In response to feedback from shareholders, Fancamp Exploration
Ltd. (“Fancamp” or the “Corporation”) (TSX Venture Exchange: FNC)
is pleased to provide answers to some of the most frequently asked
questions about the proposed business combination with ScoZinc
Mining Ltd. (“ScoZinc”) (the “Transaction”).
Q1: How does Fancamp benefit from the business combination
with ScoZinc? A: The combination of Fancamp and ScoZinc takes
two significantly undervalued companies and creates a larger,
stronger entity that will be in a better position to attract new
investments for growth and funding for strategic initiatives. The
combined entity will also be well-positioned to capitalize on the
global demand for zinc, which is expected to double by 2050.
As discussed on the January 19, 2021 and March 4, 2021 investor
calls, the new management team of the Corporation developed a
three-pronged strategy focused on:
- Exploration Properties: Selecting quality exploration
targets to enhance value, combined with a disciplined rigor when
allocating funds.
- Titanium Technology: Establishing new processes and
obtaining patents to become an active participant in a $16-billion
industry.
- Strategic Alternatives: Acquiring projects that have the
potential for near-term cash flow.
The Transaction fully supports the Corporation’s Strategic
Alternatives pillar. ScoZinc’s Scotia Mine is a high-quality asset
that has the potential to provide near-term cash flow, while
Fancamp’s strong balance sheet should enable the Corporation to
secure financing of the Scotia Mine to bring it to commercial
production. The expected cash flows from the Scotia Mine restart
should provide the combined company with future funding for
exploration and other activities.
Q2: Will the ScoZinc Scotia Mine be profitable? A: The
Corporation expects that it will be profitable. The ScoZinc Scotia
Mine, a past-producing facility with a fully built infrastructure
in a stable, premier jurisdiction near Halifax, Nova Scotia, has
the potential to produce high quality zinc and lead concentrates
for at least 14 years at low operating costs through conventional
open pit mining methods, based on a steady ore processing rate of
2,700 tonnes per day. The Scotia Mine 2020 Pre-Feasibility Study,
dated July 6, 2020 and commissioned by ScoZinc, showed that
commercial zinc and lead concentrate production can be achieved
within 9 to 12 months, with an average annual cash flow of C$14
million, based on a zinc price of US$1.19/lb. The extensive
facilities already in place, combined with the short pre-stripping
period, should enable the Scotia Mine to demonstrate a free cash
flow of approximately C$8.4 million in the first year of commercial
production alone.
Q3: Are Fancamp shareholders being diluted? A: Fancamp
shareholders will emerge from this Transaction with a greatly
enhanced opportunity to create value. The combined entity will have
a strong cash position, a significant portfolio of projects that
can provide long-term value creation, greater opportunities for
profitable growth, and be better positioned to attract new
investments that would not be otherwise available at the current
size.
Fancamp shareholders will continue to own the majority of the
shares of the Corporation, and their slice will now come from a
much larger pie. Once the ScoZinc Scotia Mine returns to successful
commercial production, shareholders will benefit from a realizable,
strong cash flow that would allow Fancamp to emerge as an important
player in the exploration and mineral development industry. The
status quo – the absence of the ScoZinc Transaction and a new
cash-generating asset – leaves the Corporation on the same
uncertain trajectory as before. Simply put, the many shareholders
we have talked to understand that the combined company has a much
greater potential to create sustained value than the status
quo.
Q4: What was the process to determine that the Transaction
was beneficial to Fancamp shareholders? A: The Transaction was
the result of a transparent, credible and thorough process with
input from Fancamp’s independent financial and legal advisors.
- On November 9, 2020, ScoZinc made a proposal for a potential
acquisition of all the issued and outstanding shares of ScoZinc by
Fancamp by way of a plan of arrangement. The current management
team of Fancamp began evaluating and negotiating at that time, and
on November 16, 2020, retained Ernst & Young LLP to advise on
the arrangement.
- During a Fancamp Board of Directors (the “Board”) meeting on
December 4, 2020, the Board was provided with details regarding the
non-binding proposition by ScoZinc, which included a detailed
presentation of ScoZinc, its management and the proposed
preliminary terms of the arrangement.
- During the Board meeting on December 4, 2020, the Board
approved the non-binding term sheet and asked to obtain a fairness
opinion from Ernst & Young LLP, conduct legal and technical due
diligence, and negotiate a binding agreement with ScoZinc, which
would be subject to subsequent approval by the Board.
- As a follow up to the December 4, 2020 Board meeting, Fancamp
management provided the Board – including Mr. Peter H. Smith – with
a draft fairness opinion from Ernst & Young LLP. The draft
fairness opinion, along with other questions and concerns the Board
had, were fully discussed at the December 18, 2020 Board
meeting.
- During the Board meeting on December 30, 2020, management
tabled and reviewed a legal due diligence report, a pre-feasibility
study review report, the final fairness opinion prepared by Ernst
& Young LLP, and financial evaluation documents sent by Ernst
& Young LLP.
- Based on all inputs and evaluations, definitive agreements were
then negotiated and approved by the Fancamp Board at the Board
meeting on February 5, 2021, and the agreement was signed on
February 13, 2021.
Shareholders should also be aware that while Fancamp was not
required to obtain a fairness opinion, in an abundance of caution,
out of a commitment to good governance and a focus on shareholder
value, the Corporation chose to do so with Ernst & Young LLP, a
leading and independent financial advisor. The financial advisor
opined that the consideration to be paid in connection with the
Transaction is fair.
Not only is the consideration to be paid fair, but Fancamp,
based on all information available, also believes that the
Transaction has the potential to create value and sustainable
growth for the Corporation over the medium to long-term. Among
other benefits, the Transaction should enable Fancamp to plan the
restart of the commercial production at the Scotia Mine in Nova
Scotia, which is expected to create significant non-dilutive
cashflow for the Corporation.
Q5: Has the ScoZinc management tried to finance the mine
without Fancamp? A: ScoZinc entered discussions with a number
of firms and investors, but chose to combine with Fancamp due to
the Corporation’s strong balance sheet, and highly liquid and
marketable securities which could help finance the Scotia Mine. The
combination of Fancamp and ScoZinc also presented an excellent
opportunity for two significantly undervalued companies with
complementary strengths to combine talents and projects to create a
world class explorer, developer and producer.
Q6: If the Transaction is so accretive, why have no other
larger players partnered with ScoZinc? A: The transformational
Transaction with Fancamp and ScoZinc combines two significantly
undervalued companies with complementary strengths and creates a
larger. stronger entity that will be in a better position to
attract new investments for growth and funding for strategic
initiatives.
Q7: Why are Fancamp shareholders not able to vote on the
Transaction? A: A vote is not required under applicable laws.
While a certain disgruntled director and activist has demanded that
the Corporation incur significant additional expenses by conducting
an unnecessary shareholder vote on the Transaction, under
applicable securities regulations, the Transaction is an
arm’s-length transaction, which means no approval is required from
the shareholders of the Corporation.
Also, as indicated in a press release on March 10, 2021, despite
the ongoing impacts of the COVID-19 pandemic and certain associated
limitations, the Corporation is eager to move forward with its
annual general meeting (“AGM”) in a timely fashion. Consistent with
the extension provided by the B.C. Registries and Online Services,
the Corporation intends to hold its AGM by June 30, 2021 and looks
forward to starting a new, value-creating chapter in the
Corporation’s history.
Q8: According to Mr. Peter H. Smith, one of the directors of
Fancamp, certain directors were conflicted with regards to the
Transaction; is this true? A: No, all the claims by Mr. Smith
are false. When the Transaction was presented to the Fancamp Board,
Mr. Ashwath Mehra was the only Fancamp director who had a
disclosable interest. As stated in the March 18, 2021 press
release, Mr. Mehra disclosed his interest in a timely manner and
recused himself from voting on the Transaction.
Mr. Smith also wrongly stated that Mr. Mark Billings was
conflicted. Mr. Billings resigned from the ScoZinc Board of
Directors and was not involved in the negotiations around the
Transaction while he was a director of ScoZinc. As Mr. Billings did
not have any disclosable interest in the Transaction, he was
entitled to vote on the Transaction.
Q9: Will the Fancamp Board of Directors change after the
Transaction? A: Yes, and the composition will be up to Fancamp
shareholders. As stated in the February 18, 2021 and March 18, 2021
press releases, as well as in the Transaction agreement (a copy of
which is available on SEDAR), after the Transaction closes, Messrs.
Mark Haywood (President and Chief Executive Officer of ScoZinc) and
Christopher Hopkins (Director of ScoZinc) will be nominated
to join the Fancamp Board of Directors of Fancamp at the
Corporation’s next AGM. Shareholders will be able to vote on these
nominees in due course.
Advisors Lavery, de Billy, L.L.P. is serving as legal
advisor to Fancamp. Kingsdale Advisors is acting as strategic
shareholder and communications advisor to Fancamp.
About Fancamp Exploration Ltd. (TSX-V:
FNC) Fancamp is a growing Canadian mineral exploration
corporation dedicated to its value-added strategy of advancing
mineral properties through exploration and development. The
Corporation owns numerous mineral resource properties in Quebec,
Ontario and New Brunswick, including gold, rare earth metals,
strategic and base metals, zinc, chromium, titanium and more.
Fancamp is also building on the industrial possibilities inherent
in dealing with some of these materials, notable being the
development of its Titanium technology strategy. It has recently
announced the acquisition of ScoZinc, a Canadian exploration and
mining corporation that has full ownership of the Scotia Mine and
related facilities near Halifax, Nova Scotia, as well as several
prospective exploration licenses in surrounding regions. The
Corporation is managed by a new and focused leadership team with
decades of mining, exploration and complementary technology
experience.
Forward-looking Statements
This news release includes certain forward-looking statements which
are not comprised of historical facts. Forward-looking statements
include estimates and statements that describe both companies’
future plans, objectives or goals, including words to the effect
that both companies or their respective management expects a stated
condition or result to occur. Forward-looking statements may be
identified by such terms as “believes”, “anticipates”, “expects”,
“estimates”, “may”, “could”, “would”, “will”, or “plan”. Since
forward-looking statements are based on assumptions and address
future events and conditions, by their very nature they involve
inherent risks and uncertainties. Although these statements are
based on information currently available to Fancamp, Fancamp
provides no assurance that actual results will meet the
management’s expectations. Risks, uncertainties and other factors
involved with forward-looking information could cause actual
events, results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward-looking
information. Forward-looking information in this news release
includes, but is not limited to, the Corporation’s AGM, objectives,
goals or future plans, statements, potential mineralization,
exploration and development results, the estimation of mineral
resources, exploration and mine development plans, timing of the
commencement of operations, estimates of market conditions, future
financial results or financing opportunities. There can be no
assurance that forward-looking statements will prove to be accurate
and actual results and future events could differ materially from
those anticipated in such statements. Important factors that could
cause actual results to differ materially from Fancamp’s
expectations include, among others, political, economic,
environmental and permitting risks, mining operational and
development risks, litigation risks, regulatory restrictions,
environmental and permitting restrictions and liabilities, the
inability of both companies to satisfy the conditions precedent to
complete the Transaction, the inability to obtain the necessary
regulatory and third-party approvals for the Transaction, the
inability to start production at the Scotia Mine, the inability of
Fancamp to realize the anticipated financial gains from the
Transaction, including generating, in the near-term, cash-flows
from the Scotia Mine, the inability of Fancamp to raise capital or
secure necessary financing in the future, the inability of both
companies to achieve the synergies excepted from the Arrangement,
as well as factors discussed in the section entitled “Risks and
Uncertainties” in Fancamp’s management’s discussion and analysis of
Fancamp’s financial statements for the period ended October 31,
2020. Although Fancamp has attempted to identify important factors
that could cause actual results to differ materially, there may be
other factors that cause results not to be as anticipated,
estimated or intended. There can be no assurance that such
statements will prove to be accurate as actual results and future
events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements.
For Further Information
Rajesh Sharma, Interim CEO
Debra Chapman, Chief Financial
Officer
+1 (604) 434 8829
+1 (604) 434 8829
info@fancamp.ca
info@fancamp.ca
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this news release.
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version on businesswire.com: https://www.businesswire.com/news/home/20210329005157/en/
Media Contact Hyunjoo Kim Director, Communication,
Marketing & Digital Strategy Kingsdale Advisors Phone:
416-867-2357 Cell: 416-899-6463 Email:
hkim@kingsdaleadvisors.com
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