have? above for a discussion of the matters on which your brokerage firm may vote your Paramount Shares.
If your Paramount Shares are registered in your name, and you do not complete your proxy card over the internet or sign and return your
proxy card, your Paramount Shares will not be voted at the Meeting unless you attend the Meeting and vote your Paramount Shares in person.
Where can I find the voting results of the Meeting?
Paramount will publish the final results in a Current Report on Form 8-K with the SEC within four (4) business days of the Meeting.
Who will pay for the costs of soliciting proxies?
Paramount will bear the cost of soliciting proxies. In an effort to have as large a representation at the meeting as possible,
Paramounts directors officers and employees may solicit proxies by telephone or in person in certain circumstances. These individuals will receive no additional compensation for their services other than their regular salaries. Paramount
anticipates engaging a proxy solicitor at an initial anticipated cost of approximately $30,000. Paramount will pay a reasonable fee in relation to these services. Upon request, Paramount will reimburse brokers, dealers, banks, voting trustees and
their nominees who are holders of record of Paramount Shares on the record date for the reasonable expenses incurred for mailing copies of the proxy materials to the beneficial owners of such Paramount Shares.
How can I obtain a copy of the 2015 Annual Report on Form 10-K?
A copy of Paramounts 2015 Annual Report on Form 10-K, including financial statements, is enclosed with this Proxy Statement and is also
available on the internet with this Proxy Statement at
http://www.paramountnevada.com/investor-relations/financials/
. The Form is also
available through the SECs website at
http://www.sec.gov
. Paramounts filings with the applicable Canadian securities
regulators are available on the System for Electronic Document Analysis and Retrieval (
SEDAR
), and may be viewed at the following website address:
www.sedar.com
.
At the written request of any stockholder who owns Paramount Shares on the record date, Paramount will provide to such stockholder, without
charge, a paper copy of Paramounts 2015 Annual Report on Form 10-K as filed with the SEC, including the financial statements, but not including exhibits.
If requested, Paramount will provide copies of the exhibits for a reasonable fee.
13
Requests for additional paper copies of the 2015 Annual Report on Form 10-K should be mailed to:
Corporate Communications
Paramount Gold Nevada Corp.
665
Anderson Street
Winnemucca, Nevada, 89445, USA.
What materials accompany or are attached to this Proxy Statement?
The following materials accompany or are attached to this Proxy Statement:
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APPENDIX A
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|
Form of Proxy Card
|
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APPENDIX B
|
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Plan of Arrangement
|
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APPENDIX C
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|
Fairness Opinion
|
|
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APPENDIX D
|
|
Information regarding Calico
|
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APPENDIX E
|
|
Historical Financial Statements of Calico
|
|
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APPENDIX F
|
|
Pro Forma Financial Statements of Paramount
|
PROPOSAL 1 - APPROVAL OF ISSUANCE OF THE PARAMOUNT ARRANGEMENT SHARES
GENERAL QUESTIONS REGARDING THE ARRANGEMENT
Why am I being asked to vote on the issuance of the Paramount Arrangement Shares?
At the Meeting, you will be asked to consider and vote upon the issuance of the Paramount Arrangement Shares in connection with the
Arrangement, under which Paramount will acquire all of the issued and outstanding Calico Shares. Under the Arrangement, Calico Shareholders will receive the Paramount Arrangement Shares (approximately 7,171,209 Paramount Shares) (representing a
ratio equal to 0.07 of a Paramount Arrangement Share for each outstanding Calico Share) in exchange for their Calico Shares. On completion of the Arrangement, Calico will be a wholly-owned subsidiary of Paramount.
Paramount Shares are listed on the NYSE MKT and Sections 712 and 713 of the NYSE MKT Company Guide require stockholder approval for the
issuance of the Paramount Arrangement Shares pursuant to the Arrangement. Section 712 of the NYSE MKT Company Guide requires stockholder approval before the issuance of common stock as sole or partial consideration for an acquisition of the
stock or assets of another company where the present or potential issuance of common stock, or securities convertible into common stock, could result in an increase in outstanding shares of common stock of 20% or more. Section 713 of the NYSE
MKT Company Guide requires Stockholder approval before the issuance of shares of common stock, or securities convertible into common stock, equal to 20% or more of the presently outstanding common stock for less than the greater of book or market
value of such common stock.
Because the Paramount Arrangement Shares issued pursuant to the Arrangement will exceed 20% of the issued and
outstanding Paramount Shares and because the Paramount Arrangement Shares may be issued at a discount to market, stockholder approval of the issuance of the Paramount Shares in connection with the Arrangement is required.
What will happen if the proposed Arrangement is completed?
Upon completion of the Arrangement, Calico will become a wholly-owned subsidiary of Paramount.
Following the Arrangement there will be a total of approximately 15,690,000 Paramount Shares outstanding, approximately 46% of which will be
owned by existing Calico Shareholders and approximately 54% of which will be owned by existing Paramount
14
Stockholders. Assuming no exercising of outstanding Calico options, existing Paramount Stockholders will hold 57% of Paramounts common stock on a fully-diluted basis, and existing Calico
Shareholders will hold the remaining 43%.
Who will manage the combined company after the Arrangement?
Following the Arrangement, Glen Van Treek will continue as the chief executive officer of Paramount and Carlo Buffone will continue as the
chief financial officer of Paramount. Following the Arrangement, the Paramount Board will remain unchanged.
How was the Arrangement
Consideration determined?
The Arrangement Consideration was determined after considerable negotiations between Paramount and Calico
and the consideration of numerous factors that each company deemed relevant. In addition, Calico received a fairness opinion from Canaccord Genuity Corp., which provided that the consideration to be paid to the Calico Shareholders was fair from a
financial point of view and Paramount received a fairness opinion from the Financial Advisor which provided that the Calico Shares to be received by Paramount in exchange for the issuance of the Paramount Arrangement Shares was fair to Paramount and
the Paramount Stockholders from a financial point of view.
When does the Paramount Board expect the Arrangement to be completed?
It is anticipated that the Effective Date of the Arrangement will be as soon as possible after receipt of all applicable
stockholder, regulatory and court approvals and is expected to be on or about July 6, 2016, but no later than July 31, 2016. In addition to approval by the Paramount Stockholders, the Arrangement requires approval of the Calico Shareholders,
court approval under the BCBCA by the Court, and approval of the NYSE MKT and TSXV. The Paramount Board expects to complete the Arrangement shortly after receiving the Final Order.
What vote is required to approve the issuance of the Paramount Arrangement Shares in connection with the Arrangement?
The issuance of the Paramount Arrangement Shares in connection with the Arrangement must be approved by a majority of the Paramount Shares
present at the Meeting.
Does the Paramount Board recommend approval of the issuance of the Paramount Arrangement Shares?
After taking into consideration, among other things, the Fairness Opinion of the Financial Advisor delivered on March 11, 2016, the
Paramount Board has unanimously concluded that the Arrangement is in the best interests of Paramount and is fair from a financial point of view to the Paramount Stockholders and has approved the Arrangement and authorized submission of the issuance
of the Paramount Arrangement Shares in connection with Arrangement to the Paramount Stockholders for approval.
THE BOARD RECOMMENDS A
VOTE FOR APPROVAL OF THE ISSUANCE OF THE PARAMOUNT ARRANGEMENT SHARES IN CONNECTION WITH THE ARRANGEMENT.
SUMMARY OF THE ARRANGEMENT
This summary is qualified in its entirety by the more detailed information appearing elsewhere in
this Proxy Statement, including the Appendices which are incorporated into and form part of this Proxy Statement. Terms with initial capital letters in this summary are defined in the Glossary Terms immediately preceding this summary.
You are being asked to approve the issuance of the Paramount Arrangement Shares, which consist of up to 7,400,000 shares of Paramount common
stock issuable pursuant to the Arrangement Agreement.
15
Pursuant to our Articles of Incorporation and applicable Nevada state law, and limited only by
the number of Paramount Shares authorized for issuance under our Articles of Incorporation, the Paramount Board has the power, without submitting the matter to a stockholder vote or approval, to issue Paramount Shares, from time to time, for any
consideration the Paramount Board deems appropriate.
However, Paramount Shares are listed on the NYSE MKT and Sections 712 and 713 of the
NYSE MKT Company Guide require Stockholder approval for the issuance of the Paramount Shares pursuant to the Arrangement. See Why am I being asked to vote on the Arrangement? above.
Calculation of Stockholder Vote Trigger
The following is a summary of the currently outstanding Paramount Shares and the number of Paramount Arrangement Shares expected to be issued
in connection with the Arrangement, as well as the percentage of currently issued and outstanding Paramount Shares.
|
|
|
Paramount Shares Authorized
|
|
50,000,000
|
Paramount Shares Outstanding
|
|
8,518,791
|
Paramount Shares Expected to be Issued in the
Arrangement (Proposal 1)
|
|
Up to 7,400,000
|
Percentage of Paramount Shares Outstanding
1
|
|
Approximately 46% of outstanding
Paramount Shares, respectively
|
Percentage Ownership of current Paramount
1
Stockholders following Arrangement
|
|
Approximately 54% of 15,690,000
outstanding Paramount Shares
|
1
|
Assumes no exercise of outstanding Calico options.
|
The Arrangement
Calico and Paramount
have agreed, subject to the satisfaction of certain conditions, to the acquisition by Paramount of all of the outstanding Calico Shares. The acquisition will be effected by way of a court-approved Plan of Arrangement under the BCBCA pursuant to
which Calico Shareholders will receive Paramount Shares in exchange for their Calico Shares.
A copy of the Plan of Arrangement is
attached as
Appendix B
and forms an integral part of this Proxy Statement. Paramount Stockholders are encouraged to read the Arrangement Agreement as it is the principal agreement that governs the Arrangement. The Arrangement Agreement may be
found in Paramounts Current Report on Form 8-K as filed with the SEC on March 17, 2016 available at
www.sec.gov
. For a
summary of the principal provisions of the Arrangement Agreement, see
The Arrangement - The Arrangement Agreement
.
About
Calico
Calico is a reporting issuer in British Columbia and Alberta and its common shares are listed on the TSXV under the symbol
CKB. Detailed information about Calico is contained in
Appendix D
-
Information Concerning Calico
.
Paramount
after the Arrangement
On completion of the Arrangement, Paramount will own, directly or indirectly, all of the outstanding Calico
Shares and it is expected that the business and operations of Calico will be managed and operated as a subsidiary of Paramount. Calico Shareholders will become stockholders of Paramount and will hold approximately 46%, or 43% on a fully-diluted
basis, of the issued and outstanding Paramount Shares after the Arrangement.
16
Following the Arrangement, Glen Van Treek will continue as the chief executive officer of
Paramount and Carlo Buffone will continue as the chief financial officer of Paramount. Following the Arrangement, the Paramount Board will remain unchanged.
Background to the Arrangement
The
provisions of the Arrangement Agreement are the result of arms length negotiations between representatives of Calico and Paramount and their respective financial and legal advisors. See
The Arrangement - Background to the
Arrangement
for a description of the background to the Arrangement.
Reasons for the Arrangement
The following is a summary of the principal reasons for the unanimous recommendation of the Paramount Board that Paramount Stockholders vote
FOR
the issuance of the Paramount Arrangement Shares in connection with the Arrangement:
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●
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Paramounts Financial Advisor has provided an opinion that, as at March 11, 2016 subject to the
assumptions, limitations and qualifications set out therein, the Arrangement Consideration is fair, from a financial point of view, to Paramount and the Paramount Stockholders.
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●
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Paramount has experienced technical and operational leadership able to take Calicos Grassy Mountain gold
project forward to production, as well as the financial resources needed to complete the permitting process and a feasibility study in connection with the project.
|
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●
|
the combined company will have a stronger asset base than Calico or Paramount separately, offering
shareholders a better opportunity for capital appreciation while also reducing administrative costs.
|
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●
|
Paramount Stockholders will continue to maintain an approximately 54% interest in the combined company
following completion of the Arrangement.
|
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●
|
the arrangement is expected to be accretive for Paramount Stockholders on a net asset value basis.
|
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●
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Calicos Grassy Mountain project is an advanced stage exploration project with a completed preliminary
economic assessment with an identifiable path to completing the mining permitting process.
|
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|
Calicos extensive Grassy Mountain land package offers considerable upside potential through exploration,
including continuation of known mineral structures.
|
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|
the Grassy Mountain deposit contains significantly higher grade gold mineralization than the Sleeper Project.
|
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the Arrangement is expected to double Paramounts mineralized gold material.
|
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●
|
the fact that the Arrangement Agreement provides for a fixed exchange ratio, which will not fluctuate as a
result of possible changes in the market prices of Paramount Shares or Calico Shares following the announcement of the Arrangement, providing reasonable certainty as to the respective
pro forma
percentage ownership of Paramount Stockholders
and Calico Shareholders.
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●
|
the all-stock transaction preserves Paramounts liquidity in a low price environment.
|
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●
|
the anticipated stakeholder and market reaction to the Arrangement.
|
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●
|
the anticipated market capitalization, cost profile, net asset value and capital structure of Paramount
following the Arrangement.
|
17
Fairness Opinion
In connection with the Arrangement, the Paramount Special Committee received a written opinion dated March 11, 2016 from the Financial
Advisor which states that, as of such date, and subject to the assumptions, limitations and qualifications set out therein, the Arrangement is fair, from a financial point of view, to the Paramount Stockholders. The Paramount Board is entitled to
rely on the Fairness Opinion. The full text of the Fairness Opinion, which sets forth certain assumptions made, matters considered and limitations on the review undertaken in connection with such opinion, is attached as
Appendix C
to this
Proxy Statement. Paramount Stockholders are urged to, and should, read the Fairness Opinion in its entirety. See
The Arrangement - Fairness Opinion
.
Subject to the terms of its engagement, the Financial Advisor has consented to the inclusion in this Proxy Statement of its Fairness Opinion
in its entirety, together with the summary herein and other information relating to the Financial Advisor and its Fairness Opinion. The Fairness Opinion addresses only the fairness of the Arrangement from a financial point of view and does not and
should not be construed as a valuation of Calico or Paramount or their respective assets, liabilities or securities or as recommendations to any Paramount Stockholders as to how to vote at the Meeting.
Court Approval
The Arrangement
requires Court approval under the BCBCA. Calico has obtained the Interim Order providing for the calling and holding of its meeting of Calico Shareholders, the Dissent Rights and certain other procedural matters. If the Calico Shareholders approve
the Arrangement as provided for in the Interim Order, Calico intends to make an application to the Court for the Final Order at 9:45 a.m. (Vancouver time), or as soon thereafter as counsel may be heard, on July 5, 2016 at the Courthouse, 800 Smithe
Street, Vancouver, British Columbia, or at any other date and time as the Court may direct. The Final Order is required for the Arrangement to become effective. In deciding whether to grant the Final Order, the Court will consider, among other
things, the fairness of the Arrangement to Calico Shareholders. The Court may approve the Arrangement either as proposed or as amended in any manner the Court may direct, and subject to compliance with such terms and conditions, if any, as the Court
sees fit. See
The Arrangement - Court Approval of the Arrangement
.
Non-Solicitation and Superior Proposals
Pursuant to the Arrangement Agreement, Calico has agreed not to solicit, initiate or encourage any Acquisition Proposals. However, the Calico
Board has the right to consider and accept a Superior Proposal under certain conditions. If Calico accepts a Superior Proposal and terminates the Arrangement Agreement, Calico must pay the Calico Termination Payment. A Superior Proposal must be
considered and accepted before the Meeting.
See
The Arrangement - The Arrangement Agreement - Non-Solicitation Covenants and
Rights to Accept a Superior Proposal
and
The Arrangement - The Arrangement Agreement
.
Calico Support Agreements
Pursuant to the Calico Support Agreements, each of the Supporting Calico Shareholders covenants with Paramount that the Supporting Calico
Shareholder will (among other things):
(a)
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not (A) sell, transfer, assign, grant a security interest in or otherwise dispose of any right or
interest in any of the securities of Calico held by such Supporting Calico Shareholder, or (B) other than as set out in the Calico Support Agreements, grant any proxies or powers attorney or in any way transfer the voting rights attaching to
such securities, call any meetings of Calico Shareholders (in each case as applicable) or give consents or approval of any kind with respect to any such securities; and
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(b)
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vote (or cause to be voted) all of the voting securities of Calico held by such Supporting Calico Shareholder
at any meeting of the security holders of Calico, including the Calico Meeting: (A) in favor of the Share Exchange (as such term is defined in the Calico Support Agreements), the adoption
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18
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of the Arrangement Agreement and any other matters necessary for the consummation of the Share Exchange and the other transaction contemplated by the Arrangement Agreement; and (B) against
(i) any Acquisition Proposal, (ii) any proposal for any recapitalization, reorganization, liquidation, dissolution, amalgamation, merger, sale of assets or other business combination between Calico and any other Person (other than the
Share Exchange), (iii) any other action that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the Share Exchange or any of the transactions contemplated by the Arrangement Agreement or the Calico
Support Agreements or any action or transaction that would result in a breach of any covenant, representation or warranty or other obligation or agreement of the Company or any of its Subsidiaries contained in the Arrangement Agreement, or of the
Supporting Calico Shareholder contained in the Calico Support Agreements, (iv) any change in the present capitalization or dividend policy of Calico or any amendment or other change to the Calicos certificate of incorporation or bylaws,
except if approved by Paramount and (v) any other change in the Calicos corporate structure or business.
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Calico Shareholders representing approximately 37.8% of the issued and outstanding Calico Shares (including FCMI Parent Co. (approximately
19.6%), Seabridge Gold Inc. (approximately 13.5%) and the directors and officers of Calico (approximately 4.7%)) have entered into Calico Support Agreements.
Termination of the Arrangement Agreement
The Arrangement Agreement may be terminated before the Effective Time in certain circumstances. Such termination may, in certain
circumstances, result in the payment by Calico to Paramount of the Calico Termination Fee, or payment by Paramount to Calico of the Paramount Termination Fee. See
The Arrangement - The Arrangement Agreement - Termination
and
The Arrangement - The Arrangement Agreement - Termination Fee
.
Risk Factors
Paramount Stockholders should carefully consider the risk factors relating to the Arrangement. Some of these risks include, but are not
limited to: the Arrangement Agreement may be terminated in certain circumstances, including the occurrence of a Material Adverse Change relating to Calico or Paramount; there can be no certainty that all conditions precedent to the Arrangement will
be satisfied and the market price for Paramount Shares may decline if the Arrangement is not completed; Paramount will incur costs even if the Arrangement is not completed, and may also be required to pay the Paramount Termination Fee to Calico; the
issue of Paramount Arrangement Shares under the Arrangement and their subsequent sale may cause the market price of Paramount Common Stock to decline. For more information see
The Arrangement - Risks Factors Relating to the
Arrangement
.
Summary Table
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Description of Purchase
:
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Paramount, a Nevada corporation, has agreed to acquire all of the outstanding securities of Calico, a British Columbia corporation. Paramount
will issue the Paramount Arrangement Shares to Calico Shareholders in exchange for all of the issued and outstanding Calico Shares.
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Principal Business of Target
:
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Calico is a junior gold exploration company with resources and advanced stage exploration assets located exclusively in Oregon. Please see
Schedule D
for additional information regarding Calico.
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Arrangement Consideration
:
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Up to 7,400,000 Paramount Shares, which represents 0.07 of one Paramount Share for each Calico Share
outstanding.
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Conditions
:
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The obligations of Calico and Paramount to consummate the Arrangement are subject to the satisfaction of certain mutual conditions relating to,
among other things:
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(a)
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approval of the Arrangement by Calico Shareholders;
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(b)
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the receipt of the Interim Order and the Final Order;
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(c)
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approval of the issuance of the Arrangement Consideration by Paramount Stockholders;
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(d)
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the absence of any law, order or decree or proceeding restraining or enjoining or that would, if successful, restrain or enjoin the
consummation of the transactions contemplated by the Arrangement Agreement;
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(e)
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Calico having received any required approval of the TSXV;
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(f)
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the authorization for listing of the Paramount Arrangement Shares issuable under the terms of the Plan of Arrangement on the NYSE
MKT;
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(g)
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the receipt of all other required material consents, waivers, permits, order and approvals;
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(h)
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the issuance of the Paramount Arrangement Shares
to be issued to the Calico Shareholders being exempt from the registration requirements of the Securities Act, and the registration and prospectus requirements of applicable Canadian securities legislation;
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(i)
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there shall not have been an amendment to Section 3(a)10 of the Securities Act which results in the Section 3(a)(10) exemption being not
available; and
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(j)
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The Arrangement Agreement shall not have been terminated.
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The obligations of Paramount to consummate the Arrangement are subject to the satisfaction of certain additional conditions relating to, among
other things: the performance of all of Calicos covenants; the accuracy of each of Calicos representations and warranties; the absence of any Calico Material Adverse Change; the provision by Calico to Paramount, on or before the
Effective Date, of written resignations from all director and officers of Calico; and no more than 5% of the Outstanding Calico Shares have validly exercised Dissent Rights.
The obligations of Calico to consummate the Arrangement are
subject to the satisfaction of certain additional conditions relating to, among other things: the performance of all of Paramounts covenants; the accuracy of each of Paramounts representations and warranties; the absence of any Paramount
Material Adverse Change; and Paramount shall have provided the Interim Financing, on terms and in form and substance reasonably satisfactory to Calico.
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Amendment:
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The Arrangement
Agreement and the Arrangement may, at any time and from time to time before the Effective Date, be amended by written agreement of Paramount and Calico without, subject to applicable law, further notice to or authorization on the part of their
respective shareholders.
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Termination of Arrangement Agreement
:
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The Arrangement
Agreement may be terminated at any time before the Effective Time, whether before or after the holding of the Meeting:
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(a)
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by the mutual written agreement of Calico and Paramount;
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(b)
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by either Paramount or Calico if:
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i.
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the Effective Time does not occur on or before July 31, 2016, provided that a Party may not terminate the Arrangement Agreement if the
failure of the Effective Time to so occur has been caused by, or is a result of, a breach by such Party of any of its representations and warranties or the failure of such Party to perform any of its obligations under the Arrangement
Agreement;
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ii.
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the transactions contemplated under the Arrangement are illegal or otherwise prohibited with respect to any law enacted or made after
March 14, 2016 or are contrary to any injunction order, decree or ruling of a governmental entity that is final and non-appealable;
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iii.
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it has been notified in writing by Calico of a Calico Proposed Agreement and either: (A) Paramount does not deliver an amended Arrangement
proposal within five Business Days of delivery of the Calico Proposed Agreement to Paramount; or (B) Paramount delivers an amended Arrangement proposal but the Calico Board determines, acting in good faith that the Acquisition Proposal provided in
the Calico Proposed Agreement constitutes a Superior Proposal in comparison to the amended Arrangement terms offered by Paramount;
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iv.
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the Paramount Stockholders fail to approve the issuance of the Paramount Arrangement Shares at the Paramount Meeting;
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(c)
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by Paramount if:
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i.
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the Calico Board fails to unanimously recommend or has withdrawn, amended, modified or qualified in a manner adverse to Paramount its unanimous
recommendation of the Arrangement or fails to publicly reaffirm its unanimous recommendation of the Arrangement within three calendar days after having been requested to do so by Paramount, has approved or recommended an Acquisition Proposal or has
otherwise breached
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ii.
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a breach of any representation or warranty or failure to
perform any covenant or agreement on the part of Calico contained in the Arrangement Agreement shall have occurred that would cause certain conditions in the Arrangement Agreement not to be satisfied, and such conditions are incapable of being
satisfied by July 31, 2016; or
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iii.
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it has been notified in writing by Calico of a Calico Proposed
Agreement (as such term is defined in the Arrangement Agreement) and either: (A) Paramount does not deliver an amended Arrangement proposal within five Business Days of delivery of the Calico Proposed Agreement to Paramount; or (B) Paramount
delivers an amended Arrangement proposal but the Calico Board determines, acting in good faith that the Acquisition Proposal provided in the Calico Proposed Agreement constitutes a Superior Proposal in comparison to the amended Arrangement terms
offered by Paramount;
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(d)
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by Calico if:
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i.
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the Paramount Board fails to unanimously recommend or has
withdrawn, amended, modified or qualified, in a manner adverse to Calico, its unanimous recommendation of the Arrangement or fails to publicly reaffirm its unanimous recommendation of the Arrangement, within three calendar days after having been
requested to do so by Calico;
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ii.
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a breach of any representation or warranty or failure to
perform any covenant or agreement on the part of Paramount contained in the Arrangement Agreement shall have occurred that would cause certain conditions in the Arrangement Agreement not to be satisfied, and such conditions are incapable of being
satisfied by July 31, 2016; or
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iii.
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it wishes to enter into a binding written agreement with
respect to a Superior Proposal and has paid the Calico Termination Fee.
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Break Fees and Reimbursement of Expenses:
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Each of the
Parties is entitled to a termination fee of US$300,000 under certain circumstances. Paramount is entitled to a termination fee in certain circumstances, including: (a) the termination of the Arrangement Agreement by Paramount in connection with a
Calico Change in Recommendation (as defined in the Arrangement Agreement) in the absence of a Paramount Material Adverse Effect; (b) the termination of the Arrangement Agreement by Calico in the event Calico wishes to enter into a binding written
agreement with respect to a Superior Proposal; or (c) the termination of the Arrangement Agreement by either Party in connection with the failure to obtain the required Calico Shareholder approval or failure to close by the Effective Time, but only
if a bona fide Acquisition Proposal for Calico was made or publicly announced by any Person other than Paramount, and within twelve (12) months following the date of such termination, Calico enters into a definitive agreement in respect of one or
more Acquisition Proposals or there shall have been consummated one or more Acquisition Proposals for Calico.
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Calico is entitled to a termination fee in the event of the termination of the Arrangement Agreement by Calico in connection with a Paramount
Change in Recommendation (as defined in the Arrangement Agreement) other than as a result of the occurrence of a Calico Material Adverse Effect.
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Appraisal Rights:
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Under Nevada
law, there are no appraisal rights for Paramount Stockholders in connection with the approval of the issuance of the Paramount Arrangement Shares.
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Required Vote:
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The issuance
of the Paramount Arrangement Shares will be approved if the majority of Paramount Shares present, whether in person or by proxy, at the Meeting vote
FOR
the approval of the issuance of the Paramount Arrangement Shares. A properly executed
proxy card marked
ABSTAIN
with respect to this proposal will have the same effect as voting
AGAINST
this proposal.
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THE ARRANGEMENT
At the Meeting, Paramount Stockholders will be asked to consider and approve the issuance of the Paramount Arrangement Shares in connection
with the Arrangement. The Arrangement, the Plan of Arrangement and the terms of the Arrangement Agreement are summarized below. This summary does not purport to be complete and is qualified in its entirety by reference to the Plan of Arrangement,
which is attached as
Appendix B
to this Proxy Statement.
Principal Steps of the Arrangement
Following is a brief description of the principal steps of the Arrangement set out in the order they will occur:
Dissenting Shares
Each Calico
Share held by a registered Calico Shareholder who has validly exercised his, her or its Dissent Rights in strict compliance with the requirements of the Plan of Arrangement and the Interim Order (a
Dissenting Shareholder
)
will be transferred to Paramount and acquired by Paramount free and clear of any claims, liens or encumbrances, and each such Dissenting Shareholder will have the right to be paid the fair value in cash of his, her or its Calico Shares.
Exchange of Calico Shares for Paramount Shares
Each issued and outstanding Calico Shares (other than any Calico Shares held by a Dissenting Shareholder and other than the Calico Shares
already held by Paramount) will be, and will be deemed to be, transferred by the holder thereof to Paramount and acquired by Paramount free and clear of any claims, liens or encumbrances in exchange for 0.07 of a Paramount Share.
Cancellation of Calico Options and Warrants
All Calico options and Calico warrants will be terminated and cancelled with no consideration payable therefor; and each holder of Calico
options and Calico warrants will cease to have any rights as a holder of Calico options or Calico warrants.
23
BACKGROUND TO THE ARRANGEMENT
On April 17, 2015, Paramount was spun out of its then parent company, Paramount Gold & Silver Corp., and became a listed company
on the NYSE MKT. The Paramount Board, together with its management team and advisors, has from time to time reviewed and considered various strategic opportunities available to Paramount. This has included evaluation of potential acquisitions of
other companies or their assets. Prior to the spin out, Paramount had engaged Cantor Fitzgerald & Co. (
Cantor
) as its financial advisor. The engagement letter with Cantor was terminated on May 27, 2015.
On June 5, 2015, Glen Van Treek, Chief Executive Officer of Paramount and Carlo Buffone, Chief Financial Officer of Paramount contacted
by telephone Rudi Fronk, Chairman of Calico, regarding a potential strategic transaction between Paramount and Calico.
On June 26,
2015, Paramount and Calico entered into a confidentiality agreement and Calico began to share non-public information with Paramount.
On
August 17 and 18, 2015, Mr. Van Treek, Ms. Nancy Wolverson, Geologist and Paramount US Project Manager, and Mr. Richard DeLong, Paramounts Environmental Consultant from Enviroscientist Inc. visited the Grassy Mountain
project and Calico office in Vale, Oregon as part of the Companys evaluation.
On August 20, 2015, Paramount retained Mine
Development Associates from Reno Nevada to evaluate the Grassy Mountain resource and mine plans.
On September 22, 2015, Mr. Van
Treek, Mr. Buffone, Christos Theodossiou, Director of Corporate Communications of Paramount, and David Smith, Chairman of the Paramount Board, met Mr. Fronk and Jay Layman, a director of Calico, for dinner in Denver to discuss ongoing due
diligence progress.
On October 5, 2015, the Paramount Board met at Paramounts corporate office in Winnemucca, Nevada.
Management presented its evaluation of the Grassy Mountain project and Calicos financial status. Management also updated the Paramount Board on other potential projects for acquisition. During the meeting, the Paramount Board formed the
Paramount Special Committee to consider and evaluate a possible transaction with Calico. The Paramount Special Committee was comprised of David Smith and John Carden. Mr. Smith was appointed chair of the Paramount Special Committee.
On October 14, 2015, Carlo Buffone met Paul Parisotto, CEO of Calico, in Toronto to discuss a possible transaction between Paramount and
Calico.
From November 11, 2015 to January 19, 2016, members of the Paramount Special Committee interviewed and considered
several law firms and financial advisors to advise the committee. On December 8, 2015, the Paramount Special Committee retained Brownstein Hyatt Farber Schreck, LLP as its legal advisor and on January 28, 2016, the Paramount Special
Committee retained ROTH Capital Partners, LLC as its Financial Advisor.
On December 7, 2015, Mr. Van Treek and Mr. Buffone
met with Mr. Parisotto in Toronto to further discuss a potential transaction between the two companies.
On December 11,
2015, Paramount and Cantor entered into a new engagement letter for Cantor to act as Paramounts financial advisor in connection with a potential transaction with Calico. Between December 11, 2015 and the execution of the transaction documents
Cantor provided presentations to Paramount management and when requested to Paramounts Special Committee.
On December 17,
2015, Paramount requested that LeClairRyan, Paramounts corporate counsel, prepare a letter of intent for the acquisition of Calico. The letter of intent provided for the acquisition of the outstanding capital stock of Calico pursuant to a plan
of arrangement. The letter of intent also contemplated $500,000 of interim debt financing to be provided by Paramount to Calico. A draft letter of intent was provided to Calico by Paramount on December 23, 2015.
On January 5, 2016, Calico responded to the proposed letter of intent objecting to the proposed exchange ratio and other provisions.
24
From time to time during the course of the discussions and negotiations between Paramount and
Calico, the Paramount Special Committee met to receive updates and reports from Paramount management and financial presentations from Cantor, and to ask questions and provide initial feedback regarding the discussions and negotiations.
On January 8, 2016, the Paramount Board met and received a report from the Paramount Special Committee regarding the status of the
discussions with Calico.
On January 11, 2016, Mr. Van Treek and Mr. Buffone met with Mr. Fronk in Toronto to discuss
the letter of intent and the potential transaction.
On January 15, 2016, Paramount provided a revised letter of intent to Calico
providing for an exchange ratio of 0.06273 of a Paramount Share for each Calico Share.
On January 25, 2016, Calico advised Paramount
that it had formed a special committee of its board of directors (the Calico Special Committee) to consider Paramounts proposal. The Calico Special Committee presented to Paramount a revised letter of intent reflecting an exchange
ratio of 0.075 of a Paramount share for each Calico Share.
On February 3, 2016 and February 4, 2016, representatives of
Paramount and Calico discussed in detail the terms of the letter of intent. On February 4, 2016, the letter of intent providing for a 0.070 exchange ratio was entered into by Calico and Paramount.
On February 16, 2016, LeClairRyan provided a draft of the definitive transaction agreement to Paramount. Paramount provided that draft to
Calico. From February 16, 2016 until March 14, 2016, Paramount, Calico and their respective advisors engaged in the exchange of non-public information and negotiated the terms of that agreement.
On February 23, 2016, Bennett Jones, counsel to the Calico Special Committee, provided a revised draft of the Arrangement Agreement.
Following a telephone conference between LeClairRyan and Bennett Jones, on February 26, 2016, Bennett Jones provided a revised draft of the Arrangement Agreement on February 29, 2016.
On March 1, 2016, Gowling WLG (Canada) LLP, Paramounts Canadian counsel, provided to Bennett Jones drafts of the documents for the
Interim Financing.
Having received and reviewed drafts of the primary proposed definitive transaction documents, the Paramount Special
Committee met on March 4, 2016, to get another update from management on the status of the transaction. LeClairRyan provided a summary of the proposed definitive transaction documents.
On March 7, 2016, the Paramount Special Committee met to get further updates from management.
On March 11, 2016, the Paramount Special Committee held a meeting. The Special Committee received an update from LeClairRyan and the
Financial Advisor regarding the status of discussions with Calico. Representatives of Brownstein Hyatt Farber Schreck reiterated its advice to the Paramount Special Committee as to its fiduciary duties (previously provided in a written memorandum
and related discussions). Also at this meeting, representatives of the Financial Advisor reviewed with the Paramount Special Committee its financial analysis of the Arrangement Consideration and rendered an oral opinion, confirmed by delivery of a
written opinion dated March 11, 2016, as more fully described below under the caption Summary of Financial Analysis and Opinion of Financial Advisor to Paramount Special Committee, to the effect that, as of that date and based
on and subject to assumptions made, matters considered and limits of its review by the Financial Advisor as set forth therein, the Arrangement Consideration is fair from a financial point of view to such holders of Paramount Shares. The written
opinion of the Financial Advisor provided that the Paramount Board would be able to rely on such opinion. The Special Committee unanimously resolved to recommend that the Paramount Board approve the transactions contemplated by the Arrangement
Agreement and the other transaction documents.
Later on March 11, 2016, the Paramount Board held a meeting. At this meeting, the
Paramount Board received an update from Paramounts management, LeClairRyan and the Financial Advisor regarding the status of
25
discussions with Calico. Also at this meeting, representatives of the Financial Advisor reviewed with the Paramount Board the Financial Advisors financial analyses of the proposed
transaction. LeClairRyan provided legal advice regarding the duties of the board in its consideration of the proposed transaction and a summary of the proposed final terms of the Arrangement Agreement, Calico Support Agreements and the other
transaction documents. After discussion, the Paramount Board, having determined that the terms of the transaction documents and the transactions contemplated thereby were advisable and in the best interests of Paramount and its shareholders,
unanimously approved and declared advisable the transaction documents and the transactions contemplated thereby, including the Arrangement Agreement.
Following the meeting, after further refinements of the definitive documentation, Paramount and Calico executed and delivered the transaction
documents on the morning of March 14, 2016. Paramount issued a press release announcing the execution of the transaction documents on the morning of March 14, 2016 before the opening of trading on the NYSE MKT.
Calico Support Agreements
Pursuant to
the Calico Support Agreements, each of the Supporting Calico Shareholders covenants with Paramount that the Supporting Calico Shareholder will (among other things):
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(a)
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not (A) sell, transfer, assign, grant a security interest in or otherwise dispose of any right or
interest in any of the securities of Calico held by such Supporting Calico Shareholder, or (B) other than as set out in the Support Agreements, grant any proxies or powers of attorney or in any way transfer the voting rights attaching to such
securities, call any meetings of Paramount Stockholders or Calico Shareholders (in each case as applicable) or give consents or approval of any kind with respect to any such securities; and
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(b)
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vote (or cause to be voted) all of the voting securities of Calico held by such Supporting Calico Shareholder
at any meeting of the security holders of Calico, including the Calico Meeting: (A) in favor of the Share Exchange (as such term is defined in the Calico Support Agreements), the adoption of the Arrangement Agreement and any other matters
necessary for the consummation of the Share Exchange and the other transaction contemplated by the Arrangement Agreement; and (B) against (i) any Acquisition Proposal, (ii) any proposal for any recapitalization, reorganization,
liquidation, dissolution, amalgamation, merger, sale of assets or other business combination between Calico and any other Person (other than the Share Exchange), (iii) any other action that would reasonably be expected to impede, interfere
with, delay, postpone or adversely affect the Share Exchange or any of the transactions contemplated by the Arrangement Agreement or the Calico Support Agreements or any action or transaction that would result in a breach of any covenant,
representation or warranty or other obligation or agreement of the Company or any of its Subsidiaries contained in the Arrangement Agreement, or of the Supporting Calico Shareholder contained in the Calico Support Agreements, (iv) any change in
the present capitalization or dividend policy of Calico or any amendment or other change to the Calicos certificate of incorporation or bylaws, except if approved by Paramount and (v) any other change in the Calicos corporate
structure or business.
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Court Approval of the Arrangement
An arrangement under the BCBCA requires approval of the Court.
Interim Order
On May 26,
2016, Calico obtained the Interim Order providing for the calling and holding of the meeting of Calico Shareholders, the dissent rights and certain other procedural matters.
26
Final Order
Subject to the terms of the Arrangement Agreement, and if the Calico Shareholders approve the Arrangement at the Calico Meeting in the manner
required by the Interim Order, Calico intends to make an application to the Court for the Final Order.
The application for the Final
Order approving the Arrangement is currently expected to be made on July 5, 2016 at 9:45 a.m. (Vancouver time), or as soon thereafter as counsel may be heard, at the Courthouse, 800 Smithe Street, Vancouver, British Columbia, or at any other date
and time as the Court may direct.
The Court has broad discretion under the BCBCA when making orders with respect to the Arrangement
and that the Court will consider, among other things, the fairness and reasonableness of the Arrangement, both from a substantive and a procedural point of view. The Court may approve the Arrangement, either as proposed or as amended, on the terms
presented or substantially on those terms. Depending upon the nature of any required amendments, Calico and Paramount may determine not to proceed with the Arrangement.
Regulatory Approvals
The Calico Shares
are listed and posted for trading on the TSXV and the Paramount Shares are listed and posted for trading on the NYSE MKT. Completion of the Arrangement is subject to the conditions, among others, that: (a) Calico has received any required
approval of the TSXV to the Arrangement; and (b) the Paramount Shares issuable pursuant to the Arrangement have been authorized for listing on the NYSE MKT. Calico has notified the TSXV of the Arrangement. Paramount has applied to list the
Paramount Shares issuable to Calico Shareholders under the Arrangement on the NYSE MKT. Listing will be subject to fulfilling all the requirements of the NYSE MKT.
Completion of the Arrangement
The
Arrangement will become effective on the Effective Date. The Effective Date is expected to be on or about July 6, 2016. However, it is possible that completion may be delayed beyond this date if the conditions to completion of the Arrangement cannot
be met on a timely basis, but in no event will completion of the Arrangement occur later than July 31, 2016, unless extended by mutual agreement between Calico and Paramount in accordance with the terms of the Arrangement Agreement.
Paramount after the Arrangement
On
completion of the Arrangement, Paramount will own, directly or indirectly, all of the outstanding Calico Shares and it is expected that the business and operations of Calico, will be managed and operated as a subsidiary of Paramount. Calico
Shareholders will become stockholders of Paramount and will hold approximately 46% of the issued and outstanding Paramount Shares after the Arrangement.
Following the Arrangement, Glen Van Treek will continue as the chief executive officer of Paramount and Carlo Buffone will continue as the
chief financial officer of Paramount. Following the Arrangement, the Paramount Board will continue to consist of the five (5) existing Paramount directors:
David Smith, Chairman
Glen Van Treek
John Carden, Ph.D
Christopher Reynolds
Eliseo Gonzalez-Urien
Interested Parties
Apart from the
members of management and the Paramount Board continuing to serve in such roles pursuant to their existing compensation arrangement with Paramount prior to the Arrangement and their current
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shareholdings and options in Paramount, no members of Paramounts management or Board have a material interest in the Arrangement.
Difference in Rights of Paramount Stockholders as a Result of the Arrangement
There will be no change in the rights of Paramount Stockholders as a result of the Arrangement.
Accounting Treatment of the Arrangement
The Arrangement will be accounted for using the purchase method of accounting with Paramount as the acquirer.
THE ARRANGEMENT AGREEMENT
The following is a summary description of certain material provisions of the Arrangement Agreement, is not comprehensive and is qualified in
its entirety by reference to the full text of the Arrangement Agreement, which was filed by Paramount with the SEC on Form 8-K on March 17, 2016. Capitalized terms used but not otherwise defined herein have the meanings set out in the
Arrangement Agreement and the Plan of Arrangement attached as
Appendix B
to this Proxy Statement.
The Arrangement
The Arrangement Agreement provides that Paramount will acquire all of the issued and outstanding Calico Shares by way of the Arrangement under
the BCBCA. For more information regarding the Arrangement, see
The Arrangement - Principal Steps of the Arrangement
.
Representations, Warranties and Covenants of Calico
The Arrangement Agreement contains customary representations and warranties for transactions of this nature on the part of Calico in respect
of matters pertaining to, among other things:
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(a)
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the ownership of its subsidiaries;
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(b)
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its incorporation and organization (and that of each of the Calico Material Subsidiaries);
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(c)
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its authority to enter into and to perform its obligations under the Arrangement Agreement;
|
|
(d)
|
its ability to execute and deliver the Arrangement Agreement and complete the transactions thereunder without
violating its formation documents, any agreement to which it is a party, or applicable Laws;
|
|
(f)
|
the absence of agreements that would impose restrictions upon the consummation of the Arrangement;
|
|
(g)
|
the absence of litigation, pending or threatened;
|
|
(h)
|
the due execution and delivery of the Arrangement Agreement;
|
|
(i)
|
its status as a reporting issuer and the absence of cease trade orders;
|
|
(j)
|
its audited annual financial statements;
|
28
|
(k)
|
its unaudited interim financial statements;
|
|
(l)
|
the correctness of its public reports and its compliance with all applicable disclosure obligations;
|
|
(m)
|
its compliance with the rules, regulations and policies of the TSXV:
|
|
(n)
|
the absence of defaults under applicable Law;
|
|
(o)
|
the absence of undisclosed liabilities;
|
|
(p)
|
its corporate records, minute books;
|
|
(q)
|
the ownership of its properties;
|
|
(r)
|
the filing of Tax returns and other Tax matters;
|
|
(s)
|
its compliance with licenses and permits;
|
|
(t)
|
its compliance with Environmental Laws and the absence of material adverse environmental conditions and other
environmental matters;
|
|
(u)
|
its compliance with technical report filing requirements of Canadian securities regulators;
|
|
(v)
|
the absence of restrictions on its business practices;
|
|
(w)
|
the approval of the Arrangement Consideration by the Calico Board, its receipt of a fairness opinion regarding
the Arrangement Consideration, and its unanimous recommendation to Calico Shareholders of the Arrangement Resolution;
|
|
(x)
|
the absence of certain adverse changes since June 30, 2015;
|
|
(y)
|
the maintenance of its books, records and accounts;
|
|
(z)
|
the disclosure of material agreements and the absence of any breach thereof;
|
|
(aa)
|
its insurance policies;
|
|
(bb)
|
certain employment matters and benefit plans;
|
|
(cc)
|
its mineral resources and real properties;
|
|
(dd)
|
the absence of certain commissions or fees;
|
|
(ee)
|
the absence of actual or threatened bankruptcy, winding-up, or similar proceedings and the solvency of Calico;
|
|
(ff)
|
the absence of the shareholders rights plan;
|
|
(gg)
|
its intellectual property;
|
|
(hh)
|
the independence of its auditors;
|
|
(ii)
|
the absence of certain indebtedness and interests in its property;
|
29
|
(jj)
|
certain anticorruption matters; and
|
|
(kk)
|
its making of full disclosure to Paramount.
|
The Arrangement Agreement, includes, among other things, negative and affirmative covenants of Calico customary for transactions of this
nature, relating to among other things:
|
(a)
|
use of commercially reasonable efforts to apply for and obtain all consents, orders or approvals as necessary
for the implementation of the Arrangement including the Interim Order, Final Order and TSXV approval and certain other matters in connection therewith;
|
|
(b)
|
filing of the Calico Circular in all required jurisdictions;
|
|
(c)
|
notification to Paramount upon the occurrence of certain events;
|
|
(d)
|
convene the Calico Meeting and solicit proxies in favor of the Calico Arrangement Resolution and attend to
certain other matters in connection with same;
|
|
(e)
|
not incur expenses or liabilities or otherwise enter into transactions not in the ordinary course of business;
|
|
(f)
|
not issue or redeem any common shares of Calico or its subsidiaries;
|
|
(g)
|
not acquire any material asset; and
|
|
(h)
|
not enter into or modify any employment or similar agreement.
|
Representations, Warranties and Covenants of Paramount
|
(a)
|
The Arrangement Agreement contains customary representations and warranties for transactions of this nature on
the part of Paramount in respect of matters pertaining to, among other things:
|
|
(b)
|
the ownership of its subsidiaries;
|
|
(c)
|
its incorporation and organization (and that of each of the Paramount Material Subsidiaries);
|
|
(d)
|
its authority to enter into and perform its obligations under the Arrangement Agreement;
|
|
(e)
|
its ability to execute and deliver the Arrangement Agreement and complete the transactions thereunder without
violating its formation documents, any agreement to which it is a party, or applicable Laws;
|
|
(g)
|
the validity of the Paramount Shares to be issued pursuant to the Arrangement;
|
|
(h)
|
the absence of agreements that would impose restrictions upon the consummation of the Arrangement;
|
|
(i)
|
the absence of litigation, pending or threatened;
|
|
(j)
|
the due execution and delivery of the Arrangement Agreement;
|
30
|
(k)
|
its reporting requirements and the absence of cease trade orders;
|
|
(l)
|
its audited annual financial statements;
|
|
(m)
|
its unaudited interim financial statements;
|
|
(n)
|
the correctness of its public reports and its compliance with all applicable disclosure obligations;
|
|
(o)
|
its compliance with the rules, regulations and policies of the NYSE MKT;
|
|
(p)
|
the absence of defaults under applicable Law;
|
|
(q)
|
the absence of undisclosed liabilities;
|
|
(r)
|
its corporate records, minute books;
|
|
(s)
|
the ownership of its properties;
|
|
(t)
|
the filing of Tax returns and other Tax matters;
|
|
(u)
|
its compliance with licenses and permits;
|
|
(v)
|
its compliance with Environmental Laws and the absence of material adverse environmental conditions;
|
|
(w)
|
the absence of restrictions on its business practices;
|
|
(x)
|
the approval of the Arrangement and the Arrangement Consideration by the Paramount Board of its receipt of a
fairness opinion regarding same, and its unanimous recommendation to Paramount Stockholders to vote in favour of the Share Issuance Resolution;
|
|
(y)
|
the absence of certain adverse changes since June 30, 2015;
|
|
(z)
|
the disclosure material agreements and the absence of any breach thereof;
|
|
(aa)
|
its insurance policies;
|
|
(bb)
|
certain employment matters and benefit plans;
|
|
(cc)
|
its mineral resources and real properties;
|
|
(dd)
|
the absence of certain commissions or fees;
|
|
(ee)
|
the absence of actual or threatened bankruptcy, winding-up, or similar proceedings and the solvency of
Paramount;
|
|
(ff)
|
the absence of the shareholders rights plan;
|
|
(gg)
|
its intellectual property;
|
|
(hh)
|
the independence of its auditors;
|
|
(ii)
|
the absence of certain indebtedness and interests in its property;
|
31
|
(jj)
|
certain anti-corruption matters; and
|
|
(kk)
|
is making of full disclosure to Calico.
|
The Arrangement Agreement includes, among other things, negative and affirmative covenants of Paramount customary for transactions of this
nature, relating to among other things:
|
(a)
|
its efforts to obtain all required regulatory approvals, including the approval of the NYSE MKT;
|
|
(b)
|
the preparation of this Proxy Statement;
|
|
(c)
|
the convening of the Paramount Meeting and attend to certain matters regarding same;
|
|
(d)
|
notification being made to Calico upon the occurrence of certain events;
|
|
(e)
|
compliance with applicable Laws and the terms of the Interim Order and Final Order;
|
|
(f)
|
in addition to the Interim Financing, to provide additional financing in certain circumstances; and
|
|
(g)
|
other things necessary or desirable in order to consummate and make effective the transactions contemplated
under the Arrangement Agreement.
|
Conditions to the Arrangement
The obligations of Calico and Paramount to consummate the Arrangement are subject to the satisfaction of certain mutual conditions relating
to, among other things:
|
(a)
|
approval of the Calico Arrangement Resolution at the Calico Meeting;
|
|
(b)
|
the receipt of the Interim Order and the Final Order and necessary orders of the Court;
|
|
(c)
|
approval of the issuance of the Paramount Arrangement Shares at the Paramount Meeting;
|
|
(d)
|
the authorization for listing of the Paramount Arrangement Shares issuable under the terms of the Plan of
Arrangement on the NYSE MKT;
|
|
(e)
|
the TSXV shall have accepted notice for filing in respect of Calico;
|
|
(f)
|
the receipt of all other required material consents, waivers, permits, order and approvals;
|
|
(g)
|
no provision of any applicable Laws and no judgment, injunction, order or decree shall be in effect which
restrains or enjoins or otherwise prohibits the consummation of the Arrangement or the transactions contemplated by the Arrangement Agreement;
|
|
(h)
|
there shall not be pending or threatened any suit, action or proceeding by any Governmental Agency that would
prohibit or materially restrict the acquisition by Paramount of any Calico Shares or impose any material condition or restriction that would be materially burdensome to the operations of Paramount or Calico;
|
|
(i)
|
the issuance of the Paramount Arrangement Shares to be issued to the Calico Shareholders being exempt from the
registration requirements of the Securities Act and the registration and prospectus requirements of applicable Canadian securities legislation;
|
32
|
(j)
|
there shall not have been an amendment to Section 3(a)(10) of the Securities Act or a charge in the
SECs interpretation of such section that would result in the Section 3(a)(10) exemption being not available to exempt the issuance of the Paramount Arrangement Shares; and
|
|
(k)
|
the Arrangement Agreement not having been terminated in accordance with its terms.
|
The obligations of Paramount to consummate the Arrangement are subject to the satisfaction of certain additional conditions relating to, among
other things: the performance of all of Calicos covenants; the accuracy of each of Calicos representations and warranties; the absence of any Calico Material Adverse Change; the provision by Calico to Paramount, or before the Effective
Date, of written resignations from all directors and officers of Calico; the Seabridge Put (as defined in the Arrangement Agreement) being modified in form and substance satisfying to Paramount; and Calico Shareholders holding no more than 5% of the
outstanding Calico Shares shall have validly exercised their Dissent Rights.
The obligations of Calico to consummate the Arrangement are
subject to the satisfaction of certain additional conditions relating to, among other things: the performance of all of Paramounts covenants; the accuracy of each of Paramounts representations and warranties; the absence of a Paramount
Material Adverse Change; and Paramount having provided the Interim Financing on terms and in form and substance reasonably satisfying to Calico.
Non-Solicitation Covenants and Rights to Accept a Superior Proposal
From the date of the Arrangement Agreement until the earlier of the Effective Time or the time at which the Arrangement Agreement is
terminated in accordance with its terms, Calico has agreed to certain non-solicitation covenants which provide, among other things, that it (and its or any of the Calico Material Subsidiaries) shall not, directly or indirectly, through any officer,
director, employee, advisor, representative, agent or otherwise):
|
(a)
|
make, solicit, assist, initiate, encourage or otherwise facilitate any inquiries, proposals or offers from any
Person (including any of its officers or employees) relating to any Acquisition Proposal for Calico, or furnish to any other Person any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek to do any of the foregoing;
|
|
(b)
|
engage in any discussions or negotiations regarding, or provide any information in respect to, or otherwise
co-operate
in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other Person to make or complete any Acquisition Proposal; provided that Calico may communicate with any
Person making an Acquisition Proposal for the purpose of clarifying the terms and conditions of such Acquisition Proposal and the likelihood of its consummation so as to determine whether such Acquisition Proposal is likely to lead to a Superior
Proposal or advising such Person that the Acquisition Proposal could not reasonably be expected to result in a Superior Proposal;
|
|
(c)
|
withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in any manner adverse to
Paramount, the approval or recommendation of the Calico Board or any committee thereof of the Arrangement Agreement or the Arrangement;
|
|
(d)
|
approve, recommend or remain neutral with respect to, or propose publicly to approve, recommend or remain
neutral with respect to, any Acquisition Proposal involving Calico; or
|
|
(e)
|
accept or enter into, or publicly propose to accept or enter into, any letter of intent, agreement in
principle, agreement, arrangement or undertaking related to any Acquisition Proposal involving Calico (except as permitted under the Arrangement Agreement).
|
Notwithstanding the above, nothing will prevent the Calico Board before the Calico Meeting from considering, participating in any discussions
or negotiations, or entering into a confidentiality agreement and providing information in accordance with the terms of the Arrangement Agreement, regarding an unsolicited
bona fide
written Acquisition Proposal that did not otherwise result
from a breach of the Arrangement Agreement and that
33
the Calico Board determines in good faith, is reasonably likely to constitute or lead to a Superior Proposal. Calico cannot consider, negotiate, accept or recommend an Acquisition Proposal after
the date of the Calico Meeting.
Calico must promptly notify Paramount of any unsolicited
bona fide
Acquisition Proposal or any
proposal, inquiry or offer that could lead to an Acquisition Proposal. Such notice must include a description of the material terms and conditions of any Acquisition Proposal, the identity of the Person making such proposal, inquiry or contact, a
copy of any written form of Acquisition Proposal and any other documents representing the Acquisition Proposal. In addition, Calico must keep Paramount fully informed with respect to the status of any Acquisition Proposal or inquiry, and provide to
Paramount copies of all correspondence and other written material sent or provided to or by Calico in connection with any Acquisition Proposal. If Calico provides confidential non-public information to a third party who has made an unsolicited
bona fide
written Acquisition Proposal, it must obtain a confidentiality agreement from the third party that is substantially similar to the Confidentiality Agreement. Calico must also send a copy of any such confidentiality agreement to
Paramount and concurrently provide Paramount with a list or copies of the information provided to the third party and access to similar information if not already provided.
Provided Calico has complied with the foregoing, Calico may, before the Calico Meeting, accept, approve, recommend or enter into any
agreement, understanding or arrangement in respect of a Superior Proposal if the following conditions are met:
|
(a)
|
Calico has provided Paramount with
|
|
i.
|
a copy of the Superior Proposal document and any other documents representing the Superior Proposal;
|
|
ii.
|
written notice from Calico that there is a Superior Proposal; and
|
|
iii.
|
written notice from the Calico Board regarding the value in financial terms that the Calico Board has in
consultation with its financial advisors determined should be ascribed to any non-cash consideration offered under the Superior Proposal;
|
|
(b)
|
five Business Days have elapsed since the date Paramount received the notice and documentation set out in
paragraph (a) above (the
Match Period
); and
|
|
(c)
|
Calico has previously or concurrently paid to Paramount the Calico Termination Fee payable under the
Arrangement Agreement, and terminated the Arrangement Agreement in accordance with its terms.
|
Right to Match
During the Match Period, Paramount has the right to propose to amend the terms of the Arrangement Agreement, and Calico must cooperate with
Paramount with respect thereto, including negotiating in good faith with Paramount to enable Paramount to make such adjustments to the terms and conditions of the Arrangement Agreement and the Arrangement as Calico deems appropriate and as would
enable Calico to proceed with the Arrangement and any related transactions on such adjusted terms. The Calico Board must review any proposal by Paramount to amend the terms of the Arrangement in order to determine, in good faith, whether
Paramounts proposal to amend the Arrangement would result in an Acquisition Proposal ceasing to be a Superior Proposal compared to the proposed amendment to the terms of the Arrangement. If the Calico Board so determines, it must enter into an
amended agreement with Paramount reflecting the amended proposal. If the Calico Board continues to believe, in good faith and after consultations with its financial advisors and outside legal counsel, that such Acquisition Proposal remains a
Superior Proposal and therefore rejects the amended proposal, such party may terminate the Arrangement Agreement, provided that it concurrently pays to Paramount the Calico Termination Fee, if any, payable under the terms of the Arrangement
Agreement and before or concurrently with such termination such party enters into a binding agreement, understanding or arrangement with respect to the Acquisition Proposal.
34
If, prior to the expiry of the Match Period, Paramount requests in writing that the Calico
Meeting proceed in compliance with this Agreement then, notwithstanding any other provision of the Arrangement Agreement, Calico will not be permitted to terminate the Arrangement Agreement, but instead shall be permitted to enter into an agreement
in respect of such Acquisition Proposal on the basis that it constitutes a Superior Proposal provided that such agreement (i) automatically terminates and is of no further force and effect, without any action on the part of the parties thereto,
if the Calico Shareholder approval is obtained at the Calico Meeting, (ii) does not prevent the Calico Meeting from proceeding in accordance with the Arrangement Agreement; and (iii) does not impose any termination, expense reimbursement
or other fees or payments or other similar obligations on Calico.
The Calico Board must promptly reaffirm its recommendation of the
Arrangement by press release after (i) any Acquisition Proposal which the Calico Board determines not to be a Superior Proposal is publicly announced or made, or (ii) the Calico Board determines that a proposed amendment to the terms of
the Arrangement would result in the Acquisition Proposal not being a Superior Proposal.
Termination
The Arrangement Agreement may be terminated at any time before the Effective Time, whether before or after the holding of the Meeting:
(a)
|
by mutual written agreement of Calico and Paramount;
|
(b)
|
by either Paramount or Calico if:
|
|
i.
|
the Effective Time does not occur on or before the July 31, 2016, provided that a Party may not terminate
the Arrangement Agreement if the failure of the Effective Time to so occur has been caused by, or is a result of, a breach by such Party of any of its representations or warranties or the failure of such Party to perform any of its covenants or
agreements under the Arrangement Agreement;
|
|
ii.
|
the transactions contemplated under the Arrangement are illegal or otherwise prohibited with respect to any
Law or are contrary to any injunction order, decree or ruling of a Governmental Entity that is final and non-appealable;
|
|
iii.
|
the Calico Shareholders fail to approve the Arrangement at the Calico Meeting in accordance with the Interim
Order; and
|
|
iv.
|
Paramount Stockholders fail to approve the issuance of the Paramount Arrangement Shares.
|
|
i.
|
the Calico Board fails to unanimously recommend or has withdrawn, amended, modified or qualified, in a manner
adverse to Paramount, its unanimous recommendation of the Arrangement, or fails to publicly reaffirm its unanimous recommendation of the Arrangement, within three calendar days after having been requested in writing to do so by Paramount, has
approved or recommended an Acquisition Proposal or has otherwise breached the non-solicitation covenants under the Arrangement Agreement;
|
|
ii.
|
a breach of any representation or warranty or failure to perform any covenant or agreement on the part of
Calico contained in the Arrangement Agreement shall have occurred that would cause the conditions in Subsection 5.2(b) or 5.2(d) of the Arrangement Agreement not to be satisfied, and such conditions are incapable of being satisfied by the
July 31, 2016, as reasonably determined by Paramount and provided that Paramount is not then in breach of the Arrangement Agreement so as to cause any condition in Subsection 5.2(b) or Section 5.2(d) not to be satisfied; or
|
35
|
iii.
|
it has been notified in writing by Calico of a Calico Proposed Agreement in accordance with
Section 7.1(e) of the Arrangement Agreement and either: (A) Paramount does not deliver an amended Arrangement proposal within five Business Days of delivery of the Calico Proposed Agreement to Paramount; or (B) Paramount delivers an
amended Arrangement proposal but the Calico Board determines, acting in good faith and in the proper discharge of its fiduciary duties, that the Acquisition Proposal provided in the Calico Proposed Agreement constitutes a Superior Proposal in
comparison to the amended Arrangement terms offered by Paramount.
|
|
i.
|
the Paramount Board fails to unanimously recommend or has withdrawn, amended, modified or qualified, in a
manner adverse to Calico, its unanimous recommendation of the Arrangement or fails to publicly reaffirm its unanimous recommendation of the Arrangement, within three calendar days after having been requested to do so by Calico;
|
|
ii.
|
a breach of any representation or warranty or failure to perform any covenant of Paramount contained in the
Arrangement Agreement occurs that would cause the conditions in Subsection 5.3(c) or 5.3(e) of the Arrangement Agreement not to be satisfied, and such conditions are incapable of being satisfied by July 31, 2016, as reasonably determined by
Calico and provided that Calico is not then in breach of the Arrangement Agreement so as to cause any condition in Subsection 5.3(c) or Section 5.3(e) not to be satisfied; or
|
|
iii.
|
it wishes to enter into a binding written agreement with respect to a Superior Proposal and has paid to
Paramount the Calico Termination Fee.
|
Entitlement to Termination Fees and Reimbursement of Expenses
Pursuant to the Arrangement Agreement, each of the Parties is entitled to a termination fee of $300,000 under certain circumstances.
Paramount is entitled to the Calico Termination Fee in certain circumstances, including: (i) the termination of the Arrangement Agreement
by Paramount in connection with a Calico Change in Recommendation other than as a result of the occurrence of a Paramount Material Adverse Effect; (b) the termination of the Arrangement Agreement by Calico in the event Calico wishes to enter
into a binding written agreement with respect to a Superior Proposal; or (c) the termination of the Arrangement Agreement by either Party in connection with the failure to obtain the required Calico Shareholder approval or failure to close by
the Effective Time, but only if: (1) a
bona fide
Acquisition Proposal for Calico shall have been made or publically announced and (2) within twelve (12) months following the date of such termination, Calico (A) enters into
a definitive agreement in respect of an Acquisition Proposal or (B) consummates an Acquisition Proposal.
Calico is entitled to the
Paramount Termination Fee upon termination of the Arrangement Agreement by Calico in connection with a Paramount Change in Recommendation (as defined in the Arrangement Agreement) other than as a result of the occurrence of a Calico Material Adverse
Effect.
Except as provided in Section 6 of the Arrangement Agreement, all expenses incurred in connection with the Arrangement and
the transactions contemplated thereby must be paid by the Party incurring such expenses.
Amending the Terms of the Arrangement Agreement
The Arrangement Agreement and the Plan of Arrangement may, at any time and from time to time before the Effective Date, be
amended by written agreement of the Parties without, subject to applicable law, further notice to or authorization on the part of the Calico Shareholders or the Paramount Shareholders, as applicable.
36
CALICO AND PARAMOUNT INFORMATION
Calico
Calico is an exploration and
development stage company, incorporated on June 17, 1998 pursuant to the BCBCA, and is engaged principally in the acquisition, exploration and development of mineral property interests. The Companys main focus is the ongoing development
of its 100% owned Grassy Mountain Gold Project, located in Oregon, USA
For further details regarding Calicos business please see
Appendix D
Information regarding Calico which is incorporated herein by reference.
Contact Information
The principal executive office of Calico is located at 615-800 West Pender Street, Vancouver, British Columbia, Canada V6L ZV6. Calicos
telephone number is 604-681-6855.
Paramount Gold Nevada Corp.
Description of Business
Paramount is an emerging growth company engaged in the business of precious metals exploration primarily in Nevada, USA. Our business strategy
is to acquire and develop known precious metals deposits in mineralized geological environments in North America. This strategy helps reduce discovery risks as exploration programs can be designed using existing geological drilling data and
significantly increases the efficiency and effectiveness of exploration programs. By developing known deposits, we spend less time trying to discover new areas of mineralization. Our projects are located near successful operating mines. This greatly
reduces the related costs for infrastructure requirements at the exploration stage and eventually for mine construction and operation.
Paramounts principal Nevada interest, the Sleeper Gold Project, is located in Humboldt County, Nevada, and was a producing mine until
1996. Paramount has no proven reserves at its Sleeper Gold Project in Nevada. Our work on the Sleeper Gold Project is consistent with Paramounts strategy of expanding and upgrading known, large-scale precious metal occurrences in established
mining camps, defining their economic potential and then partnering them with nearby producers.
Description of Paramount Shares
Paramount is authorized to issue 50,000,000 Paramount Shares. As of March 14, 2016, there were 8,518,791 Paramount Shares issued and
outstanding. Each record holder of a Paramount Share is entitled to one vote for each Paramount Share held on all matters properly submitted to the Stockholders for their vote.
Holders of our common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote
generally, including the election or removal of directors. The holders of our common stock do not have cumulative voting rights in the election of directors.
Upon our liquidation, dissolution or winding-up and after payment in full of all amounts required to be paid to creditors, the holders of our
common stock will be entitled to receive pro rata our remaining assets available for distribution. Holders of our common stock do not have preemptive, subscription, redemption or conversion rights. The common stock will not be subject to further
calls or assessment by us. There will be no redemption or sinking fund provisions applicable to the common stock. All shares of our common stock that will be outstanding at the time of the completion of the offering will be fully paid and
non-assessable.
Paramount has not paid any cash dividend to date, and the Company has no intention of paying any cash dividends on
Paramount Shares in the foreseeable future. The declaration and payment of dividends is subject to the discretion of the Paramount Board and to certain limitations imposed under the Nevada state law. The
37
timing, amount and form of dividends, if any, will depend on, among other things, our results of operation, financial condition, cash requirements and other factors deemed relevant by the
Paramount Board.
Contact Information
Paramount currently maintains its administrative office at 665 Anderson Street, Winnemucca, Nevada. The telephone number of Paramounts
administrative office is 866-481-2233 (toll free) or 775-625-3600.
RISK FACTORS RELATING TO THE ARRANGEMENT
In evaluating the Arrangement, Paramount Stockholders should carefully consider the following risk factors relating to the
Arrangement. The following risk factors are not a definitive list of all risk factors associated with the Arrangement. Additional risks and uncertainties, including those currently unknown or considered immaterial by Paramount, may also adversely
affect the Paramount Shares, and/or the business of Paramount following the Arrangement.
Paramount and Calico may not be able to
complete the acquisition or may elect to pursue a different strategic transaction, which may not occur on commercially reasonably terms or at all.
Paramount cannot assure you that the acquisition of Calico will close in a timely manner or at all. The Arrangement Agreement is subject to
many closing conditions and termination rights. If Paramount does not complete the transactions contemplated by the Arrangement Agreement, the Paramount Board may elect to attempt to complete a different strategic transaction. Attempting to complete
different strategic transactions would prove to be costly and time consuming, and Paramount cannot make any assurances that a future strategic transaction will occur on commercially reasonable terms or at all.
The combined company may not realize the benefits from the transaction because of various challenges.
The acquisition will involve the integration of companies that previously operated independently. Paramounts ability to realize the
anticipated benefits of the acquisition will depend, in part, upon the following:
|
|
|
the ability of Paramount to successfully integrate Calicos business and processes with those of
Paramount;
|
|
|
|
how efficiently Paramounts officers can manage the operations of the combined company;
|
|
|
|
the amount of charges associated with the purchase accounting for the acquisition;
|
|
|
|
economic conditions affecting both the general economy and the mining industry in particular; and
|
|
|
|
the actual closing date of the acquisition.
|
Some of these factors are also outside the control of either company. One or more of these factors could result in increased operating costs,
lower revenues, lower earnings or losses or negative cash flows, any of which could reduce the price of Paramounts stock, harming your investment.
If the proposed acquisition is not consummated, Paramount will have incurred substantial costs that may adversely affect
Paramounts financial results and operations and the market price of Paramount Shares.
Paramount has incurred and will incur
substantial costs in connection with the proposed acquisition. These costs are primarily associated with the fees of financial advisors, attorneys and accountants. In addition, Paramount has diverted significant management resources in an effort to
complete the acquisition. If the acquisition is not
38
completed, Paramount will have incurred significant costs, including the diversion of management resources, for which it will have received little or no benefit.
The completion of the acquisition is subject to several conditions and risks, including, among other things, the risk that either Calico or
Paramount will fail to obtain the required approvals. If the acquisition is not completed, the price of Paramount Shares may decline.
The increased number of Paramount Shares as a result of the issuance of Paramount Shares pursuant to the proposed acquisition may
increase the volatility of Paramounts share price.
Although the issuance of Paramount Shares in connection with the
acquisition should increase liquidity in the market for such Paramount Shares, there may be greater volatility of market prices in the near term pending the creation of a stable stockholder base. Any such volatility could result in a decline in the
market price of Paramount Shares.
The value of Paramount Shares may be adversely affected by any inability of the combined company
to achieve the benefits expected to result from the completion of the Arrangement
.
Achieving the benefits of the
Arrangement will depend in part upon meeting the challenges inherent in the successful combination of business enterprises of the size and scope of Paramount and Calico and the possible resulting diversion of management attention for an extended
period of time. There can be no assurance that the combined company will meet these challenges and that such diversion will not negatively impact the operations of the combined company following the closing of the Arrangement.
The combined company may not realize the benefits of its growth projects.
As part of its strategy, the combined company will continue existing efforts and initiate new efforts to develop gold and other mineral
projects and will have a larger number of such projects as a result of the proposed acquisition. A number of risks and uncertainties are associated with the development of these types of projects, including political, regulatory, design,
construction, labor, operating, technical and technological risks and uncertainties relating to capital and other costs and financing risks. The failure to successfully develop any of these initiatives could have a material adverse effect on the
combined companys financial position and results of operations.
REGULATORY APPROVALS
In addition to approval by both the Paramount Stockholders and Calico Shareholders, the consummation of the Arrangement is contingent on
(i) court approval under the BCBCA and a declaration following a court hearing that the Arrangement is fair to Calico security holders; (ii) approval from the NYSE MKT for the listing of the Paramount Shares issuable pursuant to the
Arrangement on the NYSE MKT; and (iii) the TSXV having accepted notice for filing in respect to Calico. There is no assurance that such approvals will be obtained.
FAIRNESS OPINION
Opinion of ROTH Capital Partners, LLC
On March 11, 2016, ROTH Capital Partners, LLC (Roth) rendered its written opinion to the Special Committee of
Paramounts Board as to the fairness, from a financial point of view, of the Arrangement Consideration to the Paramount Stockholders.
Roths opinion was directed to the Special Committee of Paramounts Board (in its capacity as such) and only addressed the
fairness to Paramounts Stockholders, from a financial point of view, of the Arrangement Consideration payable to Paramount Stockholders provided for in the Arrangement pursuant to the Arrangement Agreement and did not address any other aspect
or implication of the
39
Acquisition Proposal. The summary of Roths opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as
Appendix C
to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Roth in preparing its opinion. However, neither Roths
opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to any Paramount Stockholder as to how such stockholder should act or vote with
respect to any matter relating to the Arrangement.
In arriving at its opinion, Roth, among other things:
|
(i)
|
reviewed drafts of the Arrangement Agreement, Plan of Arrangement, Share Issuance Resolution in the forms of
drafts thereof dated March 1, 2016, and related ancillary documents;
|
|
(ii)
|
reviewed certain publicly available and other business and financial information provided (or caused to be
made available to Roth) by Paramount;
|
|
(iii)
|
reviewed certain internal financial statements and other financial and operating data concerning Calico
provided (or caused to be made available to Roth) by Paramount;
|
|
(iv)
|
reviewed certain financial forecasts relating to Calico prepared by the management of Calico (the Calico
Forecasts) and provided (or caused to be made available to us) by Paramount;
|
|
(v)
|
discussed the past and current operations, financial condition and prospects of each of Calico and Paramount
with senior management of Paramount, including the assessments of senior management of Paramount as to the liquidity needs of, and financing alternatives and other capital resources available to, Calico;
|
|
(vi)
|
participated in certain discussions with senior management of Paramount regarding their assessment of the
strategic rationale for, and the potential benefits of, the Arrangement;
|
|
(vii)
|
compared the financial performance of Paramount and Calico, and their prices and trading activity respectively
with that of certain publicly-traded companies we deemed relevant in preparing this opinion;
|
|
(viii)
|
compared certain financial terms of the Arrangement to financial terms, to the extent publicly available, of
certain other business combination transactions we deemed relevant in preparing this opinion;
|
|
(ix)
|
participated in discussions with certain representatives of Paramount, and its professional advisors; and
|
|
(x)
|
performed such other analyses and considered such other data, financial studies, analyses and investigations,
and financial, economic and market criteria and factors which we deemed relevant in preparing this opinion.
|
In arriving
at its opinion, Roth relied upon and assumed, without independent verification, the accuracy and completion of the information that was publicly available or supplied or otherwise made available to Roth by Paramount. With respect to the Calico
Forecasts, Roth assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Calico as to the future financial performance of Calico. Roth did not assess the
achievability of any projections or the assumptions on which they were based, and expressed no view as to such projections or assumptions. In addition, Roth did not assume any responsibility for any independent valuation or appraisal of the assets,
liabilities or business operations of Paramount or Calico, nor was it furnished with any such valuation or appraisal. In addition, Roth did not assume any obligation to conduct, nor did it actually conduct, any physical inspection of the properties
or facilities of Paramount or Calico.
Roth relied upon and assumed, without independent verification, that (i) the Arrangement will
be consummated substantially in accordance with the terms set forth in the Arrangement Agreement and in compliance with the applicable provisions of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange
40
Act of 1934, as amended, British Columbia Business Corporations Act, and all other applicable
federal, state and local statutes, rules, regulations promulgated thereunder and the rules and regulations of NYSE MKT, LLC, TSC Venture Exchange and any other applicable exchanges (collectively, Securities and Exchange Rules),
(ii) the representations and warranties of each party in the Arrangement Agreement are true and correct (except to the extent such representations and warranties may be reasonably construed as a determination or conclusion of or by any such
party regarding the fairness of the Arrangement), (iii) each party to the Arrangement will perform on a timely basis all covenants and agreements required to be performed by it under the Share Implementation Agreement, and (iv) all
conditions to the consummation of the Arrangement will be satisfied without waiver thereof. Roth further assumed that the final Arrangement Agreement when signed by all relevant parties will conform in all material respects to the draft Arrangement
Agreement dated March 1, 2016, and that the Arrangement will be consummated as described in the draft Arrangement Agreement. Roth further assumed that all governmental, regulatory and other consents and approvals contemplated by the Arrangement
Agreement will be timely obtained and that, in the course of obtaining any of those consents and approvals, no modification, delay, limitation, restriction or condition will be imposed or waivers made that would have a material adverse effect on
Paramount or Calico or on the contemplated benefits of the Arrangement.
Roths opinion addressed only the fairness, from a financial
point of view, as of March 11, 2016, of the Arrangement Consideration to the Paramount Stockholders. Roths opinion did not in any manner address any other aspect or implication of the Arrangement or any agreement, arrangement or
understanding entered into in connection with the Arrangement or otherwise, including, without limitation, the fairness of the amount or nature of any compensation to any officers, directors or employees of, or any class of such persons, relative to
the consideration to be received by the Paramount Stockholders in the Arrangement. Roths opinion also does not address the relative merits of the Arrangement as compared to any alternative business strategies that might exist for Paramount,
the underlying business decision of Paramount to proceed with the Arrangement, or the effects of any other transaction in which Paramount might engage. The issuance of this opinion was approved by an authorized internal fairness committee of Roth in
accordance with its customary practice. The opinion was necessarily based on economic, monetary, market, financial and other conditions as they exist and can be evaluated, and the information made available to Roth, as of March 11, 2016. Roth
did not express any opinion as to the underlying valuation, future performance or long-term viability of Paramount or Calico. Further, Roth did not express any opinion as to the actual value of the shares of Paramount when issued pursuant to the
Arrangement Agreement or the prices at which shares of Paramount will trade at any time before, after or during the Arrangement. Roth did not undertake, and is under no obligation, to update, revise or reaffirm its opinion based on any subsequent
developments or events or otherwise. In its opinion, Roth did not address any legal, tax or accounting matters.
The following is a
summary of the material financial analyses performed by Roth in preparing its written opinion, dated March 11, 2016, to Paramounts Board.
For purposes of its analysis, Roth calculated the exchange ratio driven off of Paramounts 20-day volume weighted average price
(VWAP) as of March 10, 2016, to be 0.070 Paramount shares for one Calico share. Based on this exchange ratio, Paramounts share price (VWAP as of March 10, 2016) and the 20-day VWAP of Paramount shares (as of
March 10, 2016), Roth calculated the implied equity value of Calico to be $8.7 million and, accounting for debt and cash figures provided by management, as of December 31, 2015, Roth calculated the implied enterprise value to be $8.4
million (Implied Enterprise Value).
Trading Prices
Roth reviewed the per share trading prices for Calico shares during the 52 week period prior to March 10, 2016, and observed the lowest
price was $0.046 and the highest price was $0.111. Roth compared these prices to $0.085, the implied offer price to be paid per Calico share in the Transaction, calculated using the exchange ratio and Paramounts 20-day VWAP.
Comparable Companies Analysis
Roth
performed an analysis of Calicos offer multiple against the multiples of Harte Gold, Moneta Porcupine, Midas Gold, Corvus Gold, Pershing Gold and Integra Gold. Roth chose these companies because of their similarities to the operations of
Calico. They are U.S. or Canada-listed, publicly traded metals and mining companies with exposure to gold and have a market capitalization below $200 million.
41
For Calico and each of the selected companies, Roth calculated and compared various financial
multiples and ratios of Calico and the selected comparable companies based on management projections each respective companys public filings for historical information from Capital IQ.
In its review of the selected companies, Roth considered, among other things, (i) price as a multiple of book value, and
(ii) enterprise values as a multiple of reported revenue for the latest twelve-month period (LTM).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Shares
|
|
|
Share
Price
03/10/16
|
|
|
Mkt. Cap
03/10/16
|
|
|
TEV
03/10/16
|
|
|
Mineral
Resources
|
|
|
Price/
Book
|
|
|
Enterprise
Value/
Resource
|
|
|
|
Minimum
|
|
|
23.8
|
|
|
$
|
0.078
|
|
|
$
|
24.1
|
|
|
$
|
23.7
|
|
|
|
0.4
|
|
|
|
0.2x
|
|
|
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6.3x
|
|
|
|
25th percentile
|
|
|
104.1
|
|
|
$
|
0.169
|
|
|
$
|
31.9
|
|
|
$
|
31.0
|
|
|
|
1.0
|
|
|
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1.2x
|
|
|
|
12.1x
|
|
|
|
Median
|
|
|
186.9
|
|
|
$
|
0.318
|
|
|
$
|
47.0
|
|
|
$
|
43.4
|
|
|
|
1.6
|
|
|
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2.1x
|
|
|
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43.5x
|
|
|
|
75th percentile
|
|
|
283.4
|
|
|
$
|
0.494
|
|
|
$
|
77.5
|
|
|
$
|
70.3
|
|
|
|
3.6
|
|
|
|
5.0x
|
|
|
|
66.4x
|
|
|
|
Maximum
|
|
|
396.6
|
|
|
$
|
3.670
|
|
|
$
|
134.9
|
|
|
$
|
115.7
|
|
|
|
6.5
|
|
|
|
13.8x
|
|
|
|
97.9x
|
|
Calico
|
|
|
|
|
102.4
|
|
|
$
|
0.085
|
|
|
$
|
8.7
|
|
|
$
|
8.0
|
|
|
|
1.7
|
|
|
|
0.8x
|
|
|
|
5.1x
|
|
1)
|
Source: Capital IQ & Management Projections. All values in USD millions
|
Enterprise Value = Market Cap + Net Debt
Calico multiples based on management projections. Resources in millions of ounces
Precedent Transaction Analysis
Roth
performed an analysis of selected change of control transactions in the mining space that in Roths judgment were comparable for purposes of its analysis. The transaction values ranged from $8 million to $761.8 million and closed between
January 1, 2012 and the present. Transactions without publicly available data were not considered in Roths analysis. The target in each transaction had exposure to gold, either via exploration, mining or development.
For each of the selected transactions, Roth reviewed the enterprise value in the transaction as a multiple of LTM revenue, LTM EBITDA, and LTM
mineral resources, and reviewed Calicos offer multiple against the multiples paid in these comparable transactions. Such multiples for the selected transactions were based on publicly available information at the time of the relevant
transaction. The selected transactions analyzed are set out in the following table:
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|
|
|
|
Date
|
|
Target
|
|
Buyer
|
01/26/16
|
|
St Andrew Goldfields
|
|
Kirkland Lake Gold
|
12/24/15
|
|
Mission Gold
|
|
Northern Dynasty Minerals
|
07/07/15
|
|
Coastal Gold
|
|
First Mining Finance
|
05/05/15
|
|
Callinan Royalties
|
|
Altius Minerals
|
04/28/15
|
|
Gold Royalties
|
|
Sandstorm Gold
|
09/10/14
|
|
Elgin Mining
|
|
Mandalay Resources
|
04/04/14
|
|
Marigold Mine in Nevada
|
|
Silver Standard Resources
|
03/05/14
|
|
Brigus Gold
|
|
Primero Mining
|
12/20/13
|
|
International Minerals
|
|
Hochschild Mining
|
06/01/13
|
|
Hecla Quebec
|
|
Hecla Mining
|
03/22/13
|
|
Aurbec Mines
|
|
Maudore Minerals
|
12/28/12
|
|
Queenston Mining
|
|
Osisko Mining
|
10/19/12
|
|
Geomark Exploration
|
|
Pine Cliff Energy
|
08/17/12
|
|
Bullion Monarch Mining
|
|
Eurasian Minerals
|
07/16/12
|
|
URSA Major Minerals
|
|
Wellgreen Platinum
|
07/03/12
|
|
Silvermex Resources
|
|
First Majestic Silver
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
Value ($mm)
|
|
|
Price/Book Value
|
|
|
Enterprise Value/
Resource
|
|
|
Minimum
|
|
$
|
8.0
|
|
|
|
0.8x
|
|
|
9.3x
|
|
|
25th percentile
|
|
$
|
17.5
|
|
|
|
1.0x
|
|
|
28.2x
|
|
|
Median
|
|
$
|
82.1
|
|
|
|
1.1x
|
|
|
65.5x
|
|
|
75th percentile
|
|
$
|
272.0
|
|
|
|
2.2x
|
|
|
112.1x
|
|
|
Maximum
|
|
$
|
761.8
|
|
|
|
5.3x
|
|
|
179.8x
|
Calico
|
|
|
|
$
|
8.4
|
|
|
|
0.8x
|
|
|
5.1x
|
Premiums Paid Analysis
Roth performed an analysis of the premiums paid in 24 acquisitions, from January 1, 2015 to the present, by publicly traded companies in
the diversified metals and mining, gold or precious metals space. Using publicly available information, Roth reviewed the transaction value, calculated the premium each transaction price represented relative to the stock price for the 1-day, 7-day
and 30-day period, and then compared the premiums so calculated to the premiums paid in comparable transactions.
Roth used the share
prices listed above as the most appropriate time frame for comparison in its analysis. The results of this analysis are summarized in the following table:
|
|
|
|
|
Date
|
|
Target
|
|
Buyer
|
01/26/16
|
|
St Andrew Goldfields
|
|
Kirkland Lake Gold
|
12/24/15
|
|
Mission Gold
|
|
Northern Dynasty Minerals
|
12/22/15
|
|
Northern Gold Mining
|
|
Oban Mining
|
11/17/15
|
|
PC Gold
|
|
First Mining Finance
|
11/17/15
|
|
Gold Canyon Resources
|
|
First Mining Finance
|
10/01/15
|
|
Romarco Minerals
|
|
OceanaGold
|
09/25/15
|
|
North Country Gold
|
|
Auryn Resources
|
09/18/15
|
|
Temex Resources
|
|
Lake Shore Gold
|
09/10/15
|
|
Woulfe Mining
|
|
Almonty Industries
|
08/25/15
|
|
Corona Gold
|
|
Oban Mining
|
08/25/15
|
|
Ryan Gold
|
|
Oban Mining
|
08/25/15
|
|
Eagle Hill Exploration
|
|
Oban Mining
|
08/07/15
|
|
Cortez Gold
|
|
Starcore International
|
07/07/15
|
|
Coastal Gold
|
|
First Mining Finance
|
06/22/15
|
|
Mega Precious Metals
|
|
Yamana Gold
|
06/19/15
|
|
Sunward Resources
|
|
NovaCopper
|
06/09/15
|
|
Soltoro
|
|
Agnico Eagle Mines
|
05/26/15
|
|
Newstrike Capital
|
|
Timmins Gold
|
05/05/15
|
|
Callinan Royalties
|
|
Altius Minerals
|
04/17/15
|
|
Coeur San Miguel
|
|
Coeur Mining
|
02/18/15
|
|
Chaparral Gold
|
|
Goldrock Mines; Waterton
|
02/17/15
|
|
Osisko Exploration
|
|
Osisko Gold Royalties
|
01/20/15
|
|
Duluth Metals
|
|
Antofagasta
|
01/01/15
|
|
Bayfield Ventures
|
|
New Gold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
Value ($mm)
|
|
|
1-Day Stock
Premium (%)
|
|
|
7-Day Stock
Premium (5)
|
|
|
30-Day Stock
Premium (%)
|
|
|
|
Minimum
|
|
$
|
6.5
|
|
|
|
(4.3
|
)
|
|
|
(4.3
|
)
|
|
|
(8.9
|
)
|
|
|
25th percentile
|
|
$
|
13.4
|
|
|
|
26.3
|
|
|
|
25.0
|
|
|
|
14.3
|
|
|
|
Median
|
|
$
|
18.4
|
|
|
|
45.9
|
|
|
|
49.3
|
|
|
|
50.3
|
|
|
|
75th percentile
|
|
$
|
90.9
|
|
|
|
135.2
|
|
|
|
123.7
|
|
|
|
114.4
|
|
|
|
Maximum
|
|
$
|
660.1
|
|
|
|
542.9
|
|
|
|
349.9
|
|
|
|
306.3
|
|
Calico
|
|
|
|
$
|
8.4
|
|
|
|
28.4
|
|
|
|
65.8
|
|
|
|
51.1
|
|
43
Net Present Value Analysis
Roth performed a net present value analysis of the Arrangement by calculating the estimated net present value of the unlevered, after-tax free
cash flows attributable to shareholders of Calico as forecasted to be generated in 2018 to 2025 by accounting for revenue, earnings before interest and taxes (EBIT), change in working capital, income tax, and life of mine capital
(LoM Capital). All of the information used in Roths analysis was based on publicly available sources and the financial projections provided by Calicos management.
In performing its discounted cash flow analysis, Roth calculated the estimated present values of Calicos unlevered, after-tax free cash
flows attributable to shareholders of Calico that Calico forecasted to generate in 2018 to 2025 by applying a discount rate of 10.1%, reflecting Roths estimates of Calicos weighted-average cost of capital. The weighted-average cost of
capital was calculated by adding (a) the market value of equity as a percentage of the total market value of Calicos capital multiplied by Calicos estimated cost of equity, and (b) the market value of debt as a percentage of
the total market value of Calicos capital multiplied by Calicos estimated after-tax market cost of debt. Calicos estimated cost of equity was calculated using the Capital Asset Pricing Model which took into account Calicos
beta, betas of comparable companies, the risk-free rate, a historical equity market risk premium, a historical small capitalization risk premium, which risk premiums were sourced from US Market PremiumIbbotson 2012, and an industry risk
premium.
Based on the foregoing, to arrive at the implied price per share, Roth added the sum of the present value of free cash flows to
the product of the measured and indicated gold resources times the dollars per pound, and subtracted the enterprise value to arrive at the net present value of $38.1 million.
Other Data and Considerations
Roth also
considered additional facts and data, including the high and low trading prices for Calicos stock over the 52 weeks prior to March 10, 2016 and the premiums paid for other listed mining companies that had exposure to gold. Roth also
analyzed the ratio of enterprise value to measured and indicated resource data for both publicly traded comparable companies and precedent transactions. Roth also completed an exchange ratio analysis from April 15, 2015 to March 10, 2016.
The summary set forth above does not purport to be a complete description of the analysis performed by Roth, but simply describes, in
summary form, the material analysis that Roth conducted in connection with rendering its opinion.
The preparation of a fairness opinion
is a complex process and not readily susceptible to partial analysis or summary description. In arriving at its opinion, Roth did not attribute any particular weight to any analysis or factors it considered and did not form an opinion as to whether
any individual analysis or factor, considered in isolation, supported or failed to support its opinion. Rather, Roth considered the totality of the factors and analysis performed in determining its opinion. Accordingly, Roth believes that the
summary set forth above and its analysis must be considered as a whole and that selecting portions thereof, without considering all of its analysis, could create an incomplete view of the processes underlying its analysis and opinion.
Roth based its analysis on numerous assumptions, including assumptions concerning general business and economic conditions and
industry-specific factors. Roths analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values may be significantly higher or lower than those indicated. Moreover, Roths analyses
are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold.
Other Matters
The Special Committee of Paramounts Board retained Roth based on Roths experience and reputation. Roth is regularly
engaged to render financial opinions in connection with mergers, acquisitions, divestitures, leveraged buyouts, recapitalizations, and for other purposes. Roth will receive a fee of $105,000 for its services and legal expenses, no portion of which
is contingent upon the successful completion of the Arrangement. Paramount has also agreed to reimburse Roth for certain expenses and to indemnify Roth, its affiliates and certain related
44
parties against certain potential losses, claims, damages and liabilities arising out of Roths engagement. In the two years prior to the date of its opinion, Roth has not provided any
services to the Paramount where it received a fee.
Roth, as part of its investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with Arrangements and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other
purposes. Roth is a full service securities firm engaged in securities trading and brokerage activities, as well as providing investment banking and other financial services. In the ordinary course of Roths investment banking business, Roth,
its affiliates, directors and officers may at any time acquire, hold or sell, for our and our affiliates own accounts and for the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and
other obligations) of Paramount or Calico, and, accordingly, may at any time hold a long or a short position in such securities.
The
full text of the Fairness Opinion is attached to this Proxy Statement as
Appendix C
and incorporated by reference into this Proxy Statement. We urge you to read the Opinion in its entirety for the assumptions made, procedures followed, other
matters considered and limits of the review undertaken in arriving at the Opinion.
HISTORICAL CALICO
FINANCIAL STATEMENTS
The audited financial statements of Calico as at and for the fiscal years ended June 30, 2015 and 2014
and the unaudited interim financial statements of Calico as at and for the six month periods ended December 31, 2015 and 2014 are presented in
Appendix E
Historical Financial Statements of Calico and are hereby incorporated
by reference. The financial statements have been prepared on the basis of IFRS accounting standards. The financial statements are prepared in Canadian dollars.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
AND UNAUDITED PER SHARE DATA
The following tables set forth selected unaudited
pro forma
historical financial information and unaudited
pro forma
per share
information. The
pro forma
amounts included in the tables below are presented as if the acquisition had been consummated for all periods presented, have been prepared in accordance with U.S. GAAP, but have not been audited. You should read
this information in conjunction with, and such information is qualified in its entirety by, the consolidated financial statements and accompanying notes of Calico included in
Appendix E
to this Proxy Statement (including the related
Managements Discussion and Analysis included in
Appendix D
to this Proxy Statement), the consolidated financial statements and accompanying notes of Paramount Gold Nevada Corp. (including Managements Discussion and Analysis)
contained in Paramounts annual reports on Form 10-K and quarterly reports on Form 10-Q, and the unaudited pro forma combined financial statements and accompanying discussions and notes included in
Appendix F
to this Proxy Statement. The
pro forma
amounts in the tables below are presented for informational purposes. You should not rely on the
pro forma
amounts as being indicative of the financial position or the results of operations of the combined company that would
have actually occurred had the acquisition been consummated during the periods presented or of the future financial position or future results of operations of the combined company.
Pro Forma Combined Paramount and Calico
Paramount and Calico each report its financial results on a fiscal year basis ending June 30 of each year. All unaudited
pro forma
balance sheet data is presented as of March 31, 2016.
Pro Forma Selected Financial Data
The following table shows summary unaudited
pro forma
condensed financial information about the financial condition results of
operations of the combined company the consummation of the merger. The merger will be accounted for using the purchase method of accounting, with Paramount as the acquirer.
45
The historical financial information has been adjusted to give effect to events that are directly
attributable to the transaction and factually supportable. The summary unaudited pro forma financial information does not reflect any cost savings or associated costs to achieve such savings from operating efficiencies, synergies or other
restructuring that may result from the merger and excludes an estimated $1.0 million of transaction related fees and expenses. In addition, the summary unaudited
pro forma
condensed financial information has been presented for informational
purposes only and is not necessarily indicative of what Paramounts financial position or results of operations actually would have been. Furthermore, the summary unaudited
pro forma
financial information does not purport to project the
future financial position or operating results of Paramount.
The summary unaudited
pro forma
balance sheet information has been
prepared as of March 31, 2016 and gives effect to the transaction as if it had occurred on that date.
46
The summary unaudited
pro forma
financial information set forth below has been derived
from and should be read in conjunction with the historical consolidated financial statements of Calico, which are included the proxy statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paramount As of
March 31,
2016
|
|
|
Calico As
of December 31,
2015
|
|
|
Pro Forma Adjustments
|
|
|
Pro Forma Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,070,985
|
|
|
$
|
356,302
|
|
|
|
|
|
|
$
|
7,427,287
|
|
Prepaid and deposits
|
|
|
219,939
|
|
|
|
5,011
|
|
|
|
|
|
|
|
224,950
|
|
Accounts receivable
|
|
|
-
|
|
|
|
9,513
|
|
|
|
|
|
|
|
9,513
|
|
Promissory note receivable
|
|
|
300,000
|
|
|
|
-
|
|
|
|
(300,000
|
)
|
|
|
-
|
|
Prepaid insurance, current portion
|
|
|
36,778
|
|
|
|
-
|
|
|
|
|
|
|
|
36,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
7,627,702
|
|
|
|
370,826
|
|
|
|
(300,000
|
)
|
|
|
7,698,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral properties
|
|
|
28,036,135
|
|
|
|
10,733,891
|
|
|
|
(1,774,269
|
)
|
|
|
36,995,757
|
|
Property and equipment
|
|
|
13,389
|
|
|
|
-
|
|
|
|
|
|
|
|
13,389
|
|
Reclamation bond
|
|
|
2,386,336
|
|
|
|
-
|
|
|
|
|
|
|
|
2,386,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Assets
|
|
|
30,435,860
|
|
|
|
10,733,891
|
|
|
|
(1,774,269
|
)
|
|
|
39,395,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
38,063,562
|
|
|
$
|
11,104,717
|
|
|
$
|
(2,074,269
|
)
|
|
$
|
47,094,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
326,205
|
|
|
$
|
653,285
|
|
|
|
|
|
|
$
|
979,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
326,205
|
|
|
|
653,285
|
|
|
|
-
|
|
|
|
979,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclamation and environmental obligation
|
|
|
1,280,270
|
|
|
|
-
|
|
|
|
|
|
|
|
1,280,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,606,475
|
|
|
|
653,285
|
|
|
|
-
|
|
|
|
2,259,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01, 50,000,000 authorized shares, 8,518,791 issued and outstanding at
March 31, 2016 and at June 30, 2015
|
|
|
85,188
|
|
|
|
13,449,598
|
|
|
|
(13,377,886
|
)
|
|
|
156,900
|
|
Additional paid in capital
|
|
|
64,989,672
|
|
|
|
1,797,960
|
|
|
|
6,507,491
|
|
|
|
73,295,123
|
|
Deficit
|
|
|
(28,617,773
|
)
|
|
|
(7,109,856
|
)
|
|
|
7,109,856
|
|
|
|
(28,617,773
|
)
|
Accumulated other comprehensive loss
|
|
|
-
|
|
|
|
2,313,730
|
|
|
|
(2,313,730
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
36,457,087
|
|
|
|
10,451,432
|
|
|
|
(2,074,269
|
)
|
|
|
44,834,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
38,063,562
|
|
|
$
|
11,104,717
|
|
|
$
|
(2,074,269
|
)
|
|
$
|
47,094,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical and Pro Forma Per Share Information
The following table sets forth, for the nine months ended March 31, 2016 and the year ended June 30, 2015, selected per share information
for Paramounts common stock on a historical basis and
pro forma
equivalent basis. Except for the historical information as of and for the year ended June 30, 2015, the information in the table is unaudited. The
pro forma
information is presented for illustrative purposes only and is not necessarily indicative of the future operating results or financial position of Paramount. You should read the data with the historical consolidated financial statements and related
notes of Paramount contained with this prospectus.
47
Paramounts
pro forma
book value per share was calculated by dividing total
pro
forma
common stockholders equity by
pro forma
equivalent common shares.
|
|
|
|
|
|
|
|
|
|
|
As of and for the
Nine Months Ended
March
31, 2016
|
|
|
As of and for the
Year Ended
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
Historical Data Per Common Share
|
|
|
|
|
|
|
|
|
(50,000,000 authorized shares, par value $0.01, 8,518,791 issued and outstanding)
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
2,573,533
|
|
|
$
|
3,014,850
|
|
Net Loss
|
|
|
2,637,561
|
|
|
|
5,231,207
|
|
Net Loss per share
|
|
$
|
0.31
|
|
|
$
|
0.64
|
|
Dividends declared per common share
|
|
|
-
|
|
|
|
-
|
|
Book value per share
|
|
$
|
4.28
|
|
|
$
|
4.53
|
|
|
|
|
|
|
As of and for the
Nine Months Ended
March
31, 2016
|
|
|
As of and for the
Year Ended
June 30,
2015
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Equivalent Per Common Share
|
|
|
|
|
|
|
|
|
(50,000,000 authorized shares, par value $0.01, 15,690,000 issued and outstanding)
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
$
|
4,621,005
|
|
|
$
|
6,264,350
|
|
Net Loss
|
|
|
4,681,874
|
|
|
|
8,481,153
|
|
Net Loss per share
|
|
$
|
0.30
|
|
|
$
|
0.54
|
|
Dividends declared per common share
|
|
|
-
|
|
|
|
-
|
|
Book value per share
|
|
$
|
2.86
|
|
|
|
N/A
|
|
48
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
The unaudited
pro forma
condensed combined financial statements of Paramount and Calico are presented in
Appendix F
Pro Forma Financial Statement of Paramount and are hereby incorporated by reference. The unaudited
pro forma
condensed combined financial statements are based on the respective historical consolidated financial statements and the accompanying notes of Paramount and Calico adjusted to give effect to the proposed acquisition of Calico by Paramount, and the
related issuance of 7,171,209 Paramount Shares as consideration for the purchase.
Paramount and Calico each report its financial
results on a fiscal year basis ending June 30 of each year. The unaudited
pro forma
condensed combined balance sheet is based on historical balance sheets Paramount and Calico and has been prepared to reflect the purchase as if it had
been completed on March 31, 2016. The unaudited
pro forma
condensed combined statements of income for the nine months ended March 31, 2016 and the twelve months ended June 30, 2015 assume that the purchase had been completed as of
July 1, 2014. These unaudited
pro forma
condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of Paramount (including their Managements
Discussion and Analysis) contained in Paramounts annual reports on Form 10-K and quarterly reports on Form 10-Q and Calico (including their Managements Discussion and Analysis) incorporated by reference into this Proxy Statement.
The acquisition of Calico by Paramount will be accounted for as a purchase in accordance with accounting principles generally accepted in
the United States. Under the purchase method of accounting, the total purchase price will be allocated to the assets acquired and the liabilities assumed of Calico US based on their respective fair values. The actual allocation of purchase cost and
the resulting effect on income from operations may differ significantly from the
pro forma
amounts included herein once a valuation and the allocation process is completed.
Paramounts management believes that the unaudited
pro forma
condensed combined financial statements reflect a reasonable estimate
of the Arrangement based on currently available information as set forth in the notes to such statements and are not necessarily an indication of the results that would have been achieved had the purchase been completed as of the dates indicated or
that may be achieved in the future. The unaudited
pro forma
condensed combined financial statements do not include the realization of any cost savings from operating efficiencies, synergies or other restructurings resulting from the
acquisition. Therefore, the actual amounts recorded as of the completion of the purchase an thereafter may differ materially from the information presented herein.
49
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference information into this proxy statement. This means that we can disclose important
information to you by referring you to those documents. The information incorporated by reference is considered to part of this proxy statement. However, any statement contained in a document that is incorporated by reference into this proxy
statement will be deemed updated and superseded for purposes of this proxy statement to the extent information contained in this proxy statement modifies or replaces the information. We are incorporating by reference the following items in documents
filed by us with the SEC:
|
●
|
Part II, Items 7, 7A, 8 and 9 of our Annual Report on Form 10-K for the year ended June 30, 2015; and
|
|
●
|
Part I, Items 1, 2 and 3 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.
|
Our Annual Report on Form 10-K for the year ended June 30, 2015 and Quarterly Report on Form 10-Q for the quarter ended
March 31, 2016 are enclosed with this proxy statement and are also available over the Internet or by written request as described below.
We will provide to each person, including any beneficial owner of our stock, to whom this proxy statement is delivered, a free copy of any or
all the information that has been incorporated by reference into this proxy statement. Please direct your written request to: Paramount Gold Nevada Corp., 665 Anderson Street, Winnemucca, Nevada, 89445, USA, Attention: Corporate Communications. A
copy of the annual report on Form 10-K for the year ended June 30, 2015, and the quarterly report on Form 10-Q for the quarter ended March 31, 2016 are also available on the SEC Internet site at
http://www.sec.gov
and on our website at
www.paramountnevada.com
.
Representatives of MNP LLP, our principal accountants, will not be present at the Meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management does not know of any other matter that will come before the meeting.
APPENDICES
|
|
|
APPENDIX A
|
|
Form of Proxy Card
|
APPENDIX B
|
|
Plan of Arrangement
|
APPENDIX C
|
|
Fairness Opinion
|
APPENDIX D
|
|
Information regarding Calico
|
APPENDIX E
|
|
Historical Financial Statements of Calico
|
APPENDIX F
|
|
Pro forma Financial Statements of Paramount
|
|
|
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
|
|
|
Carlo Buffone
|
|
|
|
|
Chief Financial Officer
|
|
|
Paramount Gold Nevada Corp.
665 Anderson Street
Winnemucca,
Nevada
May 27, 2016
Please sign and return the enclosed form of proxy promptly. If you decide to attend the meeting, you may, if you wish, revoke the proxy and
vote your shares in person.
50
Appendix A
|
|
|
IMPORTANT SPECIAL MEETING INFORMATION
|
|
|
|
|
|
|
|
Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the
designated areas.
|
|
x
|
|
|
Admission Ticket
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 11:59 pm, EST, on June 28, 2016.
Vote by Internet
Go to
www.investorvote.com/PZG
Or scan the QR code with your smartphone
Follow the steps outlined on the secure website
Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
Follow the instructions provided by the recorded message
|
Special Meeting Proxy Card
|
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
|
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A
|
|
Proposals The Board of Directors recommends a vote
FOR
Proposal 1.
|
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|
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For
|
|
Against
|
|
Abstain
|
|
|
1. To approve the issuance of the Paramount Gold Nevada Corp. Arrangement
Shares
|
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¨
|
|
¨
|
|
¨
|
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Change of Address
Please print your new address below.
|
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Comments
Please print your comments below.
|
|
Meeting Attendance
|
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Mark the box to the right if you plan to attend the Special Meeting.
|
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¨
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C
|
|
Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
|
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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/ /
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02DFMC
2016 Special Meeting Admission Ticket
2016 Special Meeting of
Paramount Gold
Nevada Corp. Stockholders
June 29, 2016, Paramount Gold Nevada Corp.
Head Office
665 Anderson Street
Winnemucca, NV, 89445
10:00 AM Local time
Upon
arrival, please present this admission ticket
and photo identification at the registration desk.
Important notice regarding the availability of proxy materials
for the Special Meeting of Stockholders to be held on June 29, 2016:
The proxy statement to stockholders is available at
www.paramountnevada.com/PZGProxy.pdf.
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE.
Proxy PARAMOUNT GOLD NEVADA CORP.
Notice of 2016 Special Meeting of Stockholders
Paramount Gold Nevada Corp.
Head Office
665 Anderson Street
Winnemucca, NV, 89445
10:00 AM Local time
June 29, 2016
GLEN VAN TREEK AND CARLO BUFFONE, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if personally present, at the Special Meeting of Stockholders of Paramount Gold Nevada Corp. to be held on June 29, 2016 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR
Proposal 1.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side.)
APPENDIX B
PLAN OF ARRANGEMENT
UNDER SECTION 288 OF THE
BUSINESS CORPORATIONS ACT
(BRITISH COLUMBIA)
ARTICLE 1
DEFINITIONS AND INTERPRETATION
In this Plan of Arrangement:
|
(a)
|
Arrangement
means the arrangement pursuant to Division 5 of Part 9 of the Business
Corporations Act, on the terms and conditions set forth in this Plan of Arrangement, subject to any amendment or supplement made in accordance with the Arrangement Agreement, this Plan of Arrangement or at the direction of the Court in the Final
Order;
|
|
(b)
|
Arrangement Agreement
means the arrangement agreement dated as of March 14, 2016
between Paramount and Calico, including the schedules attached thereto, as the same may be supplemented or amended from time to time;
|
|
(c)
|
Arrangement Resolution
means the special resolution to be considered by the Calico
Shareholders approving the Arrangement substantially in the form and content set out in Schedule B to the Arrangement Agreement;
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(d)
|
Business Corporations Act
means the
Business Corporations Act
(British Columbia),
S.B.C. 2002, c. 57, as amended;
|
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(e)
|
Business Day
means any day which is not a Saturday, Sunday or a day on which banks are not
open for business in Vancouver, British Columbia;
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(f)
|
Court
means the Supreme Court of British Columbia;
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(g)
|
Depositary
means Computershare Investor Services Inc., in its capacity as depositary for
the Calico Shares under the Arrangement;
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(h)
|
Dissent Procedures
means the procedures set forth in Division 2 of Part 8 of the Business
Corporations Act required to be taken by a registered holder of Calico Shares to exercise the right of dissent in respect of such Calico Shares in connection with the Arrangement, as modified by Article 6, the Interim Order and the Final Order;
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|
(i)
|
Dissent Rights
means the rights of dissent in respect of the Arrangement described in
Article 4;
|
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(j)
|
Dissenting Shareholder
means a registered Calico Shareholder who validly exercises his, her
or its Dissent Rights in strict compliance with the requirements of Article 4 and the Interim Order and who has not withdrawn or have been deemed to have withdrawn such exercise of such Dissent Rights;
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(k)
|
Effective Date
means the date that is five Business Days after the last of the conditions
precedent to the completion of the Arrangement contained in Section 5 of the Arrangement Agreement has been satisfied or waived (other than those conditions which cannot, by their terms, be satisfied until the Effective Date, but subject to
satisfaction or waiver of such conditions as of the Effective Date) or such earlier or later date as is agreed to in writing by Paramount and Calico;
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(l)
|
Effective Time
means the beginning of the day, which will be designated as 12:01 a.m.
(Vancouver time), on the Effective Date, or such other time on the Effective Date as may be agreed to in writing by Paramount and Calico;
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(m)
|
Final Order
means the final order of the Court approving the Arrangement as such order may
be amended by the Court at any time prior to the Effective Date (with the consent of the parties, acting reasonably) or, if appealed then, unless such appeal is withdrawn or denied, as affirmed or amended on appeal;
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(n)
|
Interim Order
means the interim court order of the Court providing for, among other things,
the calling and holding of the Calico Meeting, as the same may be amended, supplemented or varied by the Court (with the consent of the parties, acting reasonably);
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(o)
|
Letter of Transmittal
means, as the context requires, either a form of letter of
transmittal sent or caused to be sent by Calico to the Calico Shareholders providing for the delivery of certificates representing their Calico Shares to the Depositary, or an executed letter of transmittal substantially in such form;
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(p)
|
Paramount
means Paramount Gold Nevada Corp.;
|
|
(q)
|
Paramount Shares
means the shares of common stock with par value of US$0.01 each in the
capital of Paramount;
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|
(r)
|
parties
means Paramount and Calico, and
party
means either of them;
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|
(s)
|
Plan of Arrangement
means this plan of arrangement as amended and supplemented from time to
time in accordance with Article 6 herewith (with the consent of Paramount and Calico, acting reasonably), the Arrangement Agreement or made at the direction of the Court;
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(t)
|
Calico
means Calico Resources Corp.;
|
|
(u)
|
Calico Circular
means the management information circular of Calico, including all
schedules, appendices and exhibits attached thereto, and the notice of meeting and proxy form to be sent by Calico to the Calico Shareholders soliciting their approval of the Arrangement Resolution, including any amendments or supplements thereto;
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(v)
|
Calico Meeting
means the special meeting of Calico Shareholders and any adjournment or
postponement thereof to be held in accordance with the Interim Order to consider and, if deemed advisable, pass the Arrangement Resolution;
|
|
(w)
|
Calico Options
means options to purchase Calico Shares;
|
|
(x)
|
Calico Shareholder
means at any time a registered holder at that time of Calico Shares;
|
|
(y)
|
Calico Shares
means the common shares in the authorized share structure of Calico;
|
|
(z)
|
Calico Warrants
means warrants to purchase Calico Shares;
|
|
(aa)
|
Registrar
means the Registrar of Companies appointed under Section 400 of the Business
Corporations Act;
|
|
(bb)
|
Share Exchange Ratio
has the meaning given to it in Section 3.1(b); and
|
|
(cc)
|
Tax Act
means the
Income Tax Act
(Canada), as amended.
|
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1.2
|
Headings and References
|
The division of this Plan of Arrangement into
Articles and Sections and the insertion of headings are for convenience of reference only and do not affect the construction or interpretation of this Plan of Arrangement. Unless otherwise specified, references to sections are to sections of this
Plan of Arrangement.
Unless the context otherwise requires, words importing
the singular number only will include the plural and vice versa; words importing the use of any gender will include all genders; and words importing persons will include firms and corporations and vice versa.
In the event that any date on which any action is
required to be taken hereunder by any of the parties is not a Business Day, such action will be required to be taken on the next succeeding Business Day.
Any reference in this Plan of Arrangement to a
statute includes all regulations and rules made thereunder, all amendments to such statute or regulation in force from time to time and any statute or regulation that supplements or supersedes such statute or regulation.
ARTICLE 2
ARRANGEMENT AGREEMENT
2.1
|
Arrangement Agreement
|
This Plan of Arrangement is made pursuant to
and is subject to the provisions of the Arrangement Agreement, provided, however, that in the event of any inconsistency between this Plan of Arrangement and the Arrangement Agreement, the provisions of this Plan of Arrangement will prevail. At the
Effective Time, without any further act or formality, the Arrangement will be binding upon Paramount, Calico and the Calico Shareholders.
ARTICLE 3
THE
ARRANGEMENT
Commencing at the Effective Time, the following will
occur and will be deemed to occur in the following sequence without any further authorization, act or formality by Paramount, Calico, Calico Shareholders or any other person:
|
(a)
|
each issued and outstanding Calico Share held by a Dissenting Shareholder will be, and will be deemed to be,
transferred by the holder thereof to Paramount and acquired by Paramount free and clear from any claims, liens or encumbrances, and each Dissenting Shareholder will cease to have any rights as a Calico Shareholder other than the right to be paid the
fair value for their Calico Shares as set out in Article 4, and in respect of each such Calico Share:
|
|
(i)
|
such Dissenting Shareholder will cease to be the holder of such Calico Share at the Effective Time and such
Dissenting Shareholders name will be removed from the central securities register of Calico in respect of such Calico Share as of the Effective Time; and
|
|
(ii)
|
Paramount will be deemed to be the transferee of such Calico Share (free from any claim, lien or encumbrance)
as of the Effective Time and Paramounts name will be entered in the central securities register of Calico as the holder thereof;
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|
(b)
|
each issued and outstanding Calico Share, other than any Calico Shares held by a Dissenting Shareholder and
other than the Calico Shares already held by Paramount, will be, and will be deemed to be, transferred by the holder thereof to Paramount and acquired by Paramount free and clear from any claims, liens or encumbrances in exchange for 0.07 of a
Paramount Share (the ratio of 0.07 of a Paramount Share for each issued and outstanding Calico Share being referred to as the
Share Exchange Ratio
), and in respect of each such Calico Share:
|
|
(i)
|
the holder of such Calico Share will cease to be the holder thereof at the Effective Time concurrently with
the exchange referred to in this Section 3.1(b) and such holders name will be removed from the central securities register of Calico in respect of such Calico Share as of the Effective Time;
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|
(ii)
|
Paramount will be deemed to be the transferee of such Calico Share (free from any claim, lien or encumbrance)
as of the Effective Time and Paramounts name will be entered in the central securities register of Calico as the holder thereof; and
|
|
(iii)
|
Paramount will issue to the holder of such Calico Share 0.07 of a Paramount Share as the sole consideration
therefor and the shareholder register of Paramount will be revised accordingly; and
|
|
(c)
|
all Calico Options and Calico Warrants will be terminated and cancelled as of the Effective Time with no
consideration payable therefor, and each holder of Calico Options or Calico Warrants will cease to have any rights as a holder of Calico Options or Calico Warrants.
|
If the aggregate number of Paramount Shares to
which a Calico Shareholder would otherwise be entitled under the Arrangement would include a fractional Paramount Share, then the number of Paramount Shares that such Calico Shareholder is entitled to receive will be rounded down to the next whole
number and such Calico Shareholder will not receive cash or any other compensation in lieu of such fractional Paramount Share.
ARTICLE 4
RIGHTS
OF DISSENT
4.1
|
Grant of Rights of Dissent
|
Each Calico Shareholder may exercise
rights of dissent (the
Dissent Right
) with respect to the Calico Shares held by it pursuant to and in the manner set forth in the Interim Order and Section 238 of the Business Corporations Act, provided that written notice of
dissent contemplated by section 242 of the Business Corporations Act must be received by Calico no later than 5:00 p.m. (Vancouver time) on the Business Day that is two Business Days before the Calico Meeting or any date to which the Calico Meeting
may be postponed or adjourned. Dissenting Shareholders who:
|
(a)
|
are ultimately entitled to be paid the fair value for their Calico Shares in respect of which they duly
exercised Dissent Rights, which will be the fair value immediately before the passing of the Arrangement Resolution, will be deemed to have transferred at the Effective Time such Calico Shares, free of any claims, liens, or encumbrances, to
Paramount in accordance with Section 3.1(a) and will be paid by Paramount an amount in cash equal to such fair value; or
|
|
(b)
|
are ultimately not entitled, for any reason, to be paid by Paramount the fair value for their Calico Shares in
respect of which they duly exercised Dissent Rights will be deemed to have participated in the Arrangement in respect of those Calico Shares on the same basis as a non-dissenting Calico Shareholder, as the case may be, and will be entitled to
receive only the Paramount Shares that such non-dissenting Calico Shareholder is entitled to receive on the basis set forth in Section 3.1(b) and, for greater certainty, will be considered to have exchanged such Calico Shares for Paramount
Shares pursuant to, and at the same time as Calico Shares were exchanged pursuant to Section 3.1(b).
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B-4
4.2
|
General Dissent Provisions
|
|
(a)
|
In no event will Paramount, Calico or any other person be required to recognize a Dissenting Shareholder as a
registered or beneficial owner of Calico Shares at or after the Effective Time, and at the Effective Time the names of such Dissenting Shareholders will be deleted from the central securities register of Calico as at the Effective Time.
|
|
(b)
|
For greater certainty, in addition to any other restrictions in the Interim Order, no person will be entitled
to exercise Dissent Rights with respect to Calico Shares in respect of which a person has voted in favour of the Arrangement.
|
ARTICLE 5
DELIVERY
OF PARAMOUNT CERTIFICATES
5.1
|
Right to Paramount Shares
|
|
(a)
|
At or prior to the Effective Time, Paramount will deposit with the Depositary, for the benefit of the Calico
Shareholders, a certificate or certificates representing the aggregate number of Paramount Shares which the Calico Shareholders are entitled to receive hereunder.
|
|
(b)
|
Calico will cause the Letter of Transmittal to be sent to each Calico Shareholder prior to the Calico Meeting.
|
|
(c)
|
Any deposit of a Letter of Transmittal and accompanying certificates, or other documentation as provided in
the Letter of Transmittal, may be made at any of the offices of the Depositary specified in the Letter of Transmittal.
|
|
(d)
|
Paramount will, as soon as practicable following the later of the Effective Date and the date of deposit with
the Depositary of a Letter of Transmittal duly completed and executed by a person who was a Calico Shareholder immediately prior to the Effective Time together with the certificates representing the Calico Shares or other documentation as provided
in the Letter of Transmittal, cause the Depositary to:
|
|
(i)
|
forward or cause to be forwarded by first class mail (postage prepaid) to the former Calico Shareholder at the
address specified in the Letter of Transmittal; or
|
|
(ii)
|
if requested by the former Calico Shareholder in the Letter of Transmittal, to make available at the
Depositary for
pick-up
by the former Calico Shareholder; or
|
|
(iii)
|
if the Letter of Transmittal neither specifies an address nor contains a request as described in (ii), to
forward or cause to be forwarded by first class mail (postage prepaid) to the former Calico Shareholder at the address of such holder as shown on the central securities register maintained by or on behalf of Calico,
|
certificates representing the number of Paramount Shares issuable to such former Calico Shareholder as determined in
accordance with the provisions hereof. Such certificates will be deemed to have been delivered to such former Calico Shareholder at the time such certificates are forwarded or made available for pick-up in accordance with this Section 5.1(d).
|
(e)
|
Each former Calico Shareholder entitled in accordance with Section 3.1 to receive Paramount Shares will
be deemed to be the registered holder for all purposes as of the Effective Date of the number of Paramount Shares to which such former Calico Shareholder is entitled. All dividends paid or other distributions made on or after the Effective Date on
or in respect of any Paramount Shares which a former Calico Shareholder is entitled to receive pursuant to this Plan of Arrangement, but for which a certificate has not yet been delivered to such former Calico Shareholder in accordance with
Section 5.1(d), will be paid or made to such former Calico Shareholder when such certificate is delivered to such former Calico Shareholder in accordance with Section 5.1(d).
|
B-5
|
(f)
|
After the Effective Date, any certificate formerly representing Calico Shares will represent only the right to
receive Paramount Shares pursuant to Section 3.1 or to be paid the fair value for the Calico Shares pursuant to Section 4.1 and any dividends or other distributions to which the former Calico Shareholder is entitled under
Section 5.1(e) and any such certificate formerly representing Calico Shares not duly surrendered on or prior to the sixth anniversary of the Effective Date will cease to represent a claim or interest of any kind or nature (including a right to
receive Paramount Shares pursuant to Section 3.1, a right to be paid the fair value for the Calico Shares pursuant to Section 4.1, or a claim for dividends or other distributions under Section 5.1(e)) against Paramount or Calico by a
former Calico Shareholder. On such date, all Paramount Shares to which the holder of such certificates or any former Calico Shareholder was entitled will be deemed to have been surrendered to Paramount for cancellation without compensation therefor.
|
Calico, Paramount and the Depositary will be
entitled to deduct and withhold from any consideration deliverable or otherwise payable to any Calico Shareholder such amounts as Calico, Paramount or the Depositary is required or permitted to deduct or withhold with respect to such consideration
under the Tax Act or any provision of any applicable federal, provincial, state, local or foreign tax law or treaty, in each case, as amended. To the extent that amounts are so deducted or withheld, such deducted or withheld amounts will be treated
for all purposes hereof as having been paid to the Calico Shareholder in respect of which such deduction and withholding was made, provided that such deducted or withheld amounts are actually remitted to the appropriate taxing authority. The
Depositary is authorized, as agent for the Calico Shareholders, to sell such portion of the Paramount Shares otherwise deliverable to applicable Calico Shareholders as is necessary to provide sufficient funds to Paramount, Calico or the Depositary,
as the case may be, to enable them to comply with such deduction or withholding requirement (after deducting commission, other reasonable expenses incurred in connection with the sale, and any applicable taxes), and Paramount, Calico or the
Depositary will notify the applicable Calico Shareholder and remit any unapplied consideration including any unapplied balance of the net proceeds of such sale.
If any certificate which prior to the Effective
Date represented outstanding Calico Shares which were exchanged pursuant to Section 3.1 has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed,
the Depositary will issue in exchange for such lost, stolen or destroyed certificate, certificates representing Paramount Shares deliverable in respect thereof, if any, as determined in accordance with Section 3.1. When seeking such certificate
in exchange for any lost, stolen or destroyed certificate, the person to whom certificates representing Paramount Shares are to be issued will, as a condition precedent to the issuance thereof, give a bond satisfactory to Paramount and its transfer
agent, in such sum as Paramount may direct or otherwise indemnify Paramount and its transfer agent in a manner satisfactory to Paramount and its transfer agent against any claim that may be made against Paramount or its transfer agent with respect
to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE 6
AMENDMENT
6.1
|
Amendments to Plan of Arrangement
|
|
(a)
|
Calico and Paramount reserve the right to amend, modify and/or supplement this Plan of Arrangement at any time
and from time to time on or before the Effective Date, provided that any amendment, modification or supplement must be contained in a written document which is filed with the Court and, if made following the Calico Meeting, approved by the Court and
communicated to Calico Shareholders in the manner required by the Court (if so required).
|
|
(b)
|
Any amendment, modification or supplement to this Plan of Arrangement may be proposed by Calico and Paramount,
jointly, at any time prior to or at the Calico Meeting with or without any other prior notice or communication and, if so proposed and accepted by the persons
|
B-6
|
voting at the Calico Meeting (subject to the requirements of the Interim Order), will become part of this Plan of Arrangement for all purposes.
|
|
(c)
|
Any amendment, modification or supplement to this Plan of Arrangement which is approved by the Court following
the Calico Meeting will be effective only if (i) it is consented to by each of Calico and Paramount (acting reasonably) and (ii) if required by the Court, is consented to by the Calico Shareholders voting in the manner directed by the
Court.
|
|
(d)
|
Any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date
unilaterally by Paramount, provided that it concerns a matter which, in the reasonable opinion of Paramount, is of an administrative nature for the purpose of better giving effect to the implementation of this Plan of Arrangement and is not adverse
to the financial or economic interests of any former Calico Shareholder.
|
This Plan of Arrangement may be withdrawn prior to the
Effective Time in accordance with the terms of the Arrangement Agreement.
B-7
APPENDIX C
FAIRNESS OPINION
March 11, 2016
Special Committee of the Board of Directors
Paramount Gold Nevada Corp.
665 Anderson Street
Winnemucca, NV 89445
Attention: Dave Smith, Chairman
Members of the Special Committee of the Board of Directors:
Roth Capital Partners, LLC (Roth, us or we) understands that Paramount Gold Nevada Corp., a corporation
organized under the laws of the State of Nevada (Paramount), and Calico Resources Corp., a company organized under the laws of the Province of British Columbia (Calico), intend to enter into an Arrangement Agreement,
substantially in the form of a draft dated March 1, 2016 (the Arrangement Agreement), in which, pursuant to a Plan of Arrangement and Share Issuance Resolution, non-dissenting Calico Shareholders will be issued Paramount Shares in
accordance with the Share Exchange Ratio set forth in the Plan of Arrangement (Arrangement Consideration). In each case, capitalized terms set forth herein shall have the meanings ascribed to them in the Arrangement Agreement or Plan of
Arrangement.
You have asked us to render an opinion, as of the date hereof, with respect to the fairness, from a financial point of view,
of the Arrangement Consideration to the holders of Paramount Shares.
For purposes of the opinion set forth herein, we have reviewed a
draft of the Arrangement Agreement, Plan of Arrangement, Share Issuance Resolution in the forms of drafts thereof dated March 1, 2016, and related ancillary documents, and we have also, among other things:
|
(i)
|
reviewed certain publicly available and other business and financial information provided (or caused to be
made available to us) by Paramount;
|
|
(ii)
|
reviewed certain internal financial statements and other financial and operating data concerning Calico
provided (or caused to be made available to us) by Paramount;
|
|
(iii)
|
reviewed certain financial forecasts relating to Calico prepared by the management of Calico (the Calico
Forecasts) and provided (or caused to be made available to us) by Paramount;
|
|
(iv)
|
discussed the past and current operations, financial condition and prospects of each of Calico and Paramount
with senior management of Paramount, including the assessments of senior management of Paramount as to the liquidity needs of, and financing alternatives and other capital resources available to, Calico;
|
|
(v)
|
participated in certain discussions with senior management of Paramount regarding their assessment of the
strategic rationale for, and the potential benefits of, the Arrangement;
|
|
(vi)
|
compared the financial performance of Paramount and Calico, and their prices and trading activity respectively
with that of certain publicly-traded companies we deemed relevant in preparing this opinion;
|
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|
(vii)
|
compared certain financial terms of the Arrangement to financial terms, to the extent publicly available, of
certain other business combination transactions we deemed relevant in preparing this opinion;
|
|
(viii)
|
participated in discussions with certain representatives of Paramount, and its professional advisors; and
|
|
(ix)
|
performed such other analyses and considered such other data, financial studies, analyses and investigations,
and financial, economic and market criteria and factors which we deemed relevant in preparing this opinion.
|
In
conducting our review and arriving at our opinion, with your consent, we have not independently investigated or verified any of the foregoing information and we have assumed and relied upon such information as being accurate and complete in all
material respects, and we have further relied upon verbal or written assurances of senior management of Paramount that such information was accurate and complete in all material respects when given to us and that they are not aware of any facts or
circumstances that would make or render any of such information inaccurate, incomplete or misleading in any material respect. With respect to the Calico Forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best
then-currently available estimates and good faith judgments of the management of Calico as to the future financial performance of Calico. We have not been engaged to assess the achievability of any projections or the assumptions on which they were
based, and we express no view as to such projections or assumptions. In addition, we have not assumed any responsibility for any independent valuation or appraisal of the assets, liabilities or business operations of Paramount or Calico, nor have we
been furnished with any such valuation or appraisal. In addition, we have not assumed any obligation to conduct, nor have we actually conducted, any physical inspection of the properties or facilities of Paramount or Calico.
We also have assumed, with your consent, that (i) the Arrangement will be consummated substantially in accordance with the terms set
forth in the Arrangement Agreement and in compliance with the applicable provisions of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended, British Columbia Business Corporations
Act, and all other applicable federal, state and local statutes, rules, regulations promulgated thereunder and the rules and regulations of NYSE MKT, LLC, TSC Venture Exchange and any other applicable exchanges (collectively, Securities and
Exchange Rules), (ii) the representations and warranties of each party in the Arrangement Agreement are true and correct (except to the extent such representations and warranties may be reasonably construed as a determination or
conclusion of or by any such party regarding the fairness of the Arrangement), (iii) each party to the Arrangement will perform on a timely basis all covenants and agreements required to be performed by it under the Share Implementation
Agreement, and (iv) all conditions to the consummation of the Arrangement will be satisfied without waiver thereof. We have further assumed that the final Arrangement Agreement when signed by all relevant parties will conform in all material
respects to the draft Arrangement Agreement dated March 1, 2016, and that the Arrangement will be consummated as described in the draft Arrangement Agreement. We have also assumed that all governmental, regulatory and other consents and
approvals contemplated by the Arrangement Agreement will be timely obtained and that, in the course of obtaining any of those consents and approvals, no modification, delay, limitation, restriction or condition will be imposed or waivers made that
would have a material adverse effect on Paramount or Calico or on the contemplated benefits of the Arrangement.
Our opinion addresses
only the fairness, from a financial point of view, as of the date hereof, of the Arrangement Consideration to the holders of Paramount Shares. Our opinion does not in any manner address any other aspect or implication of the Arrangement or any
agreement, arrangement or understanding entered into in connection with the Arrangement or otherwise, including, without limitation, the fairness of the amount or nature of any compensation to any officers, directors or employees of, or any class of
such persons, relative to the consideration to be received by the holders of Paramount Shares in the Arrangement. Our opinion also does not address the relative merits of the Arrangement as compared to any alternative business strategies that might
exist for Paramount, the underlying business decision of Paramount to proceed with the Arrangement, or the effects of any other transaction in which Paramount might engage. The issuance of this opinion was approved by an authorized internal fairness
committee of Roth in accordance with our customary practice. Our opinion is necessarily based on economic, monetary, market, financial and other conditions as they exist and can be evaluated, and the information made available to us, as of the date
hereof. We express no opinion as to the underlying valuation, future performance or long-term viability of Paramount or Calico. Further, we express no opinion as to the actual value of the shares of Paramount when issued pursuant to the Arrangement
Agreement or the prices at which shares of Paramount will trade at any time before, after or during the Arrangement. It
C-2
should be understood that, although subsequent developments or events may affect various assumptions used by us in preparing our opinion, we do not have any obligation to update, revise or
reaffirm our opinion based on such developments or events or otherwise and we expressly disclaim any responsibility to do so. Our opinion does not address any legal, tax or accounting matters.
We have acted as financial advisor to Paramount in connection with the Arrangement and will receive a fee for our services payable upon
delivery of this opinion to the Special Committee of the Board of Directors of Paramount following a request from such Committee that our opinion be so delivered. Our fee is not contingent upon the consummation of the Arrangement. We will be
reimbursed for our reasonable out of pocket expenses incurred in rendering services to Paramount, subject to an agreed maximum amount. Payment of such reimbursement is not contingent upon consummation of the Arrangement. Paramount has agreed to
indemnify us for certain losses, claims, damages and liabilities arising out our performance of services pursuant to our engagement with Paramount. In the two years prior to the date hereof, we have not provided any services to the Paramount where
we received a fee.
Roth, as part of its investment banking business, is continually engaged in the valuation of businesses and their
securities in connection with Arrangements and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are a full service
securities firm engaged in securities trading and brokerage activities, as well as providing investment banking and other financial services. In the ordinary course of business, we and our affiliates may acquire, hold or sell, for our and our
affiliates own accounts and for the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Paramount or Calico, and, accordingly, may at any time hold a long or a
short position in such securities.
It is understood that this letter is solely for the information and use of the Special Committee of
the Board of Directors of Paramount in connection with its evaluation and possible recommendation of the Arrangement and does not constitute a recommendation to any stockholder of Paramount as to how such stockholder should vote or otherwise act or
refrain from acting on any matter relating to the Arrangement. Subject to all qualifications, limitations and assumptions set forth herein, the Board of Directors of Paramount is entitled to rely on this opinion in connection with its evaluation and
possible approval and recommendation of the Arrangement. Except as otherwise set forth herein, or as expressly contemplated by and subject to the limitations set forth in the Arrangement Agreement, this opinion may not be reproduced, disseminated,
quoted or referred to at any time, in any manner or for any purpose without our prior written consent, provided that we hereby authorize a copy of this opinion to be included in its entirety as an exhibit, and a summary of the contents of this
opinion to be disclosed, in any filing or other disclosure that Paramount is required to make under Securities and Exchange Rules in connection with the Arrangement, but only to the extent Paramount has reasonably concluded that such inclusion or
disclosure is required by or advisable under applicable law.
On the basis of and subject to the foregoing, we are of the opinion, as of
the date hereof, that the Arrangement Consideration is fair, from a financial point of view, to the holders of Paramount Shares.
|
Very truly yours,
|
|
Roth Capital Partners, LLC
|
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APPENDIX D
INFORMATION REGARDING CALICO
Description of Business
Name and Incorporation
Calico was incorporated under the BCBCA on June 17, 1998.
Calico has one wholly-owned subsidiary, Calico Resources USA Corp. (Calico US), which was incorporated in Nevada on April 10,
2011.
Business
Calico is an
exploration and development stage company, engaged principally in the acquisition, exploration and development of mineral property interests.
Principal Property
Calicos main
focus is the ongoing development of its 100% Grassy Mountain Gold Project (the Grassy Mountain Project) is located in northern Malheur County, Oregon, approximately 22 miles south of Vale, Oregon, and roughly 70 miles west of Boise,
Idaho. The project site is situated in the rolling hills of the high desert region of the far western Snake River Plain and consists of 418 unpatented lode claims, three patented lode claims, nine mill site claims, six association placer claims, and
various leased fee land surface and surface/mineral rights, all totaling roughly 9,300 acres. The local terrain is gentle to moderate, with elevations ranging from 3300 to 4,300 ft. above mean sea level.
The following maps illustrates the general location of the Grassy Mountain Project:
D-1
To effect mining operations power and water source infrastructure would need to be developed as
it does not currently exist.
Calico US owns and controls an undivided 100% right, title and interest (including water rights) in the
Grassy Mountain Project (subject to certain underlying agreements and royalties).
Exploration
During the 2011 exploration program, Calico mapped and sampled the Grassy Mountain Project deposit and completed three core and nine reverse
circulation drill holes in the primary zone of mineralization on the property. Calicos exploration strategy was to target areas where resource expansion was most probable. Historical data was thoroughly reviewed prior to drilling, and fresh
sets of cross-sections and long-sections were constructed based on existing information. New interpretations of the orientation of mineralization and geology were plotted on the new sections. The new sections were then used to select areas where
in-fill drilling was needed and areas where gold mineralization was open-ended and resource expansion probable. A detailed geologic model was produced based on the results of the 2011 exploration work, and subsequent supporting geophysical surveys
were completed in March, 2012.
A mineralized material estimate was prepared by Hardrock Consulting Inc. in November, 2014. An independent
preliminary economic assessment (PEA) was prepared in February, 2015 by Metal Mining Consultants Inc., which verified the mineralized material estimate and included all drill data obtained as of September 26, 2014. The PEA concluded
that potential exists for the discovery of additional mineralized material at exploration target areas identified within the Grassy Mountain claim block and the current mineralized material at Grassy Mountain is sufficient to warrant continued
planning and effort to explore, permit, and develop the Grassy Mountain Project. There is sufficient data to support a basic geologic model and continuing development of the project and the detailed geologic model described in the PEA, along with
the results of the exploration, drilling, and geophysical surveys completed as of October 2014, are sufficient to support preparation of a Preliminary Feasibility Study.
There is no certainty that the scenarios or estimated economics in the PEA will be realized.
Geology and Mineralization
The geology
of the Grassy Mountain Project is dominated by the Grassy Mountain Formation, which consists of a thick sequence of pebble conglomerate, arkosic sandstone, sandstone, clay-rich siltstone, reworked tuff, and olivine basalt flows. The sedimentary
portion of the Grassy Mountain Formation is 700 to 1000 ft thick, and within the project area most sedimentary units are silicified and strongly indurated.
Gold mineralization at the Grassy Mountain Project occurs primarily in interbedded siltstone and fine-grained sandstone (arkose) sediments
that are brecciated and cut by thin quartz chalcedony-adularia veinlets and stockworks. Mineralization is associated with epithermal hot springs deposition, and several siliceous sinter terraces are interbedded with the silicified clastic sediments.
D-2
Directors and Officers
On May
23, 2016, the directors and officers of Calico beneficially owned or had voting control or direction over Calico Shares as
follows:
|
|
|
Name
|
|
Number of Calico Shares Beneficially Owned
or
Over which Voting Control or Direction is
Exercised
|
|
|
Rudi P.
Fronk,
Chairman & Director
Greenwood Village, Colorado
|
|
1,050,000
|
|
|
Paul
Parisotto,
President, CEO and Director
Oakville, Ontario
|
|
1,486,500
|
|
|
Alec
Peck,
CFO
Surrey, British Columbia
|
|
100,000
|
|
|
Vance
Thornsberry,
VP Exploration
Nine Mile Falls, Washington
|
|
437,500
|
|
|
Pamela
White,
Corporate Secretary
Delta, British Columbia
|
|
20,000
|
|
|
Jay
Layman,
Director
Highlands Ranch, Colorado
|
|
Nil
|
|
|
Allan
Williams,
Director
Langley, British Columbia
|
|
1,589,500
|
|
|
Kevin
Milledge,
Director
Burnaby, British Columbia
|
|
83,333
|
|
|
Hugo
Sorensen,
Director
Caledon, Ontario
|
|
150,000
|
|
|
John
Pollesel,
Director
Edmonton, Alberta
|
|
Nil
|
Consolidated Capitalization
The following table sets out Calicos consolidated share and loan capital as at June 30, 2015. Financial information is provided in
Calicos comparative financial statements and management discussion and analysis in respect of its most recently completed financial year.
|
|
|
|
|
|
|
As at June 30, 2015
|
|
Share Capital
|
|
|
22,918,158
|
|
Total Long Term Debt
|
|
|
0
|
|
Total Shareholders Deficit
|
|
|
(9,577,023)
|
|
Non-Controlling Interest
|
|
|
0
|
|
|
|
|
|
|
Total Capitalization
|
|
|
13,341,135
|
|
|
|
|
|
|
Description of Calico Shares
The authorized share capital of Calico consists of an unlimited number of common shares without par value. As of May 20, 2016, 102,445,845
Calico Shares were issued and outstanding as fully paid and non-assessable common shares of Calico. The holders of Calico Shares are entitled to receive such dividends as the Calico board of directors may determine. In the event of the liquidation,
dissolution or winding-up of Calico, the holders of Calico Shares are entitled to receive, subject to the prior rights, if any, of the holders of any other
D-3
class of shares of Calico, the remaining property and assets of Calico. The Calico Shares are listed on the TSXV under the trading symbol CKB.
Calico Managements Discussion of Financial Condition and Results of Operations
You should read the following discussion and analysis of Calicos financial condition and results of operations together with its
financial statements and related notes appearing elsewhere in this Proxy Statement. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under Risk Factors Relating to the Arrangement above.
Years Ended June 30, 2015 and 2014
Results of
Operations
Calico recorded a net loss of $810,920 for the year ended June 30, 2015 as compared to a loss of $968,838 for the year ended
June 30, 2014.
The expenses for the year ended June 30, 2015 were $796,363 compared to $965,858 in the prior period. Included
in expenses is a non-cash charge of $198,848 (June 30, 2014 - $Nil) for share-based compensation. After deducting this non-cash adjustment for expenses, expenses totaled $597,515 (June 30, 2014 - $965,858) representing a decrease of $368,343 or 38%.
Material variances over the comparable period are as follows:
|
●
|
|
Investor Relations Expenses
: Investor relations expenses were $12,183 for the year ended June 30,
2015 compared to $98,893 reported over the same time period in 2014. Calico continues to curtail a significant number of these expenditures. A portion of senior management fees in fiscal 2015 ($24,356), previously allocated to investor relations
expenses, has been reallocated to direct consulting expenses, as part of the Exploration and Evaluation Assets. This reallocation is in line with the amount of time that senior management spent on the Grassy Mountain project in fiscal 2015.
|
|
●
|
|
Legal Expenses
: For the quarter ended June 30, 2015, expenses for legal services were $86,870,
compared to $56,591 for the quarter ended June 30, 2014. Expenses for legal services were $189,917 for the year ended June 30, 2015 compared to $472,153 reported over the same time period in 2014.
|
Included in legal expenses are two specific matters not in the course of the usual corporate activities.
(a) In the year ended June 30, 2015 fees totalling $37,243 were paid to US corporate counsel toward a successful defense of an action
commenced in the state of Colorado by the former President and Chief Executive Officer.
(b) At the end of the fiscal year
June 30, 2014 Calico recorded an accrued liability for services provided by previous legal counsel in the amount of $573,725. Of this amount, $200,000 was settled by the issuance of 1,666,667 common shares and 833,333 warrants. This same
previous legal counsel invoiced Calico a further amount of $69,520 on June 7, 2015. A total of $443,246 then has been recorded by Calico as an unpaid amount, being the invoiced totals less the amount settled by issuing common shares and
warrants. Calico is contesting the amount of these invoices and an action has commenced in the Supreme Court of British Columbia for a review of all of these invoices to determine what amount for which Calico would then be liable. Calico is
uncertain, at this time, as to how long the review process will take. Legal counsel retained by Calico on this matter has invoiced an amount of $37,093 in legal costs as at June 30, 2015. Additional legal costs are being incurred as the review
process is undertaken by this legal counsel.
|
●
|
|
Management Fees
: Management fees were $186,034 for the year ended June 30, 2015 compared to
$159,994 reported over the same time period in 2014. A portion of senior management fees in fiscal 2015 ($60,371) previously allocated to general management expense, has been reallocated to direct
|
D-4
|
consulting expenses, as part of Exploration and Evaluation Assets. This reallocation is in line with the amount of time that senior management spent on the Grassy Mountain project in fiscal 2015.
|
|
●
|
|
Share Based Payments
: These non-cash expenditures are a function of the implementation of the
methodology used for calculating share based payment values, and a direct result of stock options vested.
|
|
●
|
|
Transfer Agents and Filing Fees
: For the quarter ended June 30, 2015, transfer agent and filing
fees were $3,050 compared to $6,615 for the quarter ended in the prior year. Transfer agents and filings fees for the year ended June 30, 2015 were $44,673 compared to $38,903 in the prior year. The increased costs are related to the recent
financing activities of Calico.
|
|
●
|
|
Travel Expenses
: For the quarter ended June 30, 2015, travel and accommodations were $2,145
compared to $3,592 for the quarter ended in the prior year. Travel and accommodations for the year ended June 30, 2015 were $19,746 compared to $6,967 in the prior year. The increased costs are related to the recent activities of Calico.
|
Financial Condition and Liquidity
As at June 30, 2015, Calico had current assets of $1,815,189 and current liabilities of $907,563 compared to current assets of $49,202
and current liabilities of $1,158,605 as at June 30, 2014. Working capital was $907,626 at June 30, 2015 compared to a negative $1,109,403 at June 30, 2014.
Included in trade payables is the amount of $443,246 representing invoiced legal fees from Calicos previous legal counsel. Calico is
contesting the amount of these invoices and an action has commenced in the Supreme Court of British Columbia for a review of all of these invoices to determine what amount for which Calico would then be liable. Calico is uncertain at this time as to
how long the review process will take.
Cash and cash equivalents at June 30, 2015, were $1,791,499 compared to $7,689 at
June 30, 2014
Off-Balance Sheet Arrangements
Calico has no off-balance sheet arrangements.
Six Months Ended December 31, 2015 and 2014
Results of Operations
Calico recorded a
net loss of $263,605 for the six month period ended December 31, 2015, compared to a net loss of $424,386 for the six month period ended December 31, 2014.
The expenses for the six month period ended December 31, 2015 were $277,433 compared to $432,429 in the prior period. Included in
expenses is a non-cash charge of $24,922 (December 31, 2014 - $154,562) for share-based compensation. After deducting this non-cash adjustment for expenses, expenses totalled $252,511 (December 31, 2014 - $277,867) representing a decrease of $25,356
or 9%. Material variances over the comparable period are as follows:
|
●
|
|
Legal Services
: For the quarter ended December 31, 2015, legal services were $31,754, compared to
$24,498 for the quarter ended December 31, 2014. Legal services were $84,165 for the six month period ended December 31, 2015 compared to $61,105 reported over the same time period in 2014. Included in legal expenses is one matter not in
the course of the usual corporate activities, and which in turn is the main component of the increased legal fees is in 2015 when compared to the same period in 2014.
|
D-5
Calico has recorded an accrued liability for services provided by previous legal
counsel in the amount of $573,725. Of this amount, $200,000 was settled by the issuance of 1,666,667 common shares and 833,333 warrants. This same previous legal counsel invoiced Calico a further amount of $69,521 on June 7, 2015. A total of
$443,246 then has been recorded by Calico as an unpaid amount, as at the year end June 30, 2015, being the invoiced totals less the amount settled by issuing common shares and warrants. Calico is contesting the amount of these invoices and an
action was started in the Supreme Court of British Columbia for a review of all of these invoices to determine what amount for which Calico would then be liable. The review was completed on January 29, 2016 and Calico is currently waiting for
the Courts decision.
In the six month period ended December 31, 2015 legal counsel retained by Calico on this
matter invoiced Calico an amount of $65,276. Additional legal costs will be incurred as the review process is undertaken by this legal counsel on behalf of Calico.
|
●
|
|
Share Based Payments
: These non-cash expenditures are a function of the implementation of the
methodology used for calculating share based payment values, and a direct result of stock options vested.
|
|
●
|
|
Transfer Agents and Filing Fees: For the quarter ended December 31, 2015, transfer agent and filings fees
were $2,061 compared to $6,518 for the quarter ended in the prior year. Transfer agents and filings fees for the six month period ended December 31, 2015 were $6,204 compared to $31,522 in the prior year. The costs in 2014 were related to the
financing activities of Calico.
|
Financial Condition and Liquidity
As at December 31, 2015, Calico had current assets of $513,254 and current liabilities of $904,201 compared to current assets of
$1,815,189 and current liabilities of $907,563 as at June 30, 2015. Working capital was negative $390,947 at December 31, 2015 compared to positive $907,626 at June 30, 2015.
Included in trade payables is the amount of $443,246 representing invoiced legal fees from Calicos previous legal counsel. Calico is
contesting the amount of these invoices and an action was started in the Supreme Court of British Columbia for a review of all of these invoices to determine what amount for which Calico would then be liable. The review was completed on
January 29, 2016 and Calico is currently waiting for the Courts decision.
Cash and cash equivalents at December 31, 2015,
were $493,152 compared to $1,791,499 at June 30, 2015.
Off-Balance Sheet Arrangements
Calico has no off-balance sheet arrangements.
D-6
APPENDIX E
HISTORICAL FINANCIAL STATEMENTS OF CALICO
Calico Resources Corp.
Consolidated Financial Statements
Year Ended June 30, 2015
(Expressed in Canadian Dollars)
MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements of Calico Resources Corp. (An Exploration Stage Company) are the responsibility of the Companys
management. The financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and reflect managements best estimates and judgment based on information
currently available.
Management has developed and maintains a system of internal controls to ensure that the Companys assets are
safeguarded, transactions are authorized and properly recorded and financial information is reliable.
The Board of Directors is
responsible for ensuring management fulfills its responsibilities for financial reporting and internal controls through an audit committee. The Audit Committee reviews the results of the consolidated financial statements prior to their submission to
the Board of Directors for approval.
|
|
|
Paul A Parisotto
|
|
Alec Peck
|
Paul A Parisotto
|
|
Alec Peck
|
Chief Executive Officer
|
|
Chief Financial Officer
|
E-2
|
|
|
|
|
|
|
Tel: 604
688 5421
Fax: 604 688 5132
www.bdo.ca
|
|
BDO Canada LLP
600 Cathedral Place
925 West Georgia Street
Vancouver BC V6C 3L2
Canada
|
Independent Auditors Report
To the shareholders of Calico Resources Corp.
We have audited the accompanying consolidated financial statements of Calico Resources Corp., which comprise the consolidated statements of
financial position as at June 30, 2015 and 2014 and the consolidated statements of loss and comprehensive income/(loss), changes in shareholders equity and cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Managements Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our
responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Calico Resources
Corp. as at June 30, 2015 and 2014 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without qualifying
our opinion, we draw attention to Note 2 in the consolidated financial statements, which indicates that at June 30, 2015, the Company had net loss of $810,920 for the year then ended and an accumulated deficit of $9,577,023 since inception and
expects to incur further losses in the development of its business. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty that may cast significant doubt upon the Companys ability
to continue as a going concern.
(signed) BDO CANADA LLP
Chartered Professional Accountants
Vancouver, British Columbia
September 28, 2015
800 Canada LLP, a Canadian limited liability partnership, is a member of 800 International Limited, a UK company limited
by guarantee, and forms part of the international BOO network of Independent member firms.
E-3
Calico Resources Corp.
Consolidated statements of financial position
(Expressed in
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
4
|
|
$
|
1,791,499
|
|
|
$
|
7,689
|
|
Receivables
|
|
|
|
|
11,207
|
|
|
|
33,982
|
|
Prepaid expenses
|
|
|
|
|
12,483
|
|
|
|
7,531
|
|
|
|
|
|
|
|
|
1,815,189
|
|
|
|
49,202
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
|
|
-
|
|
|
|
1,349
|
|
Exploration and evaluation assets
|
|
5, 10
|
|
|
12,433,509
|
|
|
|
8,777,390
|
|
|
|
|
|
|
|
|
12,433,509
|
|
|
|
8,778,739
|
|
|
|
TOTAL ASSETS
|
|
|
|
$
|
14,248,698
|
|
|
$
|
8,827,941
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade payables and accrued liabilities
|
|
6, 10
|
|
$
|
907,563
|
|
|
$
|
908,605
|
|
Loans payable
|
|
7
|
|
|
-
|
|
|
|
250,000
|
|
|
|
TOTAL LIABILIITES
|
|
|
|
|
907,563
|
|
|
|
1,158,605
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
8
|
|
|
18,613,384
|
|
|
|
13,721,608
|
|
Subscriptions received
|
|
8
|
|
|
-
|
|
|
|
54,000
|
|
Reserves
|
|
9
|
|
|
2,463,604
|
|
|
|
2,399,598
|
|
Accumulated other comprehensive income
|
|
|
|
|
1,841,170
|
|
|
|
260,233
|
|
Deficit
|
|
|
|
|
(9,577,023
|
)
|
|
|
(8,766,103)
|
|
|
|
TOTAL SHAREHOLDERS EQUITY
|
|
|
|
|
13,341,135
|
|
|
|
7,669,336
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
$
|
14,248,698
|
|
|
$
|
8,827,941
|
|
|
|
|
|
|
Approved on behalf of the Board by:
|
John Pollesel
|
|
Director
|
John Pollesel
|
|
|
|
|
Kevin Milledge
|
|
Director
|
Kevin Milledge
|
|
|
See accompanying notes to the consolidated financial statements
E-4
Calico Resources Corp.
Consolidated statements of loss and comprehensive income / (loss)
(Expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
|
|
|
|
Notes
|
|
2015
|
|
|
2014
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Audit and tax services
|
|
|
|
$
|
27,468
|
|
|
$
|
34,624
|
|
Administration
|
|
|
|
|
105,495
|
|
|
|
109,450
|
|
Depreciation
|
|
|
|
|
1,349
|
|
|
|
578
|
|
Director fees
|
|
10
|
|
|
-
|
|
|
|
24,025
|
|
Insurance
|
|
|
|
|
10,650
|
|
|
|
17,282
|
|
Investor relations
|
|
|
|
|
12,183
|
|
|
|
98,893
|
|
Legal services
|
|
6
|
|
|
189,917
|
|
|
|
472,153
|
|
Management fees
|
|
10
|
|
|
186,034
|
|
|
|
159,994
|
|
Project generation
|
|
|
|
|
-
|
|
|
|
2,989
|
|
Share-based payments
|
|
10
|
|
|
198,848
|
|
|
|
-
|
|
Transfer agent and filing fees
|
|
|
|
|
44,673
|
|
|
|
38,903
|
|
Travel, promotion and board meetings
|
|
|
|
|
19,746
|
|
|
|
6,967
|
|
|
|
|
|
|
(796,363
|
)
|
|
|
(965,858
|
)
|
Other items
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
4,201
|
|
|
|
1,471
|
|
Interest expense
|
|
|
|
|
(4,723
|
)
|
|
|
(2,112
|
)
|
Other income
|
|
|
|
|
3,991
|
|
|
|
-
|
|
Foreign exchange loss
|
|
|
|
|
(18,026
|
)
|
|
|
(2,339
|
)
|
Net loss for year
|
|
|
|
|
(810,920
|
)
|
|
|
(968,838
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign
operations
|
|
|
|
|
1,580,937
|
|
|
|
114,961
|
|
Total comprehensive income / (loss)
|
|
|
|
$
|
770,017
|
|
|
$
|
(853,877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share basic and diluted
|
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding
|
|
|
|
|
75,785,794
|
|
|
|
51,557,212
|
|
See accompanying notes to the consolidated financial statements
E-5
Calico Resources Corp.
Consolidated statements of changes in shareholders equity
(Expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
|
|
|
Accumulated other
|
|
|
|
|
|
|
|
|
|
Share Capital
|
|
|
|
|
|
Received
|
|
|
Reserves
|
|
|
comprehensive income
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant and stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
Amount
|
|
|
Amount
|
|
|
option reserves
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2013
|
|
|
48,853,869
|
|
|
$
|
12,954,481
|
|
|
$
|
-
|
|
|
$
|
2,735,553
|
|
|
$
|
145,272
|
|
|
$
|
(7,797,265
|
)
|
|
$
|
8,038,041
|
|
Shares issued for cash - private placements
|
|
|
2,441,667
|
|
|
|
293,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
293,000
|
|
Fair value of share purchase warrants
|
|
|
|
|
|
|
(24,252
|
)
|
|
|
-
|
|
|
|
24,252
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued for cash - warrants exercised
|
|
|
1,170,500
|
|
|
|
140,460
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140,460
|
|
Share issue costs
|
|
|
-
|
|
|
|
(2,288
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,288
|
)
|
Subscriptions received
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
Fair value of warrants exercised
|
|
|
-
|
|
|
|
42,717
|
|
|
|
-
|
|
|
|
(42,717
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued non-cash
|
|
|
1,671,000
|
|
|
|
317,490
|
|
|
|
-
|
|
|
|
(317,490
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
114,961
|
|
|
|
-
|
|
|
|
114,961
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(968,838
|
)
|
|
|
(968,838
|
)
|
Balance at June 30, 2014
|
|
|
54,137,036
|
|
|
$
|
13,721,608
|
|
|
$
|
54,000
|
|
|
$
|
2,399,598
|
|
|
$
|
260,233
|
|
|
$
|
(8,766,103
|
)
|
|
$
|
7,669,336
|
|
Shares issued for cash - private placements
|
|
|
42,886,665
|
|
|
|
4,508,000
|
|
|
|
(54,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,454,000
|
|
Fair value of share purchase warrants
|
|
|
|
|
|
|
(421,197
|
)
|
|
|
-
|
|
|
|
421,197
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued for debt
|
|
|
2,526,144
|
|
|
|
303,137
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
303,137
|
|
Share issue costs
|
|
|
-
|
|
|
|
(48,404
|
)
|
|
|
-
|
|
|
|
(5,799
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(54,203
|
)
|
Shares issued non-cash
|
|
|
2,896,000
|
|
|
|
550,240
|
|
|
|
-
|
|
|
|
(550,240
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
198,848
|
|
|
|
-
|
|
|
|
-
|
|
|
|
198,848
|
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,580,937
|
|
|
|
-
|
|
|
|
1,580,937
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(810,920
|
)
|
|
|
(810,920
|
)
|
Balance at June 30, 2015
|
|
|
102,445,845
|
|
|
$
|
18,613,384
|
|
|
$
|
-
|
|
|
$
|
2,463,604
|
|
|
$
|
1,841,170
|
|
|
$
|
(9,577,023
|
)
|
|
$
|
13,341,135
|
|
See accompanying notes to the consolidated financial statements
E-6
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
Calico Resources Corp.
Consolidated statements of cash flows
(Expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
|
|
|
|
2015
|
|
|
2014
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss for year
|
|
$
|
(810,920
|
)
|
|
$
|
(968,838
|
)
|
Adjustments for non-cash items:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,349
|
|
|
|
578
|
|
Share-based payments
|
|
|
198,848
|
|
|
|
-
|
|
Changes in non-cash working capital items:
|
|
|
|
|
|
|
|
|
Other receivable and prepaid expenses
|
|
|
17,823
|
|
|
|
8,448
|
|
Trade payables and accrued
liabilities
|
|
|
15,743
|
|
|
|
531,424
|
|
Net cash flows used in operating
activities
|
|
|
(577,157
|
)
|
|
|
(428,388
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
Expenditures on exploration and evaluation assets
|
|
|
(1,977,514
|
)
|
|
|
(1,104,473
|
)
|
Other income
|
|
|
-
|
|
|
|
388,235
|
|
Net cash flows used in investing
activities
|
|
|
(1,977,514
|
)
|
|
|
(716,238
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
4,399,797
|
|
|
|
431,172
|
|
Subscriptions received
|
|
|
-
|
|
|
|
54,000
|
|
Loans payable
|
|
|
(150,000
|
)
|
|
|
250,000
|
|
Net cash flows from investing activities
|
|
|
4,249,797
|
|
|
|
735,172
|
|
Currency translation adjustment
|
|
|
88,684
|
|
|
|
-
|
|
Increase / (decrease) in cash and cash equivalents
|
|
|
1,783,810
|
|
|
|
(409,454
|
)
|
Cash and cash equivalents, beginning of the year
|
|
|
7,689
|
|
|
|
417,143
|
|
Cash and cash equivalents, end of the year
|
|
$
|
1,791,499
|
|
|
$
|
7,689
|
|
Note 13 Non-cash transactions
See accompanying notes to the consolidated financial statements
E-7
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
Calico Resources Corp. (the Company) and its wholly owned subsidiary, Calico Resources USA Corp. are focused on advancing its 100%
owned Grassy Mountain Gold Project (Grassy Mountain) located in Oregon, U.S.A. The Companys shares are traded on the TSX Venture Exchange (TSX-V) under the symbol CKB. The head office and principal address
of the Company is located at Suite 615, 800 West Pender Street, Vancouver, British Columbia, Canada, V6C 2V6. The Companys registered and records office address is Suite 2600, 1066 West Hastings Street, Vancouver, British Columbia, Canada, V6E
3X1.
2.
|
Statement of compliance and basis of preparation
|
These consolidated financial statements were authorized for issue on September 28, 2015 by the directors of the Company.
Statement of compliance
These consolidated
financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Going concern
These consolidated financial
statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course
of operations. A different basis of measurement may be appropriate if the Company was not expected to continue operations for the foreseeable future. At June 30, 2015, the Company had not achieved profitable operations, had a net loss of
$810,920 for the year ended June 30, 2015 and accumulated losses of $9,577,023 since inception, had not advanced its mineral properties to commercial production and expects to incur further losses in the development of its business, all of
which indicate a material uncertainty that may cast significant doubt upon the Companys ability to continue as a going concern. The Companys continuation as a going concern is dependent upon successful results from its mineral property
exploration activities and its ability to attain profitable operations to generate funds and/or its ability to raise equity capital or borrowings sufficient to meet its current and future obligations. Although the Company has been successful in the
past in raising funds to continue operations, there is no assurance it will be able to do so in the future.
Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis. The consolidated financial statements are presented in
Canadian dollars.
Significant accounting judgments and estimates
The preparation of the Companys consolidated financial statements in conformity with IFRS requires management to make certain judgments
and estimates that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and judgments
are continuously evaluated and are based on managements experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes may differ.
E-8
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
2.
|
Statement of compliance and basis of preparation (contd)
|
The effect of a change in an accounting estimate is recognized prospectively by including it
in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.
Information about critical judgments in applying accounting policies and estimates that have the most significant risk of causing material
adjustment to the carrying amounts of assets and liabilities recognized in the consolidated financial statements within the next financial year are discussed below.
Exploration and evaluation assets
The
application of the Companys accounting policy for exploration and evaluation assets requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future
events or circumstances. Estimates made may change if new information becomes available. If, after an expenditure is capitalized, information becomes available suggesting that the recovery of such expenditure is unlikely, the amount capitalized is
written off in the statement of loss and comprehensive loss in the period the new information becomes available.
Title to mineral property interests
Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the
Companys title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.
Share-based
payments
Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is
dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility, interest rates and, dividend yield and
expected vesting dates and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 8.
3.
|
Summary of significant accounting policies
|
Consolidation
The consolidated financial
statements include the accounts of the Company and its controlled entity. Details of its controlled entity are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage owned
|
|
|
|
Country of
incorporation
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Calico Resources USA Corp.
|
|
U.S.
|
|
|
100
|
%
|
|
|
100%
|
|
|
|
*Percentage of voting power is in proportion to ownership.
E-9
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
3.
|
Summary of significant accounting policies (contd)
|
Inter-company balances and transactions are eliminated on consolidation
Foreign currency translation
The functional
currency of each of the Companys entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Canadian dollars which is the parent
Companys functional currency.
Transactions and balances:
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction.
Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items are measured at historical cost and continue to be carried at the exchange rate at the date of the transaction. Non-monetary items are measured at
fair value and are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the
translation of monetary items or on settlement of monetary items are recognized in the statement of loss in the period in which they arise.
Reporting
currency translation:
The financial statements of the subsidiary have the US dollar as the functional currency and are translated into
Canadian dollars as follows: assets and liabilities at the closing rate at the date of the statement of financial position, and income and expenses at the average rate of the period (as this is considered a reasonable approximation to
actual rates). All resulting changes are recognized in other comprehensive income as cumulative translation adjustments.
Exploration and evaluation
assets
Exploration and evaluation expenditures relating to mineral properties include the costs of acquiring licenses, costs associated
with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets. Exploration and evaluation expenditures are capitalized. Costs incurred before the Company has obtained the legal rights to
explore an area are recognized in profit or loss.
Exploration and evaluation assets are assessed for impairment when events and
circumstances suggest that the carrying amount exceeds the recoverable amount.
Once the technical feasibility and commercial viability of
the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets
within property, plant and equipment.
The Company may occasionally enter into arrangements, whereby the Company may sell all or part of a
mineral interest.
Any cash consideration received from an agreement is credited against the costs previously capitalized to the mineral
interest given up by the Company, with any excess cash accounted for as a gain on disposal.
As the Company currently has no operational
income, any incidental income earned in connection with the exploration activities are applied as a reduction to capitalized exploration costs.
E-10
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
3.
|
Summary of significant accounting policies (contd)
|
Share capital
Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company
are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Companys common shares, share warrants and flow-through shares are classified as equity instruments. Incremental
costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Share-based payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the
statement of loss and comprehensive loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount
recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, as measured
immediately before and after the modification, is also charged to the statement of loss and comprehensive income (loss) over the remaining vesting period.
Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted
for as equity-settled share-based payment transactions. If the fair value of the goods or services received cannot be estimated reliably, the share-based payment transaction is measured at fair value of the equity instruments granted at the date the
Company receives the goods or the services or is measured by use of a valuation model. The expected life used in the model is adjusted, based on managements best estimate, for effects of non-transferability, exercise restrictions and
behavioural considerations.
Financial Assets
Financial assets are classified based on the purpose for which the asset was acquired. All transactions related to financial instruments are
recorded on a trade date basis. There are no financial assets designated as fair value through profit or loss (FVTPL), held to maturity, or available for sale. The Companys accounting policy for the remaining financial asset
category is as follows:
Loans and Receivables
These assets are non-derivative financial assets resulting from the delivery of cash or other assets by a lender to a borrower in return for a
promise to repay on a specified date or dates, or on demand. They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue and subsequently carried at amortized cost, using the
effective interest rate method, less any impairment losses. Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs.
Gains and losses are recognized in the consolidated statements of loss and comprehensive loss when the loans and receivables are derecognized or impaired, as well as through the amortization process.
The Company has classified its cash and cash equivalents as loans and receivables.
E-11
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
3.
|
Summary of significant accounting policies (contd)
|
Financial Liabilities
Financial liabilities are classified as other financial liabilities, based on the purpose for which the liability was incurred, and comprise
trade payables and accrued liabilities and loans payable. These liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument and subsequently carried at amortized cost using
the effective interest rate method. This ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes
initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding. The Company has no financial liabilities designated upon initial recognition as fair value through profit and
loss (FVTPL), or held for trading.
Trade and other payables represent liabilities for goods and services provided to the
Company prior to the end of the period which are unpaid. Trade payable amounts are unsecured and are usually paid within 30 days of recognition.
Trade payables and accrued liabilities and loans payable are classified as other financial liabilities.
Impairment of Financial Assets
At each
reporting date the Company assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is
objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets.
Impairment of long lived assets
Long
lived assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of loss and comprehensive loss.
The recoverable amount is the greater of an assets fair value less cost to sell and its value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash
inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the
estimates used to determine the recoverable amount.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and, other highly liquid investments with original maturities
up to three months that can be redeemed into known amounts at any time without penalty.
E-12
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
3.
|
Summary of significant accounting policies (contd)
|
Income taxes
Current income tax:
Current income tax assets
and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the
countries where the Company operates and generates taxable income.
Current income tax relating to items recognized directly is recorded
in other comprehensive income or equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax:
Deferred income tax
is accounted for by providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income taxes is not recognized for temporary
differences related to the initial recognition of the assets or liabilities that affect neither accounting nor taxable profit nor investments in subsidiaries, associates and interests in joint ventures to the extent it is probable that they will not
reverse in the foreseeable future.
The amount of deferred income tax provided is based on the expected manner and expected date of
realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred income tax asset is recognized only to the extent that it is probable that future
taxable amounts will be available against which the asset can be utilized.
Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of
shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the weighted number of average shares outstanding are increased to include additional shares for the
assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from the exercise of such instruments were used
to acquire common shares at the average market price during the reporting period.
Restoration and environmental obligations
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term
assets, when those obligations result from the acquisition, construction development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation
work is capitalized along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset
will be depreciated on the same basis as other mining assets. As at June 30, 2015 and 2014, the Company did not have any significant restoration or environmental obligations.
Changes in the net present value, excluding changes in the Companys estimates of reclamation costs, are charged to consolidated
statements of loss and comprehensive income (loss) for the period.
E-13
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
3.
|
Summary of significant accounting policies (contd)
|
Other Provisions
Provisions are recognized for liabilities of uncertain timing or amount that have arisen as a result of past transactions, including legal or
constructive obligations. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date.
New accounting standards and interpretations adopted
Effective July 1, 2014, the Company adopted the following accounting standards issued by IASB.
IAS 24 Related Party Disclosures
The amendments to IAS 24 clarify that a management entity, or any member of a group of which it is a part, that provides key management
services to a reporting entity, or its parent, is a related party of the reporting entity. The amendments also require an entity to disclose amounts incurred for key management personnel services provided by a separate management entity. This
replaces the more detailed disclosure by category required for other key management personnel compensation. The application of this IAS did not have a material impact on the amounts reported for the current or prior years but may affect the
disclosure for future transactions or arrangements.
IFRIC 21 Levies
The IASB issued IFRIC 21 Levies (IFRIC 21), an interpretation of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets (IAS 37), on the accounting for levies imposed by governments. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a
past event (Obligating Event). IFRIC 21 clarifies that the Obligating Event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The application of this
IFRS did not have a material impact on the amounts reported for the current or prior years but may affect the accounting for future transactions or arrangements.
The following standards and interpretations have been issued but are not yet effective:
The following standards, interpretations and amendments, which have not been applied to in these consolidated financial statements, will or may
have an effect on the Companys future consolidated financial statements. The Company is in the process of evaluating these new standards.
IFRS 9 Financial instruments, classification and measurement
IFRS 9 Financial Instruments is part of the IASBs wider project to replace IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for
financial assets: amortized cost and fair value. The basis of classification depends on the entitys business model and the contractual cash flow characteristics of the financial asset. The standard is effective for annual periods beginning on
or after January 1, 2018. The Company is in the process of evaluating the impact of the new standard.
4.
|
Cash and cash equivalents
|
Cash and cash equivalents include guaranteed investment certificates with a term to maturity of up to three months from date of acquisition
and which can be redeemed at any time without penalty.
E-14
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
5.
|
Exploration and evaluation assets
|
The following is a description of the Companys
Grassy Mountain exploration and evaluation assets and the related spending commitments.
|
|
|
|
|
Year ended June 30, 2015
|
|
|
|
Property acquisition costs
|
|
|
|
|
Balance, June 30, 2014
|
|
$
|
3,370,184
|
|
Additions
|
|
|
257,801
|
|
|
|
Balance, June 30, 2015
|
|
$
|
3,627,985
|
|
|
|
Exploration and evaluation costs
|
|
|
|
|
Balance, June 30, 2014
|
|
$
|
5,407,206
|
|
|
|
Costs incurred during year:
|
|
|
|
|
Consulting (Note 10)
|
|
|
360,113
|
|
Engineering
|
|
|
585,833
|
|
Environmental
|
|
|
627,328
|
|
Field supplies
|
|
|
225
|
|
Metallurgy
|
|
|
-
|
|
Other costs
|
|
|
51,175
|
|
Permits and fees
|
|
|
249,841
|
|
Travel and accommodations
|
|
|
31,805
|
|
|
|
|
|
|
1,906,320
|
|
|
|
Balance, June 30, 2015
|
|
|
7,313,526
|
|
|
|
Other income
|
|
|
-
|
|
Currency translation adjustment
|
|
|
1,491,998
|
|
|
|
Balance, June 30, 2015
|
|
$
|
12,433,509
|
|
|
|
|
|
|
|
|
Year ended June 30, 2014
|
|
|
|
Property acquisition costs
|
|
|
|
|
Balance, June 30, 2013
|
|
$
|
3,157,221
|
|
Additions
|
|
|
212,963
|
|
|
|
Balance, June 30, 2014
|
|
$
|
3,370,184
|
|
|
|
Exploration and evaluation costs
|
|
|
|
|
Balance, June 30, 2013
|
|
$
|
4,784,552
|
|
|
|
Costs incurred during year:
|
|
|
|
|
Consulting (Note 10)
|
|
|
180,696
|
|
Engineering
|
|
|
128,678
|
|
Environmental
|
|
|
461,864
|
|
Field supplies
|
|
|
473
|
|
Metallurgy
|
|
|
854
|
|
Other costs
|
|
|
52,623
|
|
Permits and fees
|
|
|
49,510
|
|
Travel and accommodations
|
|
|
21,230
|
|
|
|
|
|
|
895,928
|
|
|
|
Balance, June 30, 2014
|
|
|
5,680,480
|
|
|
|
Other income
|
|
|
(388,235)
|
|
Currency translation adjustment
|
|
|
114,961
|
|
|
|
Balance, June 30, 2014
|
|
$
|
8,777,390
|
|
|
|
USA Oregon
On February 5, 2013, the Company exercised its option to acquire a 100% interest in the Grassy Mountain Project from Seabridge Gold Inc.
(Seabridge) by issuing 6,433,000 common shares (the Issued Shares) and 4,567,000 Special Warrants to Seabridge. The shares and Special Warrants were valued at $0.19 each which was based on the trading price of the shares at
the date of issuance. Each Special Warrant is exercisable to acquire one additional common share of the Company (a Special Warrant Share) for no additional consideration. The Special Warrants can only be exercised to the extent that,
after exercise, Seabridge holds less than 20% of the outstanding shares of the Company. Calico has agreed to ask its shareholders to approve the exercise of those outstanding Special Warrants and approve Seabridge then holding more than 20% of the
issued shares in Calico. Pursuant to the agreement, the Company agreed to guarantee the obligations of Calico Resources USA Corp., including those guaranteed to Seabridge.
On September 26, 2013, Seabridge acquired, on behalf of its wholly owned subsidiary, Seabridge Gold Corp., 1,671,000 common shares upon
exercise of 1,671,000 Special Warrants. Including the initial 2,000,000 common shares issued under the original definitive option agreement dated April 18, 2011, at that time, Seabridge then owned and controlled 10,104,000 common shares and
2,896,000 Special Warrants of the Company, representing 19.55% of the outstanding common shares and 100% of the Special Warrants of the Company.
E-15
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
5.
|
Exploration and evaluation assets (contd)
|
On February 19, 2014, the Company held its Annual and Special General Meeting of its
shareholders. Shareholders approved the exercise by Seabridge of the balance of its 2,896,000 Special Warrants, then resulting in Seabridge holding 13 million common shares of the Company, representing 23.81% of Calicos common shares at
that time. With subsequent share issuances, this interest has fallen below 20%.
There are existing letters of credit posted with the
State of Oregon Department of Geology and Mineral Industries (DOGAMI) in the amount of $146,200 in respect of possible reclamation work required on the property. This existing security has been posted by Seabridge. The Company is required to
use reasonable commercial efforts to arrange for the release of the existing security and replace this existing security with new letters of credit or reclamation bonds as soon as possible after registered title to the property has transferred to
the Company. The intention of the Company is to replacement of security; however this has not been completed.
On November 1, 2014,
the Company entered into an amendment of the mining lease and agreement regarding Grassy Mountain with Sherry and Yates Inc., which originally provided the Company with an option to buy down the royalty to 1%, with a cash payment of $2.1 US million
at any time up to February 16, 2015. The terms of the agreement as originally entered into on February 16, 2004 provided for production royalty payments to be based on the price of gold. The rates are as follows:
|
|
|
Production Royalty Rate on Gross Proceeds
|
|
Gold Price Per Ounce ($US)
|
4.0%
|
|
Less than $500
|
5.0%
|
|
$500-800
|
6.0%
|
|
Over $800
|
In addition, the original agreement provides for a 4% production royalty on any other metals, other than gold.
On November 1, 2014, Sherry & Yates Inc. agreed to amend the buy down option as follows:
from February 17, 2015 to February 16, 2016 the royalty can be bought down to 1% for $2.2 US million;
from February 17, 2016 to February 16, 2017 the royalty can be bought down to 1.25% for $2.3 US million; and
from February 17, 2017 to February 16, 2018 the royalty can be bought down to 1.5% for $2.4 US million.
The advance royalty payment remains the same at $100,000 US per year, due on February 15th of each year.
6.
|
Trade payables and accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
Trade payables *
|
|
$
|
671,942
|
|
|
$ 763,705
|
Amounts due to related parties (Note 10)
|
|
|
121,217
|
|
|
112,900
|
Accrued liabilities
|
|
|
114,404
|
|
|
32,000
|
|
|
|
$
|
907,563
|
|
|
$ 908,605
|
|
*Included in trade payables is the amount of $443,246 (2014: $573,725) representing invoiced legal fees from
the Companys previous legal counsel. The Company is contesting the amount of these invoices, and an action has commenced in the Supreme Court of British Columbia for a review of all of these invoices to determine what amount for which the
Company would then be liable. The Company is uncertain, at this time, as to how long the review process will take.
E-16
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
At June 30, 2014, the Company had two loans payable as follows:
On November 13, 2013, the Company received a loan from Seabridge Gold Inc. and as a result issued a promissory note in the principal
amount of $100,000 plus simple interest of 5%. On July 14, 2014, the Company issued 859,477 common shares at a price of $0.12 in settlement of the Seabridge loan of $100,000, plus accrued interest of $3,137.
On March 21, 2014, the Company received a loan from an unrelated party and as a result issued a promissory note in the principal amount
of $150,000 plus interest accruing at a rate of 5%. On July 17, 2014, the Company repaid the loan plus interest in full settlement.
8.
|
Share capital and other components of equity
|
Authorized share capital
Unlimited number of common shares without par value.
Issued share capital
At
June 30, 2015, there were 102,445,845 issued and fully paid common shares (June 30, 2014 54,137,036).
On August 7 and
September 26, 2013 1,170,500 warrants with an expiry date of September 26, 2013 were exercised at $0.12 per share for total proceeds of $140,460.
On September 26, 2013, Seabridge acquired, on behalf of its wholly owned subsidiary, Seabridge Gold Corp., 1,671,000 common shares upon
exercise of 1,671,000 Special Warrants.
On April 30, 2014, the Company announced the closing of the first tranche of private
placement financing. In the first tranche, Calico issued a total of 2,441,667 units at the price of $0.12 per unit, raising gross proceeds of $293,000.
On July 3, 2014, the Company closed the second tranche of its non-brokered private placement originally announced March 25, 2014. In
the second tranche, the Company issued 800,000 units at a price of $0.12 per unit. The total gross proceeds raised in this tranche amounted to $96,000.
On July 14, 2014, the TSX Venture Exchange approved the issuance of a total of 2,526,144 shares and 833,333 share purchase warrants in
settlement of a total of $303,137 in Company debt. The Company issued 1,666,667 units at a price of $0.12 per unit in settlement of legal fees of $200,000. Each unit is comprised of one common share and one-half of one transferable share purchase
warrant. Each warrant is exercisable at a price of $0.15 into one common share until July 14, 2015. Additionally, the Company issued 859,477 common shares at a price of $0.12 in settlement of the Seabridge loan of $100,000, plus accrued
interest of $3,137.
On July 17 and 25, 2014, the Company closed the third and final tranche of its non-brokered private placement
originally announced March 25, 2014. In the third tranche, the Company issued a total of 5,033,334 units at a price of $0.12 per unit. The total gross proceeds raised in this tranche amounted to $604,000.
On August 6, 2014, Seabridge Gold Inc., on behalf of its wholly-owned subsidiary, Seabridge Gold Corporation, exercised 2,896,000 special
warrants and was issued 2,896,000 common shares.
E-17
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
8.
|
Share capital and other components of equity (contd)
|
On October 6 and 17, 2014, the Company closed the first and second tranche of a non
brokered private placement originally announced September 10, 2014. The Company issued a total of 12,053,331 units at $0.15 per unit, raising total gross proceeds of $1,808,000. Each Unit consists of one common share and one-half of one share
purchase warrant. Each full warrant entitles the holder to purchase one additional common share of the Company for a period of 12 months from closing of the private placement, at an exercise price of $0.18 per share for the first six-month period
following closing and at an exercise price of $0.21 per share for the second six-month period following closing. The Company paid a 5% cash finders fee to certain parties who qualified in accordance with securities legislation and TSX Venture
Exchange policies to receive a finders fee.
On May 28, 2015, the Company closed its non-brokered private placement financing
originally announced on May 6, 2015. The Company issued 25,000,000 common shares in the private placement, raising total gross proceeds of $2,000,000. No warrants, commissions or finders fees were paid in connection with the financing.
Warrants
The following table summarizes
information about the issued and outstanding warrants for the year ended June 30, 2015 and 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015
|
|
|
June 30, 2014
|
|
|
Number of
warrants
|
|
|
Weighted average
exercise price
|
|
|
Number of
warrants
|
|
|
Weighted average
exercise price
|
|
|
|
|
|
Warrants outstanding, beginning of year
|
|
|
5,753,683
|
|
|
$
|
0.29
|
|
|
|
8,860,350
|
|
|
$ 0.35
|
Warrants issued
|
|
|
9,776,663
|
|
|
|
0.18
|
|
|
|
1,220,833
|
|
|
0.15
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,170,500
|
)
|
|
0.12
|
Warrants expired
|
|
|
(5,753,683
|
)
|
|
|
0.29
|
|
|
|
(3,157,000
|
)
|
|
0.46
|
|
|
|
|
|
Warrants outstanding and exercisable, end of year
|
|
|
9,776,663
|
|
|
$
|
0.18
|
|
|
|
5,753,683
|
|
|
$ 0.29
|
|
Subsequent to June 30, 2015, 3,750,000 warrants with an exercise price of $0.15 expired.
As at June 30, 2015 there were 9,776,663 warrants outstanding and exercisable as follows:
|
|
|
|
|
|
|
Number of warrants outstanding
|
|
Exercise price
|
|
|
Expiry date
|
|
400,000
|
|
$
|
0.15
|
|
|
July 3, 2015
|
833,333
|
|
$
|
0.15
|
|
|
July 14, 2015
|
1,266,667
|
|
$
|
0.15
|
|
|
July 17, 2015
|
1,250,000
|
|
$
|
0.15
|
|
|
July 25, 2015
|
3,981,663
|
|
$
|
0.21
|
|
|
October 6, 2015
|
2,045,000
|
|
$
|
0.21
|
|
|
October 17, 2015
|
|
9,776,663
|
|
|
|
|
|
|
|
E-18
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
8.
|
Share capital and other components of equity (contd)
|
Special warrants
|
|
|
|
|
|
|
|
|
June 30, 2015
|
|
|
|
|
|
|
Number of special
warrants
|
|
|
Weighted average
exercise price
|
|
Special warrants outstanding, beginning of year
|
|
|
2,896,000
|
|
|
$ -
|
Special warrants exercised
|
|
|
(2,896,000
|
)
|
|
-
|
|
Special warrants outstanding, end of year
|
|
|
-
|
|
|
$ -
|
|
On August 6, 2014, Seabridge Gold Inc., on behalf of its wholly-owned subsidiary, Seabridge Gold
Corporation, exercised 2,896,000 special warrants and was issued 2,896,000 common shares.
Stock options
The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in
its discretion, and in accordance with the TSX Venture Exchange requirements, grant to directors, officers, employees and technical consultants of the Company, non-transferable stock options to purchase common shares, provided that the number of
common shares reserved for issuance is a rolling plan of 10% of the issued and outstanding common shares. Such options will be exercisable for a period of up to 5 years from the date of grant. Subject to the Board of Directors discretion, options
vest on date of grant.
The changes in options during the year ended June 30, 2015 and 2014 are as set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Number of
options
|
|
|
Weighted average
exercise price
|
|
|
Number of
options
|
|
|
Weighted average
exercise price
|
|
Options outstanding and exercisable, beginning of year
|
|
|
1,415,000
|
|
|
$
|
0.45
|
|
|
|
2,195,000
|
|
|
$ 0.46
|
Options granted
|
|
|
2,375,000
|
|
|
|
0.16
|
|
|
|
-
|
|
|
-
|
Options cancelled/expired
|
|
|
(570,000
|
)
|
|
|
0.40
|
|
|
|
(780,000
|
)
|
|
0.47
|
|
Options outstanding and exercisable, end of year
|
|
|
3,220,000
|
|
|
$
|
0.25
|
|
|
|
1,415,000
|
|
|
$ 0.45
|
|
E-19
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
8.
|
Share capital and other components of equity (contd)
|
As at June 30, 2015 there were 3,220,000 stock options outstanding as follows:
|
|
|
|
|
|
|
Number of stock options outstanding
|
|
Exercise price
|
|
|
Expiry date
|
|
100,000
|
|
$
|
0.40
|
|
|
October 12, 2015
|
500,000
|
|
$
|
0.35
|
|
|
December 14, 2015
|
50,000
|
|
$
|
0.40
|
|
|
May 12, 2016
|
110,000
|
|
$
|
0.60
|
|
|
June 10, 2016
|
25,000
|
|
$
|
0.60
|
|
|
August 22, 2016
|
185,000
|
|
$
|
0.60
|
|
|
December 22, 2016
|
1,35,0000
|
|
$
|
0.16
|
|
|
August 18, 2019
|
600,000
|
|
$
|
0.17
|
|
|
August 25, 2019
|
300,000
|
|
$
|
0.17
|
|
|
January 20, 2020
|
|
3,220,000
|
|
|
|
|
|
|
|
The weighted average expected life remaining of stock options outstanding at June 30, 2015 is 3.16 years
(June 30, 2014 2.40 years).
On August 18, 2014, the Company granted 1.35 million incentive stock options to key
non-director employees of the Company at an exercise price of $0.16 per share and exercisable for five years. Of these options, 675,000 vest immediately while the remaining 675,000 will vest immediately while the remaining
675,000 will vest upon the earlier of: (1) the sale of the Company; (2) sale of the Grassy Mountain asset; (3) completion of a
joint venture agreement on Grassy Mountain; or (4) approval of a Plan of Operation by the state of Oregon.
On August 25, 2014,
the Company granted 725,000 incentive stock options to directors and consultants of the Company pursuant to its stock option plan. These options are exercisable for a period of five years from the grant date at a price of $0.17 per share. Of these
options 362,500 will vest immediately while the remaining 362,500 will vest upon the earlier of: (1) the sale of the Company; (2) sale of the Grassy Mountain asset; (3) completion of a joint venture agreement on Grassy Mountain; or
(4) approval of a Plan of Operation by the state of Oregon.
On January 20, 2015, the Company granted 300,000 incentive stock
options to directors of the Company pursuant to its stock option plan. These options are exercisable for a period of five years from the grant date at a price of $0.17 per share. Of these options 150,000 will vest immediately while the remaining
150,000 will vest upon the earlier of: (1) the sale of the Company; (2) sale of the Grassy Mountain asset; (3) completion of a joint venture agreement on Grassy Mountain; or (4) approval of a Plan of Operation by the state of
Oregon.
For the year ended June 30, 2015, the Company recorded share-based payments of $198,848 (2014 - $Nil), based on the
following weighted average assumptions:
|
|
|
|
|
|
|
|
|
June 30, 2015
|
|
|
June 30, 2014
|
|
Expected life of options
|
|
|
5 years
|
|
|
-
|
Annualized volatility
|
|
|
113
|
%
|
|
-
|
Risk-free interest rate
|
|
|
1.39
|
%
|
|
-
|
Dividend rate
|
|
|
0
|
%
|
|
-
|
|
Stock option reserves
The stock option reserve
records items recognized as share-based payments until such time that the stock options are exercised, at which time the corresponding amount will be transferred to share capital.
E-20
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
Warrant reserves
The warrant reserve records items recognized as part of a unit financing, and for special warrants issued, until such time that the warrants
are exercised, at which time the corresponding amount will be transferred to share capital.
Accumulated other comprehensive income
The accumulated other comprehensive income reserve records exchange differences arising on translation of a subsidiary of the Company that has
a functional currency other than the Canadian dollar.
10.
|
Related party balances and key management personnel
|
The following amounts due to related parties are included in trade payables and accrued liabilities. These amounts are unsecured, non-interest
bearing and have no fixed terms of payments. All related party amounts are to key management personnel.
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Directors and officers of the Company
|
|
$
|
121,217
|
|
|
$
|
112,900
|
|
|
|
Transactions with related parties are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Management fees and other (1)
|
|
$
|
400,295
|
|
|
$
|
326,808
|
|
Director fees
|
|
|
-
|
|
|
|
24,025
|
|
Share-based payment
|
|
|
175,506
|
|
|
|
-
|
|
|
|
|
|
$
|
575,801
|
|
|
$
|
350,833
|
|
|
|
(1) in 2015, $192,863 (2014: $142,295) of management fees were allocated to exploration and evaluation assets as warranted.
During the year, the Company issued 859,477 common shares at a price of $0.12 in settlement of a related party loan (Note 8).
11.
|
Financial risk management
|
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the
risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
E-21
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
11.
|
Financial risk management (contd)
|
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a
financial loss. The Companys primary exposure to credit risk is on its cash and cash equivalents held in bank accounts. The majority of cash and cash equivalents are deposited in bank accounts which are held with major banks in Canada and
U.S.A. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a
planning and budgeting process in place to help determine the funds required to support the Companys normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business
requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents.
Historically,
the Companys main source of funding has been the issuance of equity securities for cash and cash equivalents, primarily through private placements. The Companys access to financing is always uncertain. There can be no assurance of
continued access to significant equity funding.
Foreign exchange risk
Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are
denominated in currencies that differ from the respective functional currency. The Company does not hedge its exposure to fluctuations in foreign exchange rates.
The following is an analysis of the Canadian dollar equivalent of financial assets and liabilities that are denominated in U.S. dollars:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,551
|
|
|
$
|
3,934
|
|
Accounts payable
|
|
|
(478,185)
|
|
|
|
(271,447)
|
|
|
|
|
|
$
|
(472,634)
|
|
|
$
|
(267,513)
|
|
|
|
Based on the above net exposures, as at June 30, 2015, a 10% change in the U.S. dollar to Canadian dollar
exchange rate would impact the Companys net loss by $47,263.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to significant interest rate risks.
Capital management
The Companys policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future
development of the business. The capital structure of the Company consists of equity, comprising share capital, net of accumulated deficit.
There were no changes in the Companys approach to capital management during the year. The Company is not subject to any externally
imposed capital requirements.
E-22
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
11.
|
Financial risk management (contd)
|
Fair value
The Companys financial instruments consist of cash and cash equivalents, trade payables and accrued liabilities and loans payable. The
carrying value of these financial instruments approximates their fair values due to the short term nature of these instruments.
12.
|
Segmented information
|
Operating segments
The Company operates in a
single reportable operating segment the acquisition and exploration of mineral properties.
Geographic segments
The Companys non-current assets are located in the following countries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2015
|
|
|
|
|
|
|
|
|
Canada
|
|
|
U.S.A.
|
|
|
Total
|
|
|
|
Exploration and evaluation assets
|
|
|
-
|
|
|
|
12,433,509
|
|
|
|
12,433,509
|
|
|
|
|
|
$
|
-
|
|
|
$
|
12,433,509
|
|
|
$
|
12,433,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2014
|
|
|
|
|
|
|
|
|
Canada
|
|
|
U.S.A.
|
|
|
Total
|
|
|
|
Equipment
|
|
$
|
1,349
|
|
|
$
|
-
|
|
|
$
|
1,349
|
|
Exploration and evaluation assets
|
|
|
-
|
|
|
|
8,777,390
|
|
|
|
8,777,390
|
|
|
|
|
|
$
|
1,349
|
|
|
$
|
8,777,390
|
|
|
$
|
8,778,739
|
|
|
|
13.
|
Supplemental disclosure with respect to cash flows
|
During the year ended June 30, 2015 and 2014, the Company incurred the following non-cash investing and financing activities that are not reflected in
the statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Exploration and evaluation assets included in trade payables and accrued liabilities
|
|
$
|
289,104
|
|
|
$
|
102,752
|
|
Shares issued for debt
|
|
$
|
303,137
|
|
|
|
-
|
|
|
|
E-23
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
The difference between tax expense for the year and the expected income taxes based on the statutory tax rates arises as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Loss before tax per the accounts
|
|
$
|
(810,920)
|
|
|
$
|
(968,836)
|
|
|
|
|
|
|
Income taxed at local statutory rates 26%
|
|
|
|
|
|
|
|
|
(2014 26%)
|
|
$
|
(211,000)
|
|
|
$
|
(252,000)
|
|
Foreign income taxed at other rate
|
|
|
-
|
|
|
|
(2,000)
|
|
Non-deductible expense
|
|
|
52,000
|
|
|
|
2,000
|
|
Share issue costs
|
|
|
(13,000)
|
|
|
|
(1,000)
|
|
Expiry of loss carryforward
|
|
|
60,000
|
|
|
|
-
|
|
Effect of foreign exchange and other
|
|
|
(104,000)
|
|
|
|
75,000
|
|
Unrecognized deferred tax assets
|
|
|
216,000
|
|
|
|
178,000
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Effective July 1, 2014, the Canadian Federal corporate tax rate remained at 15% and the British Columbia
provincial tax at 11%. The combined US Federal and applicable State tax rate is 38.36%.
The nature and tax effect of the taxable
temporary differences giving rise to deferred tax assets and liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2015
|
|
|
June 30,
2014
|
|
|
|
Non-capital losses
|
|
$
|
2,285,000
|
|
|
$
|
1,898,000
|
|
Undeducted financing costs
|
|
|
28,000
|
|
|
|
37,000
|
|
Cumulative eligible capital
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
Deferred Tax Asset
|
|
|
2,318,000
|
|
|
|
1,940,000
|
|
Offset deferred tax liabilities
|
|
|
(832,000)
|
|
|
|
(670,000)
|
|
|
|
|
|
|
1,486,000
|
|
|
|
1,270,000
|
|
Unrecognized deferred tax liability
|
|
|
(1,486,000)
|
|
|
|
(1,270,000)
|
|
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
E-24
Calico Resources Corp.
Notes to the consolidated financial statements
(Expressed in
Canadian dollars)
For the year ended June 30, 2015 and 2014
Deferred Tax Assets and Liabilities
As at June 30, 2015, the Company has estimated non-capital losses for income tax purposes that may be carried forward to reduce taxable
income derived in future years, as summarized below.
Canadian non-capital losses expire as follows:
|
|
|
|
|
Year of Expiry
|
|
|
|
2026
|
|
$
|
68,000
|
|
2027
|
|
|
29,000
|
|
2028
|
|
|
57,000
|
|
2029
|
|
|
81,000
|
|
2030
|
|
|
179,000
|
|
2031
|
|
|
644,000
|
|
2032
|
|
|
1,117,000
|
|
2033
|
|
|
1,027,000
|
|
2034
|
|
|
1,042,000
|
|
2035
|
|
|
692,000
|
|
|
|
|
|
|
Total
|
|
$
|
4,936,000
|
|
|
|
|
|
|
United States operating tax losses expire as follows:
|
|
|
|
|
Year of Expiry
|
|
|
|
2031
|
|
$
|
8,000
|
|
2032
|
|
|
569,000
|
|
2033
|
|
|
421,000
|
|
2034
|
|
|
501,000
|
|
2035
|
|
|
591,000
|
|
|
|
|
|
|
Total
|
|
$
|
2,090,000
|
|
|
|
|
|
|
Prior year comparatives have been reclassified in order to conform to the current year presentation.
E-25
Calico Resources Corp.
Condensed Consolidated Interim Financial Statements
Six Month
Period Ended December 31, 2015
(Unaudited prepared by Management)
(Expressed in Canadian Dollars)
E-26
MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING
The condensed consolidated interim unaudited financial statements of Calico Resources Corp. (An Exploration Stage Company) are the
responsibility of the Companys management. The financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and reflect managements best
estimates and judgment based on information currently available.
Management has developed and maintains a system of internal controls to
ensure that the Companys assets are safeguarded, transactions are authorized and properly recorded and financial information is reliable.
The Board of Directors is responsible for ensuring management fulfills its responsibilities for financial reporting and internal controls
through an audit committee. The Audit Committee reviews the results of the condensed consolidated interim unaudited financial statements prior to their submission to the Board of Directors for approval.
|
|
|
Paul A Parisotto
|
|
Alec Peck
|
Paul A Parisotto
|
|
Alec Peck
|
Chief Executive Officer
|
|
Chief Financial Officer
|
E-27
Condensed Consolidated Unaudited Interim Financial Statements
In accordance with National Instruments 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed
the condensed consolidated interim unaudited financial statements for the six months ended December 31, 2015.
E-28
Calico Resources Corp.
Condensed consolidated interim unaudited statements of financial position
(Expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
December 31,
2015
|
|
|
June 30,
2015
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
3
|
|
|
$
|
493,152
|
|
|
$
|
1,791,499
|
|
Receivables
|
|
|
|
|
|
|
6,936
|
|
|
|
11,207
|
|
Prepaid expenses
|
|
|
|
|
|
|
13,166
|
|
|
|
12,483
|
|
|
|
|
|
|
|
|
|
|
513,254
|
|
|
|
1,815,189
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation assets
|
|
|
4, 8
|
|
|
|
14,856,601
|
|
|
|
12,433,509
|
|
|
|
|
|
|
|
|
|
|
14,856,601
|
|
|
|
12,433,509
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
$
|
15,369,855
|
|
|
$
|
14,248,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables and accrued liabilities
|
|
|
5, 8
|
|
|
$
|
904,201
|
|
|
$
|
907,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
|
|
904,201
|
|
|
|
907,563
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
6
|
|
|
|
18,615,361
|
|
|
|
18,613,384
|
|
Reserves
|
|
|
7
|
|
|
|
2,488,526
|
|
|
|
2,463,604
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
3,202,395
|
|
|
|
1,841,170
|
|
Deficit
|
|
|
|
|
|
|
(9,840,628)
|
|
|
|
(9,577,023)
|
|
|
|
TOTAL SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
14,465,654
|
|
|
|
13,341,135
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
$
|
15,369,855
|
|
|
$
|
14,248,698
|
|
|
|
Approved on behalf of the Board by:
Approved on behalf of the Board by:
|
|
|
John Pollesel
|
|
Director
|
John Pollesel
|
|
|
|
|
Kevin Milledge
|
|
Director
|
Kevin Milledge
|
|
Kevin Milledge
|
See accompanying notes to the condensed consolidated interim unaudited financial statements
E-29
Calico Resources Corp.
Condensed consolidated interim unaudited statements of loss and comprehensive income
(Expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month period ended
|
|
|
Six month period ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit and tax services
|
|
$
|
7,900
|
|
|
$
|
10,468
|
|
|
$
|
14,150
|
|
|
$
|
18,468
|
|
Administration
|
|
|
16,729
|
|
|
|
22,133
|
|
|
|
41,306
|
|
|
|
52,267
|
|
Insurance
|
|
|
4,708
|
|
|
|
2,662
|
|
|
|
6,083
|
|
|
|
5,325
|
|
Investor relations
|
|
|
1,079
|
|
|
|
871
|
|
|
|
2,509
|
|
|
|
7,672
|
|
Legal services
|
|
|
31,754
|
|
|
|
24,498
|
|
|
|
84,165
|
|
|
|
61,105
|
|
Management fees
|
|
|
44,619
|
|
|
|
52,334
|
|
|
|
91,385
|
|
|
|
91,687
|
|
Share-based payments
|
|
|
12,461
|
|
|
|
11,496
|
|
|
|
24,922
|
|
|
|
154,562
|
|
Transfer agent and filing fees
|
|
|
2,061
|
|
|
|
6,518
|
|
|
|
6,204
|
|
|
|
31,522
|
|
Travel, promotion and board meetings
|
|
|
4,540
|
|
|
|
8,594
|
|
|
|
6,709
|
|
|
|
9,821
|
|
|
|
|
|
|
(125,851
|
)
|
|
|
(139,574
|
)
|
|
|
(277,433
|
)
|
|
|
(432,429)
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
564
|
|
|
|
-
|
|
|
|
3,662
|
|
|
|
58
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,723)
|
|
Foreign exchange gain / (loss)
|
|
|
(2,194
|
)
|
|
|
963
|
|
|
|
10,166
|
|
|
|
12,708
|
|
|
|
Net loss for period
|
|
|
(127,481
|
)
|
|
|
(138,611
|
)
|
|
|
(263,605
|
)
|
|
|
(424,386)
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations
|
|
|
523,381
|
|
|
|
347,389
|
|
|
|
1,361,225
|
|
|
|
775,237
|
|
|
|
Total comprehensive income
|
|
$
|
395,900
|
|
|
$
|
208,778
|
|
|
$
|
1,097,620
|
|
|
$
|
350,851
|
|
|
|
Loss per share basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01)
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
102,445,845
|
|
|
|
76,301,751
|
|
|
|
102,445,845
|
|
|
|
69,533,245
|
|
|
|
See accompanying notes to the condensed consolidated interim unaudited financial statements
E-30
Calico Resources Corp.
Condensed consolidated interim unaudited statements of changes in shareholders equity
(Expressed in Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital
|
|
|
Subscriptions
Received
|
|
|
Reserves
|
|
|
Accumulated other
comprehensive
income
|
|
|
Deficit
|
|
|
Total
|
|
|
|
Number of shares
|
|
|
Amount
|
|
|
Amount
|
|
|
Warrant and stock
option reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2014
|
|
|
54,137,036
|
|
|
$
|
13,721,608
|
|
|
$
|
54,000
|
|
|
$
|
2,399,598
|
|
|
$
|
260,233
|
|
|
$
|
(8,766,103
|
)
|
|
$
|
7,669,336
|
|
Shares issued for cash - private placements
|
|
|
17,886,665
|
|
|
|
2,508,000
|
|
|
|
(54,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,454,000
|
|
Fair value of share purchase warrants
|
|
|
|
|
|
|
(421,197
|
)
|
|
|
-
|
|
|
|
421,197
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued for debt
|
|
|
2,526,144
|
|
|
|
303,137
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
303,137
|
|
Share issue costs
|
|
|
-
|
|
|
|
(30,395
|
)
|
|
|
-
|
|
|
|
(5,799
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(36,194)
|
|
Shares issued non-cash
|
|
|
2,896,000
|
|
|
|
550,240
|
|
|
|
-
|
|
|
|
(550,240
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,562
|
|
|
|
|
|
|
|
|
|
|
|
154,562
|
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
775,237
|
|
|
|
-
|
|
|
|
775,237
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(458,600
|
)
|
|
|
(458,600)
|
|
|
|
Balance at December 31, 2014
|
|
|
77,445,845
|
|
|
$
|
16,631,393
|
|
|
$
|
-
|
|
|
$
|
2,419,318
|
|
|
$
|
1,035,470
|
|
|
$
|
(9,224,703
|
)
|
|
$
|
10,861,478
|
|
Balance at June 30, 2015
|
|
|
102,445,845
|
|
|
$
|
18,613,384
|
|
|
$
|
-
|
|
|
$
|
2,463,604
|
|
|
$
|
1,841,170
|
|
|
$
|
(9,577,023
|
)
|
|
$
|
13,341,135
|
|
Shares issued for cash - private placements
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair value of share purchase warrants
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued for debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share issue cost recovery
|
|
|
-
|
|
|
|
1,977
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,977
|
|
Shares issued non-cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,922
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,922
|
|
Currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,361,225
|
|
|
|
-
|
|
|
|
1,361,225
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(263,605
|
)
|
|
|
(263,605)
|
|
|
|
Balance at December 31, 2015
|
|
|
102,445,845
|
|
|
$
|
18,615,361
|
|
|
$
|
-
|
|
|
$
|
2,488,526
|
|
|
$
|
3,202,395
|
|
|
$
|
(9,840,628
|
)
|
|
$
|
14,465,654
|
|
|
|
See accompanying notes to the condensed consolidated interim unaudited financial statements
E-31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three month period ended
|
|
|
Six month period ended
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for period
|
|
$
|
(127,481
|
)
|
|
$
|
(138,611
|
)
|
|
$
|
(263,605
|
)
|
|
$
|
(424,386)
|
|
Adjustments for non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
-
|
|
|
|
101
|
|
|
|
-
|
|
|
|
202
|
|
Share-based payments
|
|
|
12,461
|
|
|
|
11,496
|
|
|
|
24,922
|
|
|
|
154,562
|
|
Changes in non-cash working capital items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivable and prepaid expenses
|
|
|
6,561
|
|
|
|
5,236
|
|
|
|
3,587
|
|
|
|
26,308
|
|
Trade payables and accrued liabilities
|
|
|
(10,955
|
)
|
|
|
(85,474
|
)
|
|
|
(16,030
|
)
|
|
|
(258,988)
|
|
|
|
Net cash flows used in operating activities
|
|
|
(119,414
|
)
|
|
|
(207,252
|
)
|
|
|
(251,126
|
)
|
|
|
(502,302)
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures on exploration and evaluation assets
|
|
|
(430,667
|
)
|
|
|
(651,407
|
)
|
|
|
(1,066,529
|
)
|
|
|
(931,259)
|
|
|
|
Net cash flows used in investing activities
|
|
|
(430,667
|
)
|
|
|
(651,407
|
)
|
|
|
(1,066,529
|
)
|
|
|
(931,259)
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
-
|
|
|
|
1,787,154
|
|
|
|
-
|
|
|
|
2,417,806
|
|
Subscriptions received
|
|
|
-
|
|
|
|
(816,796
|
)
|
|
|
-
|
|
|
|
-
|
|
Share issue cost recovery
|
|
|
-
|
|
|
|
-
|
|
|
|
1,977
|
|
|
|
-
|
|
|
|
Net cash flows from investing activities
|
|
|
-
|
|
|
|
970,358
|
|
|
|
1,977
|
|
|
|
2,417,806
|
|
|
|
Currency translation adjustment
|
|
|
30,620
|
|
|
|
17,684
|
|
|
|
17,331
|
|
|
|
14,183
|
|
|
|
Increase / (decrease) in cash and cash equivalents
|
|
|
(519,461
|
)
|
|
|
129,383
|
|
|
|
(1,298,347
|
)
|
|
|
998,428
|
|
Cash and cash equivalents, beginning of the period
|
|
|
1,012,613
|
|
|
|
876,734
|
|
|
|
1,791,499
|
|
|
|
7,689
|
|
|
|
Cash and cash equivalents, end of the period
|
|
$
|
493,152
|
|
|
$
|
1,006,117
|
|
|
$
|
493,152
|
|
|
$
|
1,006,117
|
|
|
|
Note 11 Non-cash transactions
See accompanying notes to the condensed consolidated interim unaudited financial statements
E-32
Calico Resources Corp. (the Company) and its wholly owned subsidiary, Calico Resources USA Corp. are focused on advancing its 100%
owned Grassy Mountain Gold Project (Grassy Mountain) located in Oregon, U.S.A. The Companys shares are traded on the TSX Venture Exchange (TSX-V) under the symbol CKB. The head office and principal address
of the Company is located at Suite 615, 800 West Pender Street, Vancouver, British Columbia, Canada, V6C 2V6. The Companys registered and records office address is Suite 2600, 1066 West Hastings Street, Vancouver, British Columbia, Canada, V6E
3X1.
2.
|
Statement of compliance and basis of preparation
|
These condensed consolidated interim unaudited financial statements were authorized for issue on February 26, 2016 by the directors of
the Company.
Statement of compliance
These condensed consolidated interim unaudited financial statements have been prepared in accordance with International Accounting Standard
34, Interim Financial Reporting (IAS 34) using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and
interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The accounting policies and methods of computation applied by the Company in these condensed consolidated interim unaudited financial statements
are the same as those applied in the Companys annual financial statements as at and for the year ended June 30, 2015.
The
condensed consolidated interim unaudited financial statements do not include all of the information and note disclosures required for full annual financial statements and should be read in conjunction with the Companys annual financial
statements as at and for the year ended June 30, 2015.
Going concern
These condensed consolidated interim unaudited financial statements have been prepared on the assumption that the Company will continue as a
going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. A different basis of measurement may be appropriate if the Company was
not expected to continue operations for the foreseeable future. At December 31, 2015, the Company had not achieved profitable operations, had a net loss of $263,605 for the six month period ended December 31, 2015 and accumulated losses of
$9,840,628 since inception, had not advanced its mineral properties to commercial production and expects to incur further losses in the development of its business, all of which indicate a material uncertainty that may cast significant doubt upon
the Companys ability to continue as a going concern. The Companys continuation as a going concern is dependent upon successful results from its mineral property exploration activities and its ability to attain profitable operations to
generate funds and/or its ability to raise equity capital or borrowings sufficient to meet its current and future obligations. Although the Company has been successful in the past in raising funds to continue operations, there is no assurance it
will be able to do so in the future.
Basis of preparation
The condensed consolidated interim unaudited financial statements have been prepared on a historical cost basis. The condensed consolidated interim unaudited
financial statements are presented in Canadian dollars.
E-33
2.
|
Statement of compliance and basis of preparation (contd)
|
Significant accounting judgments and estimates
These condensed consolidated interim unaudited financial statements are unaudited and prepared on a condensed basis in accordance with the
International Accounting Standards (IAS) 34, Interim Financial Reporting issued by the International Accounting Standard Board (IASB). These condensed consolidated interim unaudited financial statements have been prepared in
accordance with the accounting policies described in Note 3 of the Companys Annual Financial Statements as at and for the year ended June 30, 2015. Accordingly, these condensed consolidated interim unaudited financial statements for the
six month period ended December 31, 2015 and 2014 should be read together with the Annual Financial Statements as at, and for the year ended, June 30, 2015.
The following standards and interpretations have been issued but are not yet effective:
The following standards, interpretations and amendments, which have not been applied in these condensed consolidated interim unaudited
financial statements, may have an effect on the Companys future condensed consolidated interim unaudited financial statements. The Company is in the process of evaluating these new standards.
IFRS 9 Financial instruments, classification and measurement
IFRS 9 Financial Instruments is part of the IASBs wider project to replace IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for
financial assets: amortized cost and fair value. The basis of classification depends on the entitys business model and the contractual cash flow characteristics of the financial asset. The standard is effective for annual periods beginning on
or after January 1, 2018. The Company is in the process of evaluating the impact of the new standard.
3.
|
Cash and cash equivalents
|
Cash and cash equivalents include guaranteed investment certificates with a term to maturity of up to three months from date of acquisition
and which can be redeemed at any time without penalty.
4.
|
Exploration and evaluation assets
|
The following is a description of the Companys Grassy Mountain exploration and evaluation assets and the related spending commitments.
|
|
|
|
|
Period ended December 31, 2015
|
|
Property acquisition costs
|
|
|
|
|
Balance, June 30, 2015
|
|
$
|
3,627,985
|
|
Additions
|
|
|
147,266
|
|
Balance, December 31, 2015
|
|
$
|
3,775,251
|
|
Exploration and evaluation costs
|
|
|
|
|
Balance, June 30, 2015
|
|
$
|
8,805,524
|
|
Costs incurred during period:
|
|
|
|
|
Consulting (Note 8)
|
|
|
268,884
|
|
Engineering
|
|
|
18,535
|
|
Environmental
|
|
|
405,106
|
|
Field supplies
|
|
|
562
|
|
Other costs
|
|
|
51,386
|
|
Permits and fees
|
|
|
146,009
|
|
Travel and accommodations
|
|
|
41,450
|
|
|
|
|
931,932
|
|
Balance, December 31, 2015
|
|
|
9,737,456
|
|
Currency translation adjustment
|
|
|
1,343,894
|
|
Balance, December 31, 2015
|
|
$
|
14,856,601
|
|
E-34
4.
|
Exploration and evaluation assets (contd)
|
USA Oregon
On February 5, 2013, the Company exercised its option to acquire a 100% interest in the Grassy Mountain Project from Seabridge Gold Inc.
(Seabridge) by issuing 6,433,000 common shares (the Issued Shares) and 4,567,000 Special Warrants to Seabridge. The shares and Special Warrants were valued at $0.19 each which was based on the trading price of the shares at
the date of issuance. Each Special Warrant is exercisable to acquire one additional common share of the Company (a Special Warrant Share) for no additional consideration. The Special Warrants can only be exercised to the extent that,
after exercise, Seabridge holds less than 20% of the outstanding shares of the Company. Calico has agreed to ask its shareholders to approve the exercise of those outstanding Special Warrants and approve Seabridge then holding more than 20% of the
issued shares in Calico. Pursuant to the agreement, the Company agreed to guarantee the obligations of Calico Resources USA Corp., including those guaranteed to Seabridge.
On September 26, 2013, Seabridge acquired, on behalf of its wholly owned subsidiary, Seabridge Gold Corp., 1,671,000 common shares upon
exercise of 1,671,000 Special Warrants. Including the initial 2,000,000 common shares issued under the original definitive option agreement dated April 18, 2011, at that time, Seabridge then owned and controlled 10,104,000 common shares and
2,896,000 Special Warrants of the Company, representing 19.55% of the outstanding common shares and 100% of the Special Warrants of the Company.
On February 19, 2014, the Company held its Annual and Special General Meeting of its shareholders. Shareholders approved the exercise by
Seabridge of the balance of its 2,896,000 Special Warrants, then resulting in Seabridge holding 13 million common shares of the Company, representing 23.81% of Calicos common shares at that time. With subsequent share issuances, this
interest has fallen below 20%.
There are existing letters of credit posted with the State of Oregon Department of Geology and
Mineral Industries (DOGAMI) in the amount of $146,200 in respect of possible reclamation work required on the property. This existing security has been posted by Seabridge. The Company is required to use reasonable commercial efforts to arrange for
the release of the existing security and replace this existing security with new letters of credit or reclamation bonds as soon as possible after registered title to the property has transferred to the Company. The intention of the Company is to
replace the security; however this has not been completed.
On November 1, 2014, the Company entered into an amendment of the mining
lease and agreement regarding Grassy Mountain with Sherry & Yates Inc., which originally provided the Company with an option to buy down the royalty to 1%, with a cash payment of $2.1 US million at any time up to February 16, 2015. The
terms of the agreement as originally entered into on February 16, 2004 provided for production royalty payments to be based on the price of gold. The rates are as follows:
|
|
|
Production Royalty Rate on Gross Proceeds
|
|
Gold Price Per Ounce ($US)
|
4.0%
|
|
Less than $500
|
5.0%
|
|
$500-800
|
6.0%
|
|
Over $800
|
In addition, the original agreement provides for a 4% production royalty on any other metals, other than gold.
On November 1, 2014, Sherry & Yates Inc. agreed to amend the buy down option as follows:
from February 17, 2015 to February 16, 2016 the royalty can be bought down to 1% for $2.2 US million;
from February 17, 2016 to February 16, 2017 the royalty can be bought down to 1.25% for $2.3 US million; and
from February 17, 2017 to February 16, 2018 the royalty can be bought down to 1.5% for $2.4 US million.
The advance royalty payment remains the same at $100,000 US per year, due on February 15th of each year. (Subsequent to December 31,
2015, the payment of $100,000 US due on February 15, 2016, was made.)
E-35
5.
|
Trade payables and accrued liabilities (contd)
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2015
|
|
|
|
Trade payables *
|
|
$
|
569,095
|
|
|
$
|
671,942
|
|
Amounts due to related parties (Note 8)
|
|
|
126,641
|
|
|
|
121,217
|
|
Accrued liabilities
|
|
|
208,465
|
|
|
|
114,404
|
|
|
|
|
|
$
|
904,201
|
|
|
$
|
907,563
|
|
|
|
*Included in trade payables at December 31, 2015 is the amount of $443,246 (June 30, 2015: $443,246)
representing invoiced legal fees from the Companys previous legal counsel. The Company is contesting the amount of these invoices, and an action was started in the Supreme Court of British Columbia for a review of all of these invoices to
determine what amount for which the Company would then be liable. The review was completed on January 29, 2016, and the Company is currently waiting for the Courts decision.
6.
|
Share capital and other components of equity
|
Authorized share capital
Unlimited number of common shares without par value.
Issued share capital
At
December 31, 2015, there were 102,445,845 issued and fully paid common shares (June 30, 2015 102,445,845).
Warrants
The following table summarizes information about the issued and outstanding warrants for the period ended December 31, 2015 and the year
ended June 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
June 30, 2015
|
|
|
|
Number of
warrants
|
|
|
Weighted
average
exercise
price
|
|
|
Number of
warrants
|
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
Warrants outstanding, beginning of period
|
|
|
9,776,663
|
|
|
$
|
0.18
|
|
|
|
5,753,683
|
|
|
$
|
0.29
|
|
Warrants issued
|
|
|
-
|
|
|
|
-
|
|
|
|
9,776,663
|
|
|
|
0.18
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants expired
|
|
|
(9,776,663
|
)
|
|
|
0.18
|
|
|
|
(5,753,683
|
)
|
|
|
0.29
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, end of period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,776,663
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
As at December 31, 2015 there were no warrants outstanding.
Stock options
The Company has adopted an
incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the TSX Venture Exchange requirements, grant to directors, officers, employees and technical
consultants of the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance is a rolling plan of 10% of the issued and outstanding common shares. Such options will be
exercisable for a period of up to 5 years from the date of grant. Subject to the Board of Directors discretion, options vest on date of grant.
E-36
6.
|
Share capital and other components of equity (contd)
|
The changes in options during the period ended December 31, 2015 and the year ended
June 30, 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
Number of options
|
|
|
Weighted average
exercise price
|
|
|
Number of options
|
|
|
Weighted average
exercise price
|
|
|
|
Options outstanding and exercisable, beginning of period
|
|
|
3,220,000
|
|
|
$
|
0.25
|
|
|
|
1,415,000
|
|
|
$
|
0.45
|
|
Options granted
|
|
|
-
|
|
|
|
-
|
|
|
|
2,375,000
|
|
|
|
0.16
|
|
Options cancelled/expired
|
|
|
(600,000
|
)
|
|
|
0.36
|
|
|
|
(570,000
|
)
|
|
|
0.40
|
|
|
|
Options outstanding and exercisable, end of period
|
|
|
2,620,000
|
|
|
$
|
0.22
|
|
|
|
3,220,000
|
|
|
$
|
0.25
|
|
|
|
As at December 31, 2015 there were 2,620,000 stock options outstanding as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stock options outstanding
|
|
|
Exercise price
|
|
|
Expiry date
|
|
|
|
|
|
|
50,000
|
|
|
$
|
0.40
|
|
|
|
May 12, 2016
|
|
|
|
|
110,000
|
|
|
$
|
0.60
|
|
|
|
June 10, 2016
|
|
|
|
|
25,000
|
|
|
$
|
0.60
|
|
|
|
August 22, 2016
|
|
|
|
|
185,000
|
|
|
$
|
0.60
|
|
|
|
December 22, 2016
|
|
|
|
|
1,350,000
|
|
|
$
|
0.16
|
|
|
|
August 18, 2019
|
|
|
|
|
600,000
|
|
|
$
|
0.17
|
|
|
|
August 25, 2019
|
|
|
|
|
300,000
|
|
|
$
|
0.17
|
|
|
|
January 20, 2020
|
|
|
|
|
|
|
2,620,000
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average expected life remaining of stock options outstanding at December 31, 2015 is 3.53
years (June 30, 2015 3.16 years).
Stock option reserves
The stock option reserve
records items recognized as share-based payments until such time that the stock options are exercised, at which time the corresponding amount will be transferred to share capital.
Warrant reserves
The warrant reserve records
items recognized as part of a unit financing, and for special warrants issued, until such time that the warrants are exercised, at which time the corresponding amount will be transferred to share capital.
Accumulated other comprehensive income
The
accumulated other comprehensive income reserve records exchange differences arising on translation of a subsidiary of the Company that has a functional currency other than the Canadian dollar.
E-37
8.
|
Related party balances and key management personnel
|
The following amounts due to related parties are included in trade payables and accrued liabilities. These amounts are unsecured, non-interest bearing and
have no fixed terms of payments. All related party amounts are to key management personnel.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2015
|
|
|
|
Directors and officers of the Company
|
|
$
|
126,641
|
|
|
$
|
121,217
|
|
|
|
Transactions with related parties are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
Six month period ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
Management fees and other (1)
|
|
$
|
125,215
|
|
|
$
|
158,464
|
|
Share-based payment
|
|
|
21,897
|
|
|
|
-
|
|
|
|
|
|
$
|
147,112
|
|
|
$
|
158,464
|
|
|
|
(1)
|
In 2015, $34,600 (2014: $80,499) of management fees were allocated to exploration and evaluation assets as warranted.
|
9.
|
Financial risk management
|
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the
risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit risk
Credit risk is the risk that one
party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Companys primary exposure to credit risk is on its cash and cash equivalents held in bank accounts. The majority of
cash and cash equivalents are deposited in bank accounts which are held with major banks in Canada and U.S.A. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies.
Liquidity risk
Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Companys normal operating requirements on an ongoing
basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents.
Historically, the Companys main source of funding has been the issuance of equity securities for cash and cash equivalents, primarily
through private placements. The Companys access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.
Foreign exchange risk
Foreign currency risk is
the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company does not hedge its exposure to fluctuations in
foreign exchange rates.
E-38
9.
|
Financial risk management (contd)
|
The following is an analysis of the Canadian dollar equivalent of financial assets and
liabilities that are denominated in U.S. dollars:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
June 30,
2015
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,529
|
|
|
$
|
5,551
|
|
Accounts payable
|
|
|
(431,519
|
)
|
|
|
(478,185)
|
|
|
|
|
|
$
|
413,990
|
|
|
$
|
(472,634)
|
|
|
|
Based on the above net exposures, as at December 31, 2015, a 10% change in the U.S. dollar to Canadian
dollar exchange rate would impact the Companys net loss by $41,399.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to significant interest rate risks.
Capital management
The Companys policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future
development of the business. The capital structure of the Company consists of equity, comprising share capital, net of accumulated deficit.
There were no changes in the Companys approach to capital management during the period. The Company is not subject to any externally
imposed capital requirements.
Fair value
The Companys financial instruments consist of cash and cash equivalents, trade payables and accrued liabilities and loans payable. The
carrying value of these financial instruments approximates their fair values due to the short term nature of these instruments.
10.
|
Segmented information
|
Operating segments
The Company operates in a
single reportable operating segment the acquisition and exploration of mineral properties.
E-39
10.
|
Segmented information (contd)
|
Geographic segments
The Companys non-current assets are located in the following countries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2015
|
|
|
|
|
|
|
|
|
Canada
|
|
|
U.S.A.
|
|
|
Total
|
|
|
|
Exploration and evaluation assets
|
|
|
-
|
|
|
$
|
14,856,601
|
|
|
$
|
14,856,601
|
|
|
|
|
|
|
|
|
As at June 30, 2015
|
|
|
|
Canada
|
|
|
U.S.A.
|
|
|
Total
|
|
|
|
Exploration and evaluation assets
|
|
|
-
|
|
|
$
|
12,433,509
|
|
|
$
|
12,433,509
|
|
|
|
11.
|
Supplemental disclosure with respect to cash flows
|
During the six month period ended December 31, 2015 and 2014, the Company incurred the following non-cash investing and financing
activities that are not reflected in the statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
Six month period ended
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
|
Exploration and evaluation assets included in trade payables and accrued liabilities
|
|
$
|
301,769
|
|
|
$
|
163,929
|
|
|
|
E-40
APPENDIX F
PARAMOUNT GOLD NEVADA CORP. CORPORATION
PRO-FORMA CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2016
(Unaudited - Expressed
in U.S. Dollars)
On March 14, 2016, Paramount Gold Nevada Corp. (Paramount or the Company) and Calico
Resources Corp. (Calico) entered into a definitive arrangement agreement dated as of (the Arrangement Agreement) pursuant to which Paramount will acquire all of the issued and outstanding common shares of Calico (the
Transaction) by way of a plan of arrangement (the Plan of Arrangement). Pursuant to the Plan of Arrangement, Paramount will acquire each common share of Calico from Calicos shareholders in exchange for 0.07 of a
share of Paramount common stock (the Exchange Ratio).
The unaudited
pro forma
condensed combined statement of
operations for the year ended June 30, 2015 and the nine month period ended March 31, 2016 combines the historical consolidated statements of operations of Paramount and Calico, giving effect to the acquisition as if it had occurred on
July 1, 2014. The unaudited
pro forma
condensed combined balance sheet as of March 31, 2016 combines the historical consolidated balance sheets of Paramount and Calico, giving effect to the acquisition as if it had occurred on March 31,
2016. The historical consolidated financial information has been adjusted in the unaudited
pro forma
condensed combined financial statements to give effect to
pro forma
events that are (i) directly attributable to the acquisition,
(ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results.
The unaudited
pro forma
condensed combined financial statements should be read in conjunction with (i) the accompanying notes to
the unaudited
pro forma
condensed combined financial statements; (ii) the historical financial statements of Paramount and the accompanying notes in Paramounts Annual Report on Form 10-K for the year ended June 30, 2015;
(iii) the historical financial statements of Calico and the accompanying notes in Calicos annual audited financial statements for the year ended June 30, 2015 ; and (iv) additional information contained in, or incorporated by
reference into, proxy statement filed by Paramount with the Securities and Exchange Commission on May 27, 2016.
The unaudited
pro
forma
condensed combined financial statements have been presented for informational purposes only. The
pro forma
information is not necessarily indicative of what the combined companys financial position or results of operations
actually would have been had the acquisition been completed as of the dates indicated. Since the unaudited
pro forma
condensed combined financial statements have been prepared based on preliminary estimates, the final amounts recorded at the
date of the acquisition may differ materially from the information presented. These estimates are subject to change pending further review of the assets acquired and liabilities assumed. In addition, the unaudited
pro forma
condensed combined
financial information does not intend to project the future financial position or operating results of the combined company.
F-1
PARAMOUNT GOLD NEVADA CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March
31, 2016
Historical
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paramount As of
March 31,
2016
|
|
|
Calico As
of December 31,
2015
|
|
|
Pro Forma
Adjustments
(Note 4)
|
|
|
Pro Forma
Combined
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,070,985
|
|
|
$
|
356,302
|
|
|
|
|
|
|
$
|
7,427,287
|
|
Prepaid and deposits
|
|
|
219,939
|
|
|
|
5,011
|
|
|
|
|
|
|
|
224,950
|
|
Accounts receivable
|
|
|
-
|
|
|
|
9,513
|
|
|
|
|
|
|
|
9,513
|
|
Promissory note receivable
|
|
|
300,000
|
|
|
|
-
|
|
|
|
(300,000
|
) (d)
|
|
|
-
|
|
Prepaid insurance, current portion
|
|
|
36,778
|
|
|
|
-
|
|
|
|
|
|
|
|
36,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
7,627,702
|
|
|
|
370,826
|
|
|
|
(300,000
|
)
|
|
|
7,698,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral properties
|
|
|
28,036,135
|
|
|
|
10,733,891
|
|
|
|
(7,702,938
|
) (a)
|
|
|
36,995,757
|
|
|
|
|
|
|
|
|
|
|
|
|
5,928,669
|
(b)
|
|
|
|
|
Property and equipment (Note 9)
|
|
|
13,389
|
|
|
|
-
|
|
|
|
|
|
|
|
13,389
|
|
Reclamation bond
|
|
|
2,386,336
|
|
|
|
-
|
|
|
|
|
|
|
|
2,386,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Assets
|
|
|
30,435,860
|
|
|
|
10,733,891
|
|
|
|
(1,774,269
|
)
|
|
|
39,395,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
38,063,562
|
|
|
$
|
11,104,717
|
|
|
$
|
(2,074,269
|
)
|
|
$
|
47,094,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
326,205
|
|
|
$
|
653,285
|
|
|
|
|
|
|
$
|
979,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
326,205
|
|
|
|
653,285
|
|
|
|
-
|
|
|
|
979,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclamation and environmental obligation
|
|
|
1,280,270
|
|
|
|
-
|
|
|
|
|
|
|
|
1,280,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,606,475
|
|
|
|
653,285
|
|
|
|
-
|
|
|
|
2,259,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01, 50,000,000 authorized shares, 8,518,791 issued and outstanding at
March 31, 2016 and at June 30, 2015
|
|
|
85,188
|
|
|
|
13,449,598
|
|
|
|
(13,377,886
|
) (b)
|
|
$
|
156,900
|
|
Additional paid in capital
|
|
|
64,989,672
|
|
|
|
1,797,960
|
|
|
|
6,507,491
|
(b) (d)
|
|
|
73,295,123
|
|
Deficit
|
|
|
(28,617,773
|
)
|
|
|
(7,109,856
|
)
|
|
|
(7,702,938
|
) (a)
|
|
|
(28,617,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
14,812,794
|
(b)
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
-
|
|
|
|
2,313,730
|
|
|
|
(2,313,730
|
) (b)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
36,457,087
|
|
|
|
10,451,432
|
|
|
|
(2,074,269
|
)
|
|
|
44,834,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
38,063,562
|
|
|
$
|
11,104,717
|
|
|
$
|
(2,074,269
|
)
|
|
$
|
47,094,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-2
PARAMOUNT GOLD NEVADA CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paramount
Year Ended
June 30, 2015
|
|
|
Calico
Year Ended
June 30, 2015
|
|
|
Pro Forma
Adjustments
(Note 4)
|
|
|
Pro Forma
Combined
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
136,437
|
|
|
$
|
3,411
|
|
|
|
|
|
|
$
|
139,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
136,437
|
|
|
|
3,411
|
|
|
|
|
|
|
|
139,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
910,215
|
|
|
|
15,408
|
|
|
|
2,416,944
|
|
|
a
|
3,342,567
|
|
Land holding costs
|
|
|
444,756
|
|
|
|
-
|
|
|
|
|
|
|
|
444,756
|
|
Professional fees
|
|
|
508,711
|
|
|
|
185,814
|
|
|
|
|
|
|
|
694,525
|
|
Salaries and benefits
|
|
|
373,345
|
|
|
|
169,969
|
|
|
|
|
|
|
|
543,314
|
|
Directors compensation
|
|
|
123,149
|
|
|
|
444
|
|
|
|
|
|
|
|
123,593
|
|
General and administrative
|
|
|
211,277
|
|
|
|
314,228
|
|
|
|
|
|
|
|
525,505
|
|
Insurance
|
|
|
106,333
|
|
|
|
9,103
|
|
|
|
|
|
|
|
115,436
|
|
Depreciation
|
|
|
1,333
|
|
|
|
1,153
|
|
|
|
|
|
|
|
2,486
|
|
Accretion
|
|
|
134,768
|
|
|
|
-
|
|
|
|
|
|
|
|
134,768
|
|
Write down of mineral properties
|
|
|
337,400
|
|
|
|
-
|
|
|
|
|
|
|
|
337,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
3,151,287
|
|
|
|
696,119
|
|
|
|
2,416,944
|
|
|
|
6,264,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before other items
|
|
|
3,014,850
|
|
|
|
692,708
|
|
|
|
2,416,944
|
|
|
|
6,124,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(4,195
|
)
|
|
|
(3,591
|
)
|
|
|
|
|
|
|
(7,786
|
)
|
Interest and service charges
|
|
|
2,252,527
|
|
|
|
4,037
|
|
|
|
|
|
|
|
2,256,564
|
|
Gain on sale of marketable securities
|
|
|
(31,975
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(31,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
5,231,207
|
|
|
|
693,154
|
|
|
|
2,416,944
|
|
|
|
8,341,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale-securities
|
|
|
115,342
|
|
|
|
-
|
|
|
|
|
|
|
|
115,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss for the Period
|
|
$
|
5,346,549
|
|
|
$
|
693,154
|
|
|
$
|
2,416,944
|
|
|
$
|
8,456,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.64
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.54
|
|
Diluted
|
|
$
|
0.64
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.54
|
|
Weighted Average Number of Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Used in Per Share Calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,185,999
|
|
|
|
75,785,794
|
|
|
|
7,171,209
|
|
|
|
15,357,208
|
|
Diluted
|
|
|
8,185,999
|
|
|
|
75,785,794
|
|
|
|
7,171,209
|
|
|
|
15,357,208
|
|
F-3
PARAMOUNT GOLD NEVADA CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paramount
Nine Month
Period Ended
March 31, 2016
|
|
|
Calico
Nine Month
Period Ended
March 31, 2016
(Note 1)
|
|
|
Pro Forma
Adjustments
(Note 4)
|
|
|
Pro Forma
Combined
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
$
|
130,924
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
130,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
130,924
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
548,113
|
|
|
|
(5,960
|
)
|
|
|
2,234,571
|
(a)
|
|
|
2,776,724
|
|
Land holding costs
|
|
|
296,664
|
|
|
|
-
|
|
|
|
-
|
|
|
|
296,664
|
|
Professional fees
|
|
|
559,356
|
|
|
|
103,141
|
|
|
|
(482,620
|
) (c)
|
|
|
179,877
|
|
Salaries and benefits
|
|
|
637,119
|
|
|
|
61,302
|
|
|
|
-
|
|
|
|
698,421
|
|
Directors compensation
|
|
|
157,983
|
|
|
|
-
|
|
|
|
|
|
|
|
157,983
|
|
General and administrative
|
|
|
241,801
|
|
|
|
128,971
|
|
|
|
-
|
|
|
|
370,772
|
|
Insurance
|
|
|
149,454
|
|
|
|
8,067
|
|
|
|
|
|
|
|
157,521
|
|
Depreciation
|
|
|
2,972
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,972
|
|
Accretion
|
|
|
110,995
|
|
|
|
-
|
|
|
|
-
|
|
|
|
110,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
2,704,457
|
|
|
|
295,521
|
|
|
|
1,751,951
|
|
|
|
4,751,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before other items
|
|
|
2,573,533
|
|
|
|
295,521
|
|
|
|
1,751,951
|
|
|
|
4,621,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(6,008
|
)
|
|
|
(3,159
|
)
|
|
|
-
|
|
|
|
(9,167
|
)
|
Interest and service charges
|
|
|
186
|
|
|
|
-
|
|
|
|
|
|
|
|
186
|
|
Other than temporary impairment of available-for-sale-securities
|
|
|
69,850
|
|
|
|
-
|
|
|
|
|
|
|
|
69,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
2,637,561
|
|
|
|
292,362
|
|
|
|
1,751,951
|
|
|
|
4,681,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale-securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss for the Period
|
|
$
|
2,637,561
|
|
|
$
|
292,362
|
|
|
$
|
1,751,951
|
|
|
$
|
4,681,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.30
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.30
|
|
Weighted Average Number of Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Used in Per Share Calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
8,518,791
|
|
|
|
102,445,845
|
|
|
|
7,171,209
|
|
|
|
15,690,000
|
|
Diluted
|
|
|
8,518,791
|
|
|
|
102,445,845
|
|
|
|
7,171,209
|
|
|
|
15,690,000
|
|
F-4
Note -1 Basis of presentation
The unaudited
pro forma
condensed combined financial statements are based on Paramounts and Calicos historical consolidated
financial statements as adjusted to give effect to the acquisition of Calico. The unaudited
pro forma
combined statements of operations for the nine months ended March 31, 2016 and year ended June 30, 2015 give effect to the Calico
acquisition as if it occurred on July 1, 2014. The unaudited
pro forma
combined balance sheet as of March 31, 2016 gives effect to the Calico acquisition as if it had occurred on March 31, 2016.
These unaudited pro forma consolidated financial statements have been compiled from:
|
a)
|
The unaudited pro forma condensed combined balance sheet combines Paramounts balance sheet as of March 31, 2016 and Calicos balance sheet of December 31, 2015.
|
|
b)
|
The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2015 combines Paramounts statement of operations for the year ended June 30, 2015 and Calicos statement of
operation for the year ended June 30, 2015.
|
|
c)
|
The unaudited pro forma condensed combined statement of operations for the nine months ended March 31, 2016 combines Paramounts statement of operations for the nine months ended March 31, 2016 and Calicos
statement of operations for the nine months ended March 31, 2016. Calicos statement of operations for the nine months ended March 31, 2016 have been derived by adding its statement of operations for the three month period ended December 31,
2015 to its statement of operations for the six month period ended December 31, 2015.
|
The unaudited
pro forma
condensed combined financial statements also do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition, the total expected costs to integrate the operations of
Paramount and Calico, or the total expected costs necessary to achieve such cost savings and operating synergies.
Certain
reclassifications have been made to the historical presentation of Calico to conform to the presentation used in the unaudited
pro forma
condensed combined financial statements. These reclassifications have no impact on the historical
operating loss, total assets, liabilities or shareholders equity reported by Paramount or Calico. Upon consummation of the acquisition, further review of Calicos financial statements may result in additional revisions to Calicos
classifications to conform to Paramounts presentation.
Calico presents its financial statements in its functional currency of the
Canadian Dollar. Paramount presents its financial statements in its functional currency of the U.S. Dollar. The historical financial statements of Calico, from which the unaudited consolidated combined
pro forma
financial statements
have been derived, have been translated from the Canadian Dollar to the U.S. Dollar utilizing exchange rates follows:
|
|
|
|
|
Balance Sheet as of March 31, 2016
|
|
|
0.7225
|
|
Statement of Operations for the nine months ended March 31, 2016
|
|
|
0.7476
|
|
Statement of Operations for the year ended June 30, 2015
|
|
|
0.8548
|
|
Note 2 Accounting Policies
Upon consummation of the Agreement, Paramount will continue the review of Calicos accounting policies. As a result of that review,
Paramount may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, Paramount is not aware of any differences that would
have a material impact on the combined financial statements, except as follows.
Calicos prepares its financial statements in
accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Under IFRS, acquisition and exploration expenditures on mineral properties, less
recoveries in the pre-production stage, are deferred until such time as the properties are put into commercial production, sold, or become impaired. On the commencement of commercial production, the deferred costs are charged to operations on
the unit-of-production method based upon estimated recoverable proven and probable reserves. General exploration expenditures are charged to operations in the period in which they are incurred.
Under U.S. GAAP, acquisition costs are capitalized, but exploration costs are not considered to have the characteristics of property, plant
and equipment and, accordingly, are expensed prior to the company determining that economically proven and probable mineral reserves exist, after which all such costs are capitalized.
F-5
Set out below are the material adjustments to Calicos mineral properties and deficit as at
March 31, 2016, and to operating expenses for the nine months ended March 31, 2016 and the year ended June 30, 2015 in order to conform to U.S. GAAP:
|
|
|
|
|
|
|
|
|
Mineral Properties
|
|
|
|
|
As at March 31,
2016
|
|
IFRS
|
|
|
|
|
|
$
|
10,733,891
|
|
Deferred exploration costs prior to the establishment of proven and probable reserves
|
|
|
|
|
|
|
(7,702,938
|
)
|
|
|
|
|
|
|
|
|
|
U.S. G.A.A.P
|
|
|
|
|
|
$
|
3,030,953
|
|
|
|
|
Statement of Operations
|
|
Nine Months Ended
March 31, 2016
|
|
|
Year Ended June 30,
2015
|
|
Net Loss based on IFRS
|
|
$
|
292,362
|
|
|
$
|
693,154
|
|
Deferred exploration costs prior to the establishment of proven and probable reserves
|
|
|
2,234,571
|
|
|
|
2,416,944
|
|
|
|
|
|
|
|
|
|
|
Net Loss based on U.S. G.A.A.P
|
|
$
|
2,526,933
|
|
|
$
|
3,110,098
|
|
Note 3 Preliminary Purchase Price Allocation
The acquisition of Calico by Paramount has been accounted for using the acquisition method of accounting in accordance with ASC
805. Further, under the acquisition method, the purchase price is allocated to assets acquired and liabilities assumed based on their estimated fair values, with any excess of the purchase price over the estimated fair value of the identifiable
net assets acquired recorded as goodwill.
The estimated consideration is approximately $8.7 million based on Paramounts closing
share price of $1.21 on March 11, 2016. The value of the merger consideration will fluctuate based upon changes in the share price of Paramounts common stock and the number of Calicos common shares outstanding on the closing date.
The following table summarizes the components of the estimated consideration
|
|
|
|
|
Shares eligible for conversion
|
|
|
102,445,845
|
|
Common stock exchange ratio per share
|
|
|
0.07
|
|
|
|
|
|
|
Equivalent new shares issued (par value $0.01)
|
|
|
7,171,209
|
|
Paramount common stock price on March 11, 2016
|
|
$
|
1.21
|
|
|
|
|
|
|
Total preliminary purchase price
|
|
$
|
8,677,163
|
|
The purchase price will be computed using the value of Paramount common stock on the closing date, therefore
the actual purchase price will fluctuate with the market price of Paramount common stock until the Transaction is closed. As a result, the final purchase price could differ significantly from the current estimate, which could materially impact
the
pro forma
financial statements.
The following table provides sensitivities to changes in purchase price due to changes in the
per share price of Paramount common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price of Paramount
Common
Stock
|
|
|
Exchange Ratio
|
|
|
Calculated per Share
Value of
Calico Common Stock
|
|
|
Total Purchase Price
|
|
As of March 11, 2016
|
|
$
|
1.21
|
|
|
|
0.07
|
|
|
$
|
0.085
|
|
|
$
|
8,677,163
|
|
Decrease of 10%
|
|
$
|
1.03
|
|
|
|
0.07
|
|
|
$
|
0.072
|
|
|
$
|
7,375,589
|
|
Increase of 10%
|
|
$
|
1.39
|
|
|
|
0.07
|
|
|
$
|
0.097
|
|
|
$
|
9,978,738
|
|
F-6
The following represents the preliminary allocation of the total purchase price to the estimated
fair value of the assets acquired and liabilities assumed at the acquisition date:
|
|
|
|
|
Total Purchase Price
|
|
$
|
8,677,163
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
356,302
|
|
Accounts receivable
|
|
|
5,011
|
|
Prepaid
|
|
|
9,512
|
|
Mineral properties
|
|
|
10,733,891
|
|
|
|
|
|
|
Total identifiable assets
|
|
$
|
11,104,717
|
|
Accounts payable
|
|
|
(653,285
|
)
|
Net identifiable assets
|
|
$
|
10,451,432
|
|
Deficiency over purchase price over historical assets acquired
|
|
|
(1,774,269
|
)
|
Adjustment to mineral properties for U.S. GAAP
|
|
$
|
7,702,938
|
|
|
|
|
|
|
Proforma adjustment to mineral property acquisition costs
|
|
$
|
5,928,669
|
|
Net tangible assets were valued at their respective carrying amounts as management believes that these amounts
approximate their current fair values.
Note 4 Pro forma adjustments
The
pro forma
adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments
have been reflected in the unaudited
pro forma
condensed combined financial information:
|
a.
|
To adjust mineral property exploration costs that were capitalized under IFRS, but would have been expensed under U.S. GAAP (see Note 2). The effect of this adjustment at March 31, 2016 is to reduce the carrying
value of mineral property interest by $7,702,938 and increase deficit by $7,702,938. The effect of this adjustment for the nine months ended March 31, 2016 is to increase exploration expense by $2,234,371. The effect of this adjustment for the
year ended June 30, 2015 is to increase exploration expense by $2,416,944.
|
|
b.
|
To record the issuance of: (a) 7,171,209 common shares of Paramount with par value of $0.01 in exchange
for all of the issued and outstanding common shares of Calico pursuant to the Agreement; recorded at fair value of $8,677,163 (see Note 3), and to eliminate the common stock, contributed surplus and deficit of Calico prior to acquisition.
|
|
c.
|
Represents the elimination of non-recurring transaction costs incurred during the nine-month period ended
March 31, 2016 of $482,620 that are directly related to the acquisition of Calico.
|
|
d.
|
In connection with the acquisition of Calico, Paramount expects to incur approximately $800,000 of cash
expenses related to a loan to Calico to finance Calicos operating activities. As at March 31, 2016 $300,000 of this loan has been advanced and this adjustment represents the elimination of the amount owing upon completion of the acquisition of
Calico.
|
|
e.
|
Pro forma
loss per share, basic and diluted, includes the addition of 7,171,209 shares of common stock
which will be issued in conjunction with the closing of the Agreement (Note 3). The following adjustments represent the changes to basic and diluted weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical Weighted
Average Shares - Basic
and
Diluted
|
|
|
Share Issuance
|
|
|
Pro Forma Weighted
Average Shares - Basic
and
Diluted
|
|
Year ended June 30, 2015
|
|
|
8,185,999
|
|
|
|
7,171,209
|
|
|
|
15,357,208
|
|
Six months ended December 31, 2015
|
|
|
8,518,791
|
|
|
|
7,171,209
|
|
|
|
15,690,000
|
|
|
f.
|
Paramount has not provided for any income tax benefit related to the operating losses of Calico due to
insufficient evidence to indicate on a more likely than not basis such benefits could be realized.
|
F-7
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