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TORONTO, Aug. 20, 2014 /CNW/ - Corsa Coal Corp. (TSXV:
CSO) ("Corsa" or the "Company") is pleased to announce that
yesterday it completed the previously announced transaction for the
acquisition of PBS Coals Limited, a wholly-owned subsidiary of OAO
Severstal, in an all-cash transaction for consideration of
US$60 million, subject to customary
adjustments for working capital and debt (the "Transaction"). As
part of the Transaction, Corsa has assumed 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 Coals Limited 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.
As part of its acquisition financing, Corsa completed its
previously announced non-brokered private placement of 463,821,966
common shares ("Common Shares") for gross proceeds of approximately
US$65 million at C$0.15 per Common Share ("Private Placement") and
entered into a US$25 million
non-revolving term credit facility ("Credit Facility") with a
syndicate of lenders that includes Sprott Resource Lending
Partnership ("SRL"). The proceeds of the Private Placement and from
the Credit Facility were used to satisfy the consideration payable
in connection with the Transaction, with additional proceeds being
used for purposes related to the Transaction and growth
capital.
Changes to Management and the Board of Directors
The Company is pleased to announce the appointment of
George Dethlefsen as its Chief
Executive Officer. Mr. Dethlefsen is currently also a Director of
Corsa. As part of the transition, Mr. Dethlefsen has stepped
down as Managing Director of Quintana Capital Group. In connection
with his appointment, the Board of Directors of the Company (the
"Board") granted Mr. Dethlefsen stock options to purchase a total
of 6,000,000 Common Shares.
The options were granted on August 19,
2014 in accordance with Corsa's Amended and Restated Stock
Option Plan (the "Option Plan"), are exercisable for five years at
a price of C$0.29 per Common Share
and subject to the terms and conditions of the Option Plan, Mr.
Dethlefsen's employment agreement and the approval of the TSXV.
Such options will vest one-third on the first anniversary of the
date of grant, one-third on the second anniversary of the date of
grant and one-third on the third anniversary of the date of grant.
The C$0.29 exercise price represents
the closing market price on August 18,
2014, the day immediately preceding the date of grant.
Pursuant to the terms of Sprott Resource Partnership's ("SRP"),
a wholly-owned affiliate of Sprott Resource Corp. (TSX: SCP),
acquisition of Common Shares under the Private Placement,
Arthur Einav, a nominee of SRP, was
appointed to the Board. Keith Dyke,
Chief Operating Officer and President of Corsa, stepped down as a
member of the Board.
Arthur Einav is Managing
Director, General Counsel and Corporate Secretary of Sprott
Resource Corp. Mr. Einav is also General Counsel of Sprott Inc. and
is a director of Independence Contract Drilling, Inc., an
NYSE-listed portfolio company of Sprott Resource Corp. He holds a
Bachelor of Laws degree and a Masters in Business Administration
from Osgoode Hall Law School and the Schulich School of Business.
He also holds a Bachelor of Science degree from the University of Toronto and is a member of the Law
Society of Upper Canada and the
New York State Bar.
Stock Option Grants
In connection with the Acquisition, the Board granted stock
options to purchase a total 12,200,000 Common Shares to certain
employees of PBS and the Company. The grant, together with the
options granted to Mr. Dethlefsen, represents approximately 1.5% of
the total Common Shares outstanding. The options granted to such
employees were granted in accordance with the Option Plan, are
exercisable for five years at a price of C$0.29 per Common Share and are subject to the
terms and conditions of the Option Plan and TSXV approval. Such
options will vest one-third on the first anniversary of the date of
grant, one-third on the second anniversary of the date of grant and
one-third on the third anniversary of the date of grant.
Financing of the Transaction
Private Placement
The TSXV has conditionally approved the listing of the Common
Shares issued under the Private Placement and the Common Shares
issued as part of the Private Placement are subject to resale
restrictions pursuant to applicable securities laws requirements
and will not be freely tradeable until December 20, 2014. The Private Placement was
originally announced on July 15,
2014.
As part of the Private Placement, Corsa and QKGI New Holdings LP
("New QKGI") allocated New QKGI's entire subscription of
141,786,666 Common Shares to two affiliated funds of Quintana
Capital Group LP, Quintana Energy Partners II, LP ("QEP II") and
Quintana Energy Partners II – TE, LP ("QEP II – TE"). QEP II
acquired 128,824,387 Common Shares for approximately US$18.2 million and QEP II – TE acquired
12,962,279 Common Shares for approximately US$1.8 million.
Accordingly, New QKGI, QKGI Legacy Holdings LP, QEP II and QEP
II - TE (collectively, "QEP"), all affiliates of Quintana Capital
Group LP, hold an aggregate of 578,819,438 Common Shares,
representing 48.6% of the issued and outstanding Common Shares and
170,316,639 redeemable membership units of Wilson Creek Energy, LLC
("Redeemable Units"), Corsa's US operating subsidiary, which, for
as long as amounts are outstanding under the Credit Facility, are
redeemable for Common Shares on a one for one basis. 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.
In addition, SRP, which acquired 236,963,302 Common Shares as
part of the Private Placement, representing approximately 19.9% of
the outstanding Common Shares, entered into a Registration Rights
Agreements with Corsa on August 19,
2014 which provides SRP with rights to twice demand
registration in Canada for as long
as it holds at least 10% of the outstanding Common Shares. A copy
of the registration rights agreement will be filed on SEDAR under
Corsa's profile. The summary herein is qualified in its entirety by
the detailed terms and conditions of the registration rights
agreement.
SPR will also 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 QEP
has undertaken 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.
Credit Facility
In connection with the Credit Facility, SRL was issued
36,100,000 Common Share purchase warrants of Corsa (each a "Bonus
Warrant"). Each Bonus Warrant has a term of five years and is
exercisable for one Common Share at an exercise price of
C$0.195. The Common Share purchase
warrants issued to SRL and the Common Shares issuable thereunder
are subject to resale restrictions pursuant to applicable
securities laws requirements and the policies of the TSXV and will
not be freely tradeable until December 20,
2014.
A copy of the credit agreement with respect to the Credit
Facility will be filed on SEDAR under Corsa's profile. The summary
herein is qualified in its entirety by the detailed terms and
conditions of the credit agreement.
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 QEP's Investment in
Corsa
QEP currently owns an aggregate of 578,819,438 Common Shares, or
approximately 48.6% of the Common Shares outstanding and,
accordingly, QEP is a 'Control Person' as defined in the TSXV
Corporate Finance Manual, and the subscription by QEP II and QEP II
- TE under the Private Placement was 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 was 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 QEP II and QEP – TE, together, exceeded 25% of Corsa's market
capitalization calculated in accordance with MI 61-101.
In connection with the Private Placement, QEP waived its
anti-dilution rights under its investor rights agreement with the
Company dated July 31, 2013.
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 PBS
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. 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.
Based solely on management prepared unaudited interim financial
statements, as at June 30, 2014 (six
months ended 2014), PBS sold approximately 482,000 tons of
metallurgical and thermal coal, generated operating revenues of
approximately US$46 million, incurred
cost of sales and operating expenses, exclusive of depreciation and
amortization, of approximately US$50
million and had negative earnings before interest,
depreciation, and amortization of approximately US$4 million. Corsa expects to realize synergies
from the Transaction as it combines its personnel, assets and
infrastructure with those of PBS, especially given the close
proximity to Corsa's existing assets.
Corsa has not included figures from the audited financial
statements of PBS, as Corsa does not believe such historical
financials to be an accurate representation of the current business
operations at PBS in light of recent market conditions experienced
by the coal mining industry and may be misleading without
sufficient additional information. Such financial information will
be available in the business acquisition report in respect of the
Transaction to be prepared in compliance with National Instrument
51-102 – Continuous Disclosure Obligations and filed within
75 days from the date of the completion of the Transaction.
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
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.
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.
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.