Regulus and Pachamama Announce Agreement to Merge, Proposed Financing and New Drill Results
February 08 2012 - 4:10PM
Marketwired Canada
NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION TO THE UNITED
STATES
Regulus Resources Inc. ("Regulus")(TSX VENTURE:REG) and Pachamama Resources Ltd.
("Pachamama")(TSX VENTURE:PMA) are pleased to announce the signing of a binding
letter of intent dated February 8, 2012 (the "LOI") that provides for a merger
of the two companies (the "Merger"). Regulus and Pachamama each own a 50%
interest in the Rio Grande copper-gold porphyry project in Salta Province,
Argentina. The two companies also intend to complete an equity financing of a
minimum of $20 million in conjunction with the Merger in order to carry out the
next phase of exploration on the Rio Grande project. First Quantum Minerals Ltd.
("First Quantum", FM TSX) has agreed to subscribe for that number of units of
the proposed financing that will result in First Quantum owning 9.9% of the
merged company. First Quantum currently owns approximately 9.9% of the
outstanding shares of Regulus and no shares of Pachamama.
Wayne Hewgill, President of Regulus, and John M. Leask, President of Pachamama,
commented as follows:
"The objective of the proposed merger is to combine our respective 50% interests
in the Rio Grande copper-gold porphyry project in Argentina into one company.
This will better position us to move forward with an aggressive drill program in
2012 to test the recent high- grade discovery hole (RGR-11-086) encountered in
the Southwest Zone (see press releases of each of Regulus and Pachamama issued
Dec 14, 2011) and to test other priority target areas on the property.
Exploration to date has demonstrated that Rio Grande is a large, mineralized
porphyry system that warrants an extensive drill program. Management of both
companies believe that unitizing ownership of the Rio Grande project into a
single company will enhance value for both Regulus and Pachamama shareholders as
exploration of Rio Grande is aggressively pursued. We are delighted to have the
support of First Quantum for this transaction. We intend to proceed quickly to
complete the documentation and to call shareholder meetings as required to
approve the Merger."
While management of both companies are strongly supportive of the proposed
Merger, readers are cautioned that completion thereof is subject to several
conditions including execution of formal documentation, regulatory approvals
including approval of the TSX Venture Exchange (the "TSXV"), shareholder
approvals, confirmatory diligence and closing of the proposed financing. No
assurance can be given at this time that the proposed Merger will be completed
or that the terms of the Merger and financing will not change materially from
those described below.
Merger Terms
The LOI provides that the Merger will be based on the relative valuations of
Regulus and Pachamama as agreed to by management of the two companies. Most of
the value of each company is derived from its respective 50% interest in the Rio
Grande project. After adjustments to account for estimated current working
capital balances and for value ascribed to other assets of each company, an
exchange ratio of 0.815 shares of Regulus for each share of Pachamama has been
agreed to. If there is a difference in the financial information on the date of
execution of the definitive agreement in respect of the Merger that would result
in a difference in the foregoing exchange ratio of greater than 0.001 of a
share; the parties have agreed to adjust the exchange ratio to reflect such
difference.
The specific structure of the Merger has not yet been finalized but the parties
will agree on the best way to effect the Merger having regard to all applicable
corporate, tax and securities issues, including applicable laws and regulations
in Argentina.
Financing Terms
Regulus and Pachamama intend to complete an equity financing (the "Financing")
in conjunction with the Merger of a minimum of $20 million. The proposed
Financing will be in the form of subscription receipts of Regulus at a price of
$1.15 per subscription receipt, which will convert into units of the resulting
issuer. Each unit will consist of one share and one half of a common share
purchase warrant. The warrants will be exercisable at $1.60 for a period of 24
months from closing of the Financing into escrow. Proceeds from the Financing
will be placed in escrow on closing of the Financing and will be released to the
Resulting Issuer upon closing of the Merger.
First Quantum has agreed to subscribe for that number of units of the proposed
Financing that will result in First Quantum owning 9.9% of the resulting issuer.
First Quantum currently owns approximately 9.9% of the outstanding shares of
Regulus and no shares of Pachamama. The resulting issuer will also grant First
Quantum a contractual pre-emptive right to maintain its 9.9% equity interest in
the resulting issuer in the event of future financings.
Regulus has retained Dundee Capital Markets to lead this Financing and the
syndicate will also include Axemen Resource Capital Ltd.
About The Resulting Issuer
Name and Stock Exchange Listing
The parties have agreed that the resulting issuer will retain the name of
Regulus Resources Inc. Regulus will apply to list the common shares issuable in
connection with the Merger and the Financing on the TSX.V upon completion of the
Merger.
Share Capital
Based on the current share capital of Regulus and Pachamama, the resulting
issuer will have approximately 76,687,365 million shares outstanding at closing
of the Merger (not including the proposed Financing). All outstanding options of
Pachamama will be exercised immediately prior to the effective date of the
Merger.
Senior Management
The proposed executive officers of the resulting issuer will be as follows:
Chief Executive Officer: John Black.
Mr. John Black is an economic geologist with 30 years of global exploration
experience. He received his Master's degree in Geology - Ore Deposits
Exploration from Stanford University in 1988. Mr Black was most recently the
President and CEO of Antares Minerals Inc. ("Antares") a position he held from
May of 2004 until the sale of Antares to First Quantum in December of 2010.
Prior to his work with Antares, Mr. Black was Western Mining Corporation's
Technical Exploration Manager for porphyry copper exploration in Chile and Peru,
and Principal Geologist for Rio Tinto, Kennecott's parent corporation, exploring
for porphyry copper deposits in northern Chile and Ecuador.
Chief Operating Officer: Wayne Hewgill
Mr. Hewgill is a Professional Geoscientist with over 25 years of experience in
the mineral exploration industry in Canada, Australia, New Zealand, Zimbabwe and
South Africa. He has been the President and CEO of Regulus from December 2010 to
the present. Prior thereto he was Vice President, Corporate Development with
Antares and before that he spent five years as a mining analyst for two Canadian
financial institutions focusing on early and advanced stage exploration
companies. He holds a B.Sc. in Geology from the University of British Columbia
and is registered as a Professional Geoscientist (P.Geo) with APEGBC.
Chief Financial Officer: Mark Wayne
Mr. Wayne is a former lawyer and he holds a Chartered Financial Analyst
designation. He has raised money for, and has served as a director or officer
of, a number of public and private companies in the mining, oil and gas and
technology sectors. Mr. Wayne was a co-founder and the Chief Financial Officer
of Antares until its sale in 2010.
Advisory Board - Technical Committee Chairman: Dr. Kevin B. Heather
The resulting issuer expects to form a Technical Committee in order to provide
additional technical expertise to the company. Dr. Kevin B. Heather has agreed
to serve as Chairman of the Technical Committee. Dr Heather is an economic
geologist with more than 30 years of field experience in North and South
America. He received a BSc. (honours) degree in geology from the University of
British Columbia in 1982, a MSc. degree in geology from Queen's University in
1985, and a PhD. degree from the University of Keele (Keele, England) in 2001.
Dr. Heather served as VP Geology with Antares from 2004 until the sale of
Antares in 2010. Prior to that, Dr. Heather worked as a consultant and as
geologist for Barrick Gold and Anglogold Ashanti.
Dr. Heather in conjunction with company management will look to add new members
with a special focus on adding recognized geological, metallurgical, and
engineering professionals to the committee to guide advancement of the Rio
Grande project.
Board of Directors
The LOI contemplates that the Board of Directors of the resulting issuer will
initially consist of five members, namely John Black, Mark Wayne and Jim
McDonald, each of whom is currently a director of Regulus, and John Leask and
Gordon Leask, each of whom is currently a director of Pachamama. Brief bios of
the non-management directors are as follows:
John M. Leask: Director
John Leask has a Bachelor of Applied Science degree in geological engineering
from the University of British Columbia and is a Professional Engineer. He has
served as a director of Mansfield Minerals Inc. since June 1998 and as president
of Pachamama since its inception in 2008. Mr. Leask was the President and CEO of
White Knight Resources Ltd. until its takeover by U.S. Gold Corporation in 2007.
Mr. Leask has 30 years of experience in the exploration and mining business at
all levels.
Gordon. P. Leask: Director
Gord Leask has a Bachelor of Applied Science degree in geological engineering
from the University of British Columbia and is a Professional Engineer. He has
served as President of Mansfield Minerals Inc. since 1991 and was a director of
White Knight Resources Ltd. until its takeover by U.S. Gold Corporation in 2007.
Mr. Leask has over 26 years' experience in the exploration and mining business.
James McDonald, B.Sc., P Geol.: Director
Mr. McDonald began a 25 year career in the mining industry working as a project
geologist with Noranda Explorations Ltd. Mr. McDonald has been a founding member
in developing several successful junior exploration companies such as White
Knight Resources, Black Bull Resources and National Gold (now Alamos Gold Inc.).
Mr. McDonald is currently the President and CEO of Kootenay Gold Inc.
Break Fee
Each company has agreed to pay the other company a break fee of $1.2 million if
the proposed Merger is not completed because the parties fail to recommend to
their respective shareholders to vote in favour of the Merger at a duly called
meeting of shareholders, or a party accepts a proposal to complete an
alternative transaction.
Lock-Ups
Each of the directors or officers has agreed to enter into lock-up agreements to
irrevocably support the Merger. Collectively the directors and officers of
Pachamama, following exercise of all options, will hold 8,424,536 Pachamama
shares (17.5%) and the directors and officers of Regulus hold 2,607,719 Regulus
shares (7.1%).
Business of the Resulting Issuer
On successful completion of the Merger, the resulting company will focus on the
exploration and development of its 100% owned Rio Grande copper-gold porphyry
project. Rio Grande is located in the Puna region of Salta Province,
northwestern Argentina, approximately 450km west of the city of Salta.
Mineralization occurs within a distinct 2-km diameter ring-shaped fracture zone
that was the focus of the pre-2011 drilling. In December, 2011, Regulus and
Pachamama announced the results of an initial 43-101 resource estimate on the
property, based on drilling to the end of 2008. The resource estimate included
637,025 oz gold and 416 million lbs copper in the indicated category and
1,002,458 oz gold and 674 million lbs copper in the inferred category.
To view Table 1: Resource Highlights, please visit the following link:
http://media3.marketwire.com/docs/208table.jpg.
Recent Results at Rio Grande
On December 14, 2011, Regulus and Pachamama released results from five
additional drill holes from the current 15,000 metre drilling program at Rio
Grande. These include results from drill hole RGR-11-86 which discovered a new
gold-rich, high-grade copper-gold zone. Specifically, drill hole RGR-11-86
intersected three main mineralized intervals, including the best intercept
encountered to-date at Rio Grande, as follows:
1) An upper, gold-dominant oxide zone of 49.60 metres with 0.26% Cu, 1.34 g/t
Au, and 3.10 g/t Ag starting at a depth of 64 metres.
2) A zone of gold-rich, high-grade copper-gold-silver sulphide mineralization
starting at a depth of 293 metres with an interval of:
-- 257.2 metres grading 0.53% Cu, 1.20 g/t Au, 1.59 g/t Ag (1.19% Cu Eq
or 2.39 g/t Au Eq ) including
-- 54.5 metres with 1.34% Cu, 4.52 g/t Au, and 2.68 g/t Ag (3.79% Cu Eq
or 7.58 g/t Au Eq).
3) A lower copper-gold-silver-molybdenum sulphide zone with 120 metres
containing 0.33% Cu, 0.34 g/t Au, 5.95 g/t Ag, and 0.011% Mo (0.61% Cu Eq)
starting at a depth of 598 meters.
This hole is considered a significant breakthrough at Rio Grande and future
drilling will focus primarily on delineating this new zone.
The above samples were analysed with the following methods: Au - 30 g FA with AA
Finish, Cu - four acid digestion for trace Cu and four acid digestion and AAS
for ore grade Cu, 35 element Aqua Regia ICP-AES.
New Drill Results
Regulus and Pachamama hereby announce results from five previously unreported
drill holes from the current 15,000 metre drilling program Rio Grande.
Results are presented from drill holes RGR-11-087 through RGR-11-91. The more
significant results include the following:
-- RGR-11-087 - Intersected a strongly altered diorite intrusive with broad
low-grade Cu- Au mineralization averaging 0.13 g/t Au and 0.08% Cu over
150 metres. Lithology and alteration are distinctly different from
nearby drill hole RGR-11-086 and more closely resemble the strongly
altered central portion of the system.
-- RGR-11-088 - Encountered a new zone of oxide gold m ineralization with
104.5 metres averaging 0.66 g/t Au beginning at the surface, including
35 metres with 1.03 g/t Au. This is the second intercept of near-surface
oxide gold mineralization found in the Southwest Zone. This new near-
surface zone may relate to similar mineralization in the upper portion
of drill hole RGR-11-086, 550 metres to the south.
-- RGR-11-091 was lost at 500 metres depth in Cu-Au mineralization due to
mechanical issues. The hole ended in increasingly strong fine grained
disseminated copper sulphide mineralization with 11.3 metres averaging
0.57% Cu, 0.48 g/t Au and 3.47 g/t Ag.
----------------------------------------------------------------------------
Mineral
RGR-11-087 SW Zone From To Metres Cu Au g/t Ag g/t Cu Eq Zone
----------------------------------------------------------------------------
TD- 969.50 264.00 274.00 10.00 0.05% 0.24 0.24 N/A Oxide
----------------------------------------------------------------------------
Mineral
RGR-11-088 Central From To Metres Cu Au g/t Ag g/t Cu Eq Zone
----------------------------------------------------------------------------
TD -
1115.60 2.00 106.50 104.50 0.09% 0.66 1.40 N/A Oxide
----------------------------------------------------------------------------
including 71.50 106.50 35.00 0.04% 1.03 2.54 N/A Oxide
----------------------------------------------------------------------------
Mineral
RGR-11-090 Central From To Metres Cu Au g/t Ag g/t Cu Eq Zone
----------------------------------------------------------------------------
TD 966.80 195.00 228.00 33.00 0.14% 0.28 0.55 0.28% Oxide
----------------------------------------------------------------------------
Mineral
RGR-11-091 Central From To Metres Cu Au g/t Ag g/t Cu Eq Zone
----------------------------------------------------------------------------
TD 501.70 263.00 297.00 34.00 0.07% 0.25 5.81 N/A Oxide
----------------------------------------------------------------------------
392.00 498.00 120.00 0.28% 0.32 1.48 0.46% Sulphide
----------------------------------------------------------------------------
including 486.70 498.00 11.30 0.57% 0.48 3.47 0.86% Sulphide
----------------------------------------------------------------------------
Table 2: Assay results RG-11-087 to RGR-11-091
Advisors and Counsel
Regulus' financial advisor is Dundee Capital Markets and its legal counsel is
Burnet, Duckworth and Palmer LLP. Pachamama's financial advisor is Axemen
Resource Capital Ltd. and its legal counsel is McCarthy Tetrault LLP.
About Regulus Resources Inc.
Regulus Resources Inc. (TSX VENTURE:REG) is a mineral exploration company formed
in December, 2010 in connection with the sale of Antares to First Quantum
Minerals Ltd. (TSX:FM). Regulus is currently exploring the Rio Grande
copper-gold porphyry project in Salta Province of NW Argentina on a 50/50
joint-venture basis with Pachamama.
About Pachamama Resources Ltd.
Pachamama is a mineral exploration company which was formed in October 2008 as a
spin-out from Mansfield Minerals Inc (TSX VENTURE:MDR). The principle asset of
the company is its 50% interest in the Rio Grande copper-gold porphyry project
in Salta Province Argentina. The company has the same managemnt team as
Mansfield Minerals Inc.
About First Quantum Minerals Ltd.
First Quantum (TSX:FM)(LSE:FQM)(LuSE:FQMZ) is a rapidly growing mining and
metals company with two operating mines in Zambia and Mauritania. First Quantum
also has five development projects in Australia, Finland, Zambia and Peru. The
company currently produces copper and gold from the Kansanshi Mine in Zambia and
the Guelb Moghrein Mine in Mauritania. First Quantum expects to be among the
global leaders in nickel production once its Ravensthorpe and Kevitsa projects
are in steady-state production in 2012.
All of Regulus' exploration programs and pertinent disclosure of a technical or
scientific nature are prepared by, or under the direct supervision of, Wayne
Hewgill, P.Geo, and Regulus' President, who serves as Regulus' qualified person
(QP) under the definitions of National Instrument 43-101.
All of Pachamama's exploration programs and pertinent disclosure of a technical
or scientific nature are prepared by, or under the direct supervision of, John
M. Leask, P.Eng., President and CEO of Pachamama, who serves as Pachamama's
qualified person (QP) under the definitions of National Instrument 43-101.
Regulus' security, chain of custody and quality control is described on their
website and can be reviewed at:
http://www.regulusresources.com/BestPractices/SamplingMethodologies.aspx
Forward Looking Information
Certain statements regarding Regulus and Pachamama, including management's
assessment of future plans and operations, may constitute forward-looking
statements under applicable securities laws and necessarily involve known and
unknown risks and uncertainties, most of which are beyond Regulus' and
Pachamama's control. Often, but not always, forward-looking statements or
information can be identified by the use of words such as "plans", "expects" or
"does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or
variations of such words and phrases or statements that certain actions, events
or results "may", "could", "would", "might" or "will" be taken, occur or be
achieved.
Specifically, and without limitation, all statements included in this press
release that address activities, events or developments that either Regulus or
Pachamama expect or anticipate will or may occur in the future, including the
proposed merger and financing as described herein, and management's assessment
of future plans and operations and statements with respect to the completion of
the anticipated drilling program, may constitute forward-looking statements
under applicable securities laws and necessarily involve known and unknown risks
and uncertainties, most of which are beyond Regulus' and Pachamama's control.
These risks may cause actual financial and operating results, performance,
levels of activity and achievements to differ materially from those expressed
in, or implied by, such forward- looking statements. Although Regulus and
Pachamama believe that the expectations represented in such forward-looking
statements are reasonable, there can be no assurance that such expectations will
prove to be correct
Regulus and Pachamama do not undertake any obligation to publicly update or
revise any forward- looking statements other than required by applicable
securities law.
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