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TORONTO, July 15, 2014 /CNW/ - Corsa Coal Corp.
(TSXV: CSO) ("Corsa" or the "Company") announces that it has
entered into an agreement (the "Agreement") with Lybica Holding
B.V. ("Lybica"), a wholly-owned subsidiary of OAO Severstal, among
others, to acquire all of the issued and outstanding
shares of Lybica's wholly-owned subsidiary, PBS Coals Limited
("PBS"), in an all-cash transaction for consideration of
US$60 million, subject to customary
adjustments for working capital and debt (the "Transaction").
"This acquisition is a perfect match for Corsa's strategic
vision of building a low cost, premium-quality metallurgical coal
producer. Corsa is now positioned with the asset base and financial
flexibility required to capitalize on the company's ambitious
growth plans," commented Corbin Robertson
III, Corsa's Chairman and Co-Founder of Quintana Capital
Group, the largest shareholder of Corsa. George Dethlefsen, a Corsa Board Director and
Managing Director of Quintana Capital Group, added "Quintana is
pleased to partner in financing this transaction with Sprott
Resource Corp., Sprott Resource Lending, and the Lundin Family, who
share our investment philosophy and favorable long term outlook for
low volatile metallurgical coal."
"The proximity of PBS' assets and infrastructure to Corsa's
existing Pennsylvania operations
creates considerable synergy and marketing opportunities. Adding
the PBS metallurgical coal properties improves Corsa's ability to
grow production, lower costs, and better serve our customers
domestically and internationally," commented Keith Dyke, President of Corsa.
Transaction Highlights
- Large permitted base of globally scarce low-volatile
metallurgical ("met") coal
- Complementary infrastructure and customer base
- Close proximity to the largest metallurgical coal buying
region in the U.S. as well as the Baltimore port
- Low capital-intensity organic growth pipeline with
attractive cost structure
- Assets acquired at a low-point in the commodity
cycle
Acquired Assets
PBS, based in Somerset County,
Pennsylvania, commenced production in 1963 and was acquired
by OAO Severstal in 2008. Its current operations include 13
developed mines (3 active) and two preparation plants with access
to both the CSX and Norfolk Southern Railway. Collectively, these
mines sold approximately 2.5 million and 1.7 million tons of
premium quality low-volatile met coal in 2012 and 2013,
respectively. PBS is located 60 miles from Pittsburgh and 170 miles from the Baltimore port, and its coal brands are well
recognized by long-standing domestic and international customers.
Its existing assets and infrastructure enable PBS to scale up to
3.5 million tons of saleable metallurgical production per year if
market conditions warrant.
Updated Investor Presentation and SEDAR Filing
An updated version of the Company's Investor Presentation
detailing the Transaction is now available on its website at
www.corsacoal.com.
A copy of the Agreement will be filed with the Canadian
securities regulatory authorities and will be available under
Corsa's profile at www.sedar.com.
Conference Call
Corsa will host a joint investor conference call with Sprott
Resources Corp. set to begin at 11:00
am Eastern Time today, July 15,
2014 to discuss the Transaction. The call can be accessed by
dialing (888) 231-8192 (toll free), ten minutes prior to the
scheduled start of the call and providing conference number:
74742708.The call will be available for replay approximately one
hour after the completion of the conference call by dialing (855)
859-2056 (toll free) or (416) 849-0833 (reference number: 74742708)
until July 28, 2014. The conference
call will be webcast live at www.sprottresource.com.
The Transaction
The Transaction is subject to customary conditions including,
but not limited to, approval of the TSX Venture Exchange ("TSXV").
The Transaction has been unanimously approved by Corsa's board of
directors and Corsa anticipates that the Transaction will be
completed by mid-August 2014. As part
of the Transaction, Corsa has also agreed to assume certain
reclamation and water treatment liabilities totaling approximately
US$60 million and will fund
US$20 million of cash currently used
as bonding collateral by PBS into escrow accounts for water
treatment and certain other liabilities, to be released to a
subsidiary of OAO Severstal following a customary time period and
subject to adjustments
Financing of the Transaction
The consideration for the Transaction will be paid using equity
financing and a new credit facility with additional proceeds to be
used for purposes related to the Transaction and growth
capital:
- Approximately US$65 million to be
raised through a non-brokered private placement of common shares of
Corsa ("Common Shares") at C$0.15 per
Common Share; and
- US$25 million non-revolving term
credit facility underwritten by Sprott Resource Lending Partnership
("SRL").
Private Placement
Corsa has entered into subscription agreements with each of
Sprott Resource Corp., through Sprott Resource Partnership ("SRP"),
QKGI New Holdings LP ("New QKGI"), corporations controlled by
Lundin Family Trusts, and Bank Julius Baer & Co. Ltd. ("Bank
Julius Baer") to complete a non-brokered private placement for an
aggregate of 463,821,966 Common Shares (the "Private Placement"),
to be issued at C$0.15 per Common
Share for gross proceeds of US$65,425,329 (C$69,573,295, based on the exchange rate of
US$1.00:C$1.0634, being the Bank of Canada's noon rate on July 3, 2014).
SRP has agreed to acquire 236,963,302 Common Shares for a total
of approximately US$33.4 million as
part of the Private Placement. Assuming completion of the Private
Placement, SRP will hold 19.9% of the outstanding Common Shares and
will have certain ongoing rights including the right to nominate
one member of the Corsa board of directors, subject to certain
conditions. The right to nominate one member of the Corsa board of
directors will terminate if SRP, together with its affiliates,
ceases to hold at least 10% or more of the outstanding Common
Shares for a continuous period of at least 30 days and New QKGI and
its affiliate, QKGI Legacy Holdings LP (collectively, "QEP") will
be required to undertake to vote in favor of the election of the
SRP board nominee at any shareholder meeting, for so long as QEP
owns at least 20% of the outstanding Common Shares. SRP will also
have certain registration rights for as long as it holds at least
10% of the outstanding Common Shares.
As part of the Private Placement, New QKGI, a current
shareholder of the Company and affiliate of Quintana, has agreed to
acquire 141,786,666 Common Shares for a total of US$20 million, Zebra Holdings and Investments
S.á r.l. and Lorito Holdings S.á r.l., two corporations
controlled by Lundin family trusts and current shareholders of the
Company, have agreed to acquire an aggregate of 70,893,332 Common
Shares for a total of US$10 million
and Bank Julius Baer has agreed to acquire 14,178,666 Common Shares
for a total of US$2 million.
Corsa may also issue Common Shares to certain other
institutional and accredited investors prior to the closing of the
Transaction as part of the Private Placement. If any such investors
participate, Corsa will allocate to such investors a portion of New
QKGI's $20 million subscription and
New QKGI's subscription will be reduced accordingly.
The Private Placement is expected to close immediately prior to
the closing of the Transaction. Completion of the Private Placement
is subject to customary conditions, including receipt of the
approval of the TSXV and all other necessary regulatory
approvals.
Credit Facility
In addition to the Private Placement, Corsa has entered into a
binding commitment letter with SRL pursuant to which SRL has agreed
to provide the Company with a senior secured non-revolving term
credit facility in the amount of US$25
million with a five year term (the "Facility"). The interest
rate under the Facility would be ten percent (10%) per annum. For
the period up to and including the second anniversary of the
Facility, Corsa would have the option of adding any interest
payable under the Facility to the principal amount or, subject to
approval of the TSXV, satisfying any interest payment by the
issuance of Common Shares (based on five day volume weighted
average trading price for common shares immediately prior to the
last business day of the period multiplied by 105%). In addition,
the Facility may be prepaid without penalty, in whole or in part,
at any time after three months of interest has been paid.
In consideration for the Facility, SRL will also receive up to
36.1 million Common Share purchase warrants of Corsa ("Bonus
Warrants"). Each Bonus Warrant will have a term of five years and
be exercisable for one Common Share at an exercise price of
C$0.195. The terms of the Bonus
Warrants are subject to approval of the TSXV.
The Facility will be established immediately prior to the
closing of the Transaction and is subject to customary closing
conditions, including the entering into of definitive loan
documentation by the parties and approval of the TSXV.
Change in Corsa Management
Following the closing of the Transaction, the Company is pleased
to announce that it intends to appoint George Dethlefsen as its Chief Executive Officer
and add the title of Chief Operating Officer to Keith Dyke, current President of Corsa.
In addition to being a director of Corsa, Mr. Dethlefsen is
currently a Managing Director at Quintana Capital Group, where he
is responsible for sourcing, evaluating and executing investments,
including leading Quintana Capital Group's coal sector investments.
Previously, he was with the general partner of Natural Resource
Partners. Prior to joining Natural Resource Partners, George was
with Goldman, Sachs & Co.'s Mergers & Acquisitions
Department. Mr. Dethlefsen attended Rice
University, where he earned a B.A. in Economics and
Managerial Studies, and The University of
Texas at Austin, where he earned an M.B.A.
Corsa's Chairman, Corbin Robertson
III said, "George has played a key role in Quintana's coal
investments since 2002, and has been a director of Kopper Glo since
2008 and a director of Corsa for the past year. He brings a wealth
of industry knowledge, financial knowledge, and mergers and
acquisitions expertise to our management team. It should be a
seamless transition for our team as George and Keith have worked
closely together for over six years and the Board felt that adding
George's skill set with Keith Dyke
and the rest of our board's and management team's expertise would
strengthen our ability to continue to aggressively grow the Company
and increase shareholder value."
Advisors
Corsa obtained legal and tax advice from Stikeman Elliott LLP,
Vinson & Elkins LLP, PennStuart, Fike, Cascio & Boose LLP,
Jackson Kelly PLLC, and PricewaterhouseCoopers LLP.
Additional Disclosure regarding New QKGI's Investment in
Corsa
QEP currently owns an aggregate of 437,032,772 Common Shares, or
approximately 60.1% of the Common Shares outstanding as of
July 14, 2014 and, accordingly, New
QKGI is a 'Control Person' as defined in the TSXV Corporate Finance
Manual, and its subscription under the Private Placement is a
'related party transaction' as defined under Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions ("MI 61-101"). The Private Placement is
exempt from the minority shareholder approval requirements of MI
61-101, as neither the fair market value of any securities issued
to nor the consideration paid by New QKGI will exceed 25% of
Corsa's market capitalization calculated in accordance with MI
61-101.
Assuming completion of the Private Placement, the 141,786,666
Common Shares acquired by New QKGI as part of the Private Placement
will represent approximately 11.9% of the 1,190,770,362 outstanding
Common Shares and QEP will exercise control or direction over
578,819,438 Common Shares, representing approximately 48.6% of the
then outstanding Common Shares, as well as 170,316,639 common
membership units ("Redeemable Units") of Corsa's subsidiary, Wilson
Creek Energy, LLC. Assuming the tender for redemption of all
Redeemable Units and exchange for Common Shares, QEP would exercise
control or direction over an aggregate of 749,136,077 Common
Shares, representing approximately 55.0% of the outstanding Common
Shares upon completion of the Private Placement.
The address of QEP is 601 Jefferson Street, Suite 3600,
Houston, Texas. QEP's acquisition
of Common Shares is made as a strategic investment and QEP may
increase or decrease its investment, directly or indirectly, in
Corsa from time to time, depending on market conditions or any
other relevant factors.
A copy of the early warning report to be filed by QEP will be
available shortly under Corsa's profile at www.sedar.com and
further information can be obtained by contacting Jimmy McDonald, CFO at 713-751-7500.
The securities described herein have not been registered
under the U.S. Securities Act of 1933, as amended, and may not be
offered or sold in the United
States unless registered thereunder or unless an exemption
from registration is available.
Information about Corsa
Corsa's primary business is the mining, processing and selling
of metallurgical and thermal coal, as well as actively exploring,
acquiring and developing resource properties consistent with its
coal business.
Caution
Completion of the Transaction, Private Placement and Facility
are subject to a number of conditions, including TSXV approval.
There can be no assurance that the Transaction will be completed as
proposed or at all.
Investors are cautioned that, except as disclosed by the
Company, any information released or received with respect to the
Transaction may not be accurate or complete and should not be
relied upon. Trading in the securities of Corsa should be
considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits
of the Transaction, Private Placement or Facility and has neither
approved nor disapproved the contents of this press
release.
Forward-Looking Statements
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws (collectively, "forward-looking statements") and
which are based on the expectations, estimates and projections of
management of Corsa as of the date of this press release unless
otherwise stated. Forward-looking statements are statements and
information regarding possible events, conditions or results of
operations that are based upon assumptions about future economic
conditions and courses of action. Some of the forward-looking
statements may be identified by words such as "expects"
"anticipates", "believes", "plans", "projections", "outlook",
"intends", "may", "could", "would", "might", "will" and similar
expressions. More particular and without limitation, this press
release contains forward-looking statements and information
concerning: the anticipated benefits of the transaction to Corsa
and its securityholders, the timing and anticipated receipt of all
necessary approvals, including TSXV approvals for the Transaction,
Private Placement and Facility; and the ability of the parties to
satisfy the conditions to, and to complete, the Transaction,
Private Placement and Facility;
By their very nature, forward‐looking statements involve
numerous assumptions, inherent risks and uncertainties, both
general and specific, and the risk that predictions and other
forward‐looking statements will not prove to be accurate. Do not
unduly rely on forward‐looking statements, as a number of important
factors, many of which are beyond Corsa's control, could cause
actual results to differ materially from the estimates and
intentions expressed in such forward‐looking statements. Risks and
uncertainties inherent in the nature of the Transaction include the
failure to obtain TSXV and other necessary approvals or to
otherwise satisfy the conditions to the completion of the
Transaction, Private Placement and Facility, in a timely manner, or
at all. Failure to obtain such approvals, or the failure of the
parties to otherwise satisfy the conditions to or complete the
Transaction, Private Placement or Facility, may result in the
Transaction not being completed on the proposed terms, or at
all.
Forward‐looking statements speak only as of the date those
statements are made. Except as required by applicable law, Corsa
does not assume any obligation to update, or to publicly announce
the results of any change to, any forward‐looking statement
contained herein to reflect actual results, future events or
developments, changes in assumptions or changes in other factors
affecting the forward‐looking statements.
The TSXV has in no way passed on the merits of this news
release. Neither TSXV nor its Regulation
Services Provider (as that term is defined in policies of the TSXV)
accepts responsibility for the adequacy or accuracy of this
release.
SOURCE Corsa Coal Corp.