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Item
1.01
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Entry
into a Material Definitive Agreement.
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On
August 12, 2020, Silver Bull Resources, Inc. (“Silver Bull” or the “Company”) entered into an option
agreement (the “Option Agreement”) with Copperbelt AG, a corporation existing under the laws of Switzerland (“CB
Parent”), and Dostyk LLP, an entity existing under the laws of Kazakhstan and a wholly-owned subsidiary of CB Parent (“CB
Sub,” and together with CB Parent, “CB”), pursuant to which Silver Bull will receive the exclusive right and
option (the “Option”) to acquire CB’s right, title and 100% interest in the Beskauga Property located in Kazakhstan
(the “Beskauga Property”), which consists of the Beskauga Main project (the “Beskauga Main Project”) and
the Beskauga South project (the “Beskauga South Project”). Upon the execution of the Option Agreement, Silver Bull
paid CB Parent US$30,000.
The
closing of the transactions contemplated by the Option Agreement is subject to customary closing conditions, including the payment
by Silver Bull to CB Parent of US$40,000 within five business days after the results of Silver Bull’s due diligence on the
Beskauga Property are completed to the Company’s satisfaction. Silver Bull will have a 60-day due diligence period beginning
after the Company has been able to access the Beskauga Property in a matter that complies with governmental recommendations and
advisories with respect to the global COVID-19 pandemic, among other conditions.
The
Option Agreement provides that subject to the terms and conditions set forth in the Option Agreement, in order to maintain the
effectiveness of the Option, Silver Bull must incur US$2,000,000 in cumulative exploration expenditures on the Beskauga Property
by the first anniversary following the closing of the transactions contemplated by the Option Agreement (the “Closing Date”),
US$5,000,000 in cumulative expenditures on the Beskauga Property by the second anniversary following the Closing Date, US$10,000,000
in cumulative expenditures on the Beskauga Property by the third anniversary following the Closing Date, and US$15,000,000 in
cumulative expenditures on the Beskauga Property by the fourth anniversary following the Closing Date (collectively, the “Exploration
Expenditures”). The Option Agreement also provides that subject to the terms and conditions set forth in the Option Agreement,
after Silver Bull has incurred the Exploration Expenditures, Silver Bull may exercise the Option and acquire (i) the Beskauga
Property by paying CB US$15,000,000 in cash, (ii) the Beskauga Main Project only by paying CB US$13,500,000 in cash, or (iii) the
Beskauga South Project only by paying CB US$1,500,000 in cash.
In
addition, the Option Agreement provides that subject to the terms and conditions set forth in the Option Agreement, Silver Bull
may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to CB Parent if the Beskauga
Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with Canadian National
Instrument 43-101 indicating gold equivalent resources in the amounts set forth below, with (i) (A) 20% of the
Bonus Payments payable after completion of the bankable feasibility study or after the mineral resource statement is finally determined
and (B) the remaining 80% of the Bonus Payments due within 15 business days of commencement of on-site construction of a
mine for the Beskauga Main Project or the Beskauga South Project, as applicable, and (ii) up to 50% of the Bonus Payments
payable in shares of Silver Bull common stock to be valued at the 20-day volume-weighted average trading price of the shares on
the Toronto Stock Exchange calculated as of the date immediately preceding the date such shares are issued:
Gold
equivalent resources
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Bonus
Payment
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Beskauga
Main Project
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3,000,000
ounces
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US$2,000,000
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5,000,000
ounces
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US$4,000,000
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7,000,000
ounces
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US$6,000,000
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10,000,000
ounces
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US$8,000,000
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Beskauga
South Project
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2,000,000
ounces
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US$2,000,000
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3,000,000
ounces
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US$3,000,000
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4,000,000
ounces
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US$3,000,000
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5,000,000
ounces
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US$4,000,000
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For
example, if 5,000,000 ounces of gold equivalent resources and 3,000,000 ounces of gold equivalent resources are detailed in bankable
feasibility studies on the Beskauga Main Project and the Beskauga South Project, respectively, that are unchallenged by CB, then
CB Parent would be entitled to bonus payments equal to US$6,000,000 in respect of the Beskauga Main Project and US$5,000,000 in
respect of the Beskauga South Project.
Silver
Bull, CB Parent, and CB Sub have made customary representations and warranties in the Option Agreement for a transaction of this
nature. The representations and warranties of the parties will survive for a period of three years after the date of the Option
Agreement.
In
addition, the parties have agreed to certain covenants in the Option Agreement, including with respect to, among other items,
(i) CB Sub serving as the operator for the exploration of the Beskauga Property, with any related work done being pursuant
to programs and budgets approved by Silver Bull; (ii) CB operating CB Sub in the ordinary course of business in accordance
with past custom and practice; (iii) each party being obligated, during the term of the Option Agreement, to notify the other
parties of any opportunities to stake or otherwise acquire any mineral interest or rights located wholly or in part in a certain
area of interest, with the other party having an opportunity to participate in the staking or acquisition of such mineral interest
or rights; and (iv) Silver Bull having a right of first refusal if CB receives a bona fide offer from an arms-length third
party to purchase either all of its interest in the Beskauga Property or only the interest in the Beskauga Main Project or Beskauga
South Project. If Silver Bull does not exercise its right of first refusal with respect to any such interest of CB and such interest
is transferred to a third party, such party must agree in writing to be bound by the terms and conditions of the Option Agreement
applicable to CB. The obligations of each party to the Option Agreement may be suspended to the extent and for the period that
performance is prevented by any cause, whether foreseeable or unforeseeable, beyond its reasonable control.
The
Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of Silver
Bull and CB; (ii) upon the delivery of written notice by Silver Bull, provided that at the time of delivery of such notice,
unless there has been a material breach of a representation or warranty given by CB that has not been cured, the Beskauga Property
is in good standing; (iii) if there is a material breach by a party of its obligations under the Option Agreement and the
other party has provided written notice of such material breach, which is incapable of being cured or remains uncured; or (iv) if
the Closing Date does not occur by August 12, 2021.
Each
of Silver Bull and CB has also agreed to indemnify each other against certain losses in connection with any breach of any representation,
warranty, covenant, agreement or condition made by it and contained in the Option Agreement.
In
connection with the transactions contemplated by the Option Agreement, the Company expects to pay a finder’s fee to a third
party in the form of shares of Silver Bull common stock.