Galway Resources Ltd. announces premium cash offer for Galway
shareholders and the spin out of the Vetas and Victorio projects
TORONTO,
Oct. 19, 2012 /CNW/ - Galway
Resources Ltd. (GWY: TSX-V) ("Galway") is pleased to
announce the execution of an arrangement agreement (the
"Arrangement Agreement") with AUX Acquisition 2 S.àr.l. and
its wholly-owned Ontario
subsidiary (collectively, "AUX"), under which AUX has agreed
to acquire all of the outstanding common shares of Galway (other
than common shares of Galway held by AUX and its affiliates) (the
"Galway Shares") by way of a plan of arrangement (the
"Arrangement").
Under the transaction Galway shareholders will
receive Cdn$2.05 in cash, 0.9 of a
share in a new company to hold the Vetas gold project and 1.0 share
in a new company to hold the Victorio tungsten-molybdenum project.
The new companies will be well capitalized with US$18 million of cash and US$12 million of cash, respectively. Upon closing
of the transaction, existing Galway shareholders will hold 90% of
the Vetas SpinCo and 100% of the Victorio SpinCo. AUX will have the
right to nominate one director for election to the board of
directors of the Vetas SpinCo.
The Cdn$2.05 per
share cash consideration represents a premium of approximately 47%
over the volume weighted average trading price of Cdn$1.39 per Galway Share on the TSX Venture
Exchange ("TSX-V") for the 20-trading days ending on
October 18, 2012. It is anticipated
that the Arrangement will close on or before December 31, 2012.
"We are extremely pleased with this transaction
as we believe it represents great value for shareholders. We also
look forward to creating ongoing value for Galway shareholders
through the advancement of the Vetas and Victorio projects. Both
projects have excellent infrastructure and tremendous geological
upside," said Robert Hinchcliffe,
President and CEO of Galway. "I'd really like to thank Galway's
employees in Colombia for all
their diligent efforts."
In addition, AUX has entered into lock-up
agreements with certain officers and directors of Galway, pursuant
to which these shareholders have agreed, subject to certain
conditions, to exercise the voting rights attached to their Galway
Shares in favour of the Arrangement.
The board of directors of Galway (the
"Board"), based in part on a fairness opinion from National
Bank Financial Inc. that the consideration offered in the
Arrangement is fair, from a financial point of view, to Galway
shareholders, other than AUX, has unanimously determined that the
completion of the Arrangement is in the best interests of Galway
shareholders. The Board has unanimously resolved to recommend that
Galway's shareholders vote in favour of the Arrangement.
A summary of the opinion given by National Bank
Financial Inc., the factors that were considered by the Board in
approving the Arrangement, and other material background
information relating to the Arrangement, will be included in the
Management Information Circular to be mailed to Galway's
securityholders in connection with a special meeting of Galway,
which is expected to be held in early to mid December, 2012 (the
"Meeting") to approve the Arrangement.
Completion of the Arrangement is subject to,
among other things, i) the affirmative vote at the Meeting of at
least two-thirds (66 2/3%) of the votes cast by all Galway
shareholders ii) approval of the Superior Court of Justice of
Ontario; and iii) receipt of all
required regulatory approvals, including acceptance of the
transaction by the TSX-V.
A copy of the Arrangement Agreement will be
filed with Canadian securities regulatory authorities and will be
available under Galway's profile on the SEDAR website, at
www.sedar.com. It is currently expected that the Management
Information Circular to be prepared in connection with the Meeting
will be mailed to Galway's securityholders in early November, 2012,
and those materials will also be available at www.sedar.com.
Galway's financial advisor in connection with the Arrangement is
National Bank Financial Inc. and its legal advisor is Stikeman
Elliott LLP. AUX's financial advisor is BMO Capital Markets, and
its legal counsel is Cassels Brock
& Blackwell LLP.
CALIFORNIA
RESOURCE ESTIMATE
On September 12,
2012, Galway announced the results of its resources estimate
at California conducted by SRK
Consulting (U.S.) Inc., in accordance with National Instrument
43-101. The California properties
host indicated gold resources of 424,000 ounces in 2.39M tonnes at
5.5 g/t, plus inferred gold resources of 666,000 ounces in 3.85M
tonnes at 5.4 g/t at a 2.0 g/t Au cutoff.
Cutoff |
Indicated |
Inferred |
Au Grade
(g/t) |
TONNES |
Au
(g/t) |
Ag
(g/t) |
Cu
(%) |
Au
Ounces |
TONNES |
Au
(g/t) |
Ag
(g/t) |
Cu
(%) |
Au
Ounces |
0.25 |
34,246,800 |
0.82 |
4.14 |
0.062 |
898,355 |
114,285,600 |
0.64 |
4.01 |
0.056 |
2,349,207 |
0.50 |
9,315,000 |
2.05 |
4.73 |
0.064 |
615,371 |
30,034,800 |
1.46 |
4.42 |
0.060 |
1,414,263 |
1.00 |
5,367,600 |
3.09 |
4.96 |
0.065 |
533,840 |
17,069,400 |
2.08 |
4.37 |
0.059 |
1,142,287 |
1.25 |
2,705,400 |
5.08 |
6.74 |
0.071 |
442,276 |
4,849,200 |
4.63 |
6.44 |
0.067 |
721,786 |
1.50 |
2,683,800 |
5.11 |
6.78 |
0.071 |
441,315 |
4,703,400 |
4.73 |
6.28 |
0.067 |
715,260 |
2.00 |
2,386,800 |
5.53 |
6.93 |
0.072 |
424,385 |
3,850,200 |
5.38 |
6.36 |
0.067 |
666,470 |
2.25 |
2,192,400 |
5.83 |
7.10 |
0.072 |
411,142 |
3,493,800 |
5.72 |
6.54 |
0.066 |
642,042 |
2.50 |
1,873,800 |
6.42 |
7.25 |
0.071 |
387,061 |
2,953,800 |
6.32 |
6.46 |
0.066 |
600,654 |
3.00 |
1,436,400 |
7.55 |
7.46 |
0.072 |
348,712 |
2,327,400 |
7.29 |
6.49 |
0.066 |
545,742 |
3.50 |
1,177,200 |
8.49 |
7.44 |
0.073 |
321,494 |
1,852,200 |
8.34 |
6.74 |
0.067 |
496,415 |
4.00 |
939,600 |
9.69 |
7.93 |
0.073 |
292,634 |
1,517,400 |
9.36 |
6.85 |
0.068 |
456,467 |
4.50 |
810,000 |
10.56 |
7.83 |
0.073 |
274,922 |
1,333,800 |
10.05 |
7.18 |
0.069 |
431,192 |
VETAS GOLD-SILVER PROJECT: TO BE SPUN OUT
INTO A NEW COMPANY WITH US$18 MILLION
CASH. AGGRESSIVE EXPLORATION PROGRAM UNDERWAY - MINERALIZATION OPEN
IN ALL DIRECTIONS
The Vetas property contains the high-grade El
Volcan gold-silver mine, the largest gold mine in the Vetas and
California gold districts and has
been in production for over 400 years. Galway began drilling at El
Volcan in April, 2011 with the focus to test for a continuation of
mineralization below the mine, strike and lateral extensions to the
mine as well as to test the 6 surface anomalies that have been
identified. The initial corporate goal was to delineate resources
of 1,000,000 ounces from Vetas by drilling off an area of 500 m
along strike by 500 m depth below the mine workings. Using an
average horizontal mining width of 1.5 m, a grade of 15 g/t, and
with a 25% success ratio over the mines' 8 veins would give
1,000,000 ounces. The actual average horizontal mining width has
been exceeded, the success ratio has been exceeded, the depth has
been exceeded, and the number of veins present is greater than the
8 originally thought to exist. As such, Galway intends to issue
a robust gold and silver resource estimate for Vetas in the second
half of 2013.
There are currently two drills operating
underground below the mine and one drill set to resume operations
now that Galway has received all necessary pad construction
approvals. Surface drilling is targeting the stockwork intrusive
located west of the mine, in the vicinity of CB Gold's significant
discoveries, among other gold-rich anomalies. Galway has more than
doubled the depth at which gold mineralization has been identified
below the Reina de Oro level to
nearly 700 meters, or 860 meters below surface. Galway is also
considering the ramping up of drilling at Vetas to three
underground and two surface rigs such that a robust resource can
quickly be delineated.
Highlights of results from the 52 underground
drill holes that have been reported include:
- 1,082.6 g/t gold (Au) and 718.0 g/t silver (Ag) over 1.21 m,
plus 77.1 g/t Au and 51.3 g/t Ag over 1.13 m, plus 95.6 g/t Au over
1.26 m, plus 17.8 g/t Au and 77.7 g/t Ag over 2.34 m from
GWY-V021
- 1,034.3 g/t Au and 300.0 g/t Ag over 0.91 m, plus 27.4 g/t Au
over 3.38 m, including 49.4 g/t Au over 1.16 m from GWY-V027
- 679.6 g/t Au and 164.0 g/t Ag over 1.16 m from GWY-V026
- 203.4 g/t Au and 1,311.0 g/t Ag over 1.25 m from GWY-V029
- 157.4 g/t Au over 4.15 m, including 470.2 g/t Au over 1.33 m
from GWY-V036
- 143.7 g/t Au over 1.17 m from GWY-V059
- 82.5 g/t Au and 39.1 g/t Ag over 2.66 m, including 202.0 g/t Au
and 53.5 g/t Ag over 1.07 m, plus 21.9 g/t Au and 63.0 g/t Ag over
6.7 m, including 69.1 g/t Au and 81.6 g/t Ag over 1.5 m from
GWY-V003
- 78.2 g/t Au over 3.16 m, including 248.3 g/t Au and 38.0 g/t Ag
over 0.96 m from GWY-V016
- 34.3 g/t Au and 83.0 g/t Ag over 6.44 m, including 98.8 g/t Au
and 154.0 g/t Ag over 1.30 m, plus 18.9 g/t Au over 11.81 m,
including 52.9 g/t Au over 1.32 m in GWY-V049
- 15.3 g/t Au and 36.5 g/t Ag over 11.44 m, including 112.3 g/t
Au and 34.2 g/t Ag over 0.92 m from GWY-V012
- 8.9 g/t Au and 17.3 g/t Ag over 17.00 m, including 19.7 g/t Au
and 22.0 g/t Ag over 1.18 m, 17.7 g/t Au and 49.9 g/t Ag over 4.81
m, and 27.2 g/t Au over 1.05 m from GWY-V056
- 40.4 g/t Au over 3.47 m, including 84.9 g/t Au over 1.16 m,
plus 104.4 g/t Au over 1.20 m, plus 41.9 g/t Au over 1.04 m from
GWY-V015
Highlights of results from the 16 surface drill
holes that have been reported include:
- 26.0 g/t Au and 26.9 g/t Ag over 4.19 m, including 105.0 g/t Au
and 76.6 g/t Ag over 1.00 m, plus 29.2 g/t Au over 1.34m in
GWY-V061
- 45.9 g/t Au over 1.04 m in GWY-V054
- 17.4 g/t Au over 1.38 m, including 45.2 g/t Au over 0.51 m,
plus 4.0 g/t Au over 12.38 m, including 7.8 g/t Au over 1.58 m,
12.0 g/t Au over 0.97 m, and 8.32 g/t Au over 2.30 m in
GWY-V028
To date, 45 of the 52 underground holes that
have been reported on host at least one assay in excess of 10 g/t
Au (the average is 2.8 per hole, or 146 times in total), and all
holes except hole 25 contain multiple mineralized intersects. In
the first 52 underground drill holes, Galway has intersected 5 g/t
Au or more 237 times, 20 g/t Au or more 76 times, 30 g/t Au or more
44 times, 100 g/t Au or more 13 times and 1,000 g/t or more two
times.
Galway filed a preliminary NI 43-101 technical
report prepared by Roscoe Postle Associates on August 24, 2011. KTTM Geophysics of Medellin, Colombia, completed an Induced
Polarization (IP) and Ground Magnetic (MAG) survey over the geology
grid on the Vetas Project. Galway conducted mapping and sampling of
the drifts at the El Volcan mine on the two main work levels -
Reina de Oro and Tajo Abierto. A
total of 7,345 meters of drifts were mapped and 3,769 chip channel
samples were taken from vein, wall rock and stockwork
mineralization between vein sets. The average gold sample grade for
the Reina de Oro level is 614.7 m
of 37.9 g/t Au and 60.8 g/t Ag (TW=.99). The average sample grade
for the Tajo Abierto level is 563.0 m of 21.5 g/t Au and 31.9 g/t
Ag (TW=1.17). No assay cut was used on channel and chip samples; a
2.0 g/t Au lower cut was used in the Vetas drill program; no upper
cut was used. True widths for assays for underground drill holes
reported above are 48% to 92% of downhole widths, except hole
GWY-V036, which is 32%. True widths for all surface holes have not
been established as the zones are of unknown orientations.
VICTORIO TUNGSTEN-MOLYBDENUM PROJECT: TO BE
SPUN OUT INTO A NEW COMPANY WITH US$12
MILLION CASH. NEXT STEP - PREFEASIBILITY STUDY
The Victorio Tungsten-Molybdenum Project is an
advanced-stage exploration property secured through an option
agreement that when executed will give the Victorio SpinCo 100%
ownership. The property has excellent infrastructure such as access
by paved road to within a few miles of the site, a nearby railway
and a gas pipeline. Victorio is located approximately 20 miles west
of Deming, New Mexico.
TUNGSTEN PRICES REMAIN NEAR RECORD HIGHS
Record high tungsten prices coupled with a
steady molybdenum price has prompted management to begin investing
capital in the project again in an effort to create value for
shareholders in the new Victorio company. The current combined
metal prices of tungsten and molybdenum is almost 22% higher than
the combined metal prices used in the SRK scoping study that is
highlighted below. Tight tungsten supply out of China has driven prices to $16 per pound, up from $8 a pound just a few years ago. The molybdenum
price has been trading at $12 per
pound. Please note that the SRK scoping study noted below used
tungsten and molybdenum prices of $8
and $15 respectively.
The Company recently initiated an infill
drilling program to upgrade the resource which is part of the
pre-feasibility process recommended by SRK. The project has had
extensive work performed by Humble/Exxon, Cominco, Santa Fe, Echo
Bay and Gulf Minerals, among others prior to being acquired
by Galway, including a total of 127 drill holes along with
extensive geophysical and geochemical studies. The project became
dormant in the mid-eighties due to depressed metal prices before
being acquired by Galway in 2006, when prices took a strong
up-swing.
The Victorio Project was subject to a positive
Scoping Study completed by SRK Consulting, results of which were
reported in May 2008. The study was
based on NI 43-101 resource estimates from 109 drill holes
comprising a total of 217,000 feet of drilling, of which Galway
drilled 18 holes for 38,000 feet. The study included a larger block
caving scenario and a smaller selective mining scenario.
Supervision, Qualified Person and Quality Control
The Vetas Project is under the supervision of
Project Manager Alex Cruz, of
Quito Ecuador. In compliance with
National Instrument 43-101, Mr. Mike
Sutton, P.Geo. and Mr. Dale
Schultz, P.Geo. (Manitoba
and Saskatchewan) of Buscore
Consulting Limited (www.buscore.net) are the Qualified Persons
responsible for the accuracy of this news release. Samples from the
Vetas Project are sent to the Acme Labs preparation facility in
Medellin, Colombia, for processing
and are analyzed at Acme Labs laboratory in Vancouver, Canada. Surface rock samples are
analyzed for Au by a 30g fire assay and AAS finish method (code
G601) plus a multi-element suite with an aqua regia digestion and
ICP-MS finish (code 1F04). Underground samples are analyzed by G601
and 1F04 methods and over limits of Ag >100ppm and Cu-Pb-Zn
>1% by an ore grade determination with an aqua regia digestion
and analysis by ICP-ES (Code 7AR2). If strong mineralization or
visible gold is observed, then a screen metallic assay for Au (code
G615) is used. Acme Labs is an ISO 9001:2008 qualified assayer that
performs and makes available internal assaying controls. Quality
control protocols by Galway that are in place consist of the
insertion of one blank at least every 20 samples, a reject
duplicate every 20 samples, and one of three different certified
reference standard material for every 20 rock samples. Core
recovery in the mineralized zones has averaged over 90%. Quarter
coring of some select samples will take place. Assays reported in
this press release may have screen, and quarter core assays pending
and will be updated in the table on the website as needed.
MMI soil samples were sent to SGS Group (ISO
19011 certified) preparation facility in Medellin, Colombia, for processing and are
analyzed in SGS's laboratory in Lima,
Peru.
Neither the TSX Venture Exchange nor its
regulation services provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Forward Looking Statements:
Certain statements contained in this release
containing words like "believe", "intend", "may", "will", "expect",
"would" and other similar expressions, are forward-looking
statements that involve a number of risks and uncertainties. This
forward-looking information relates to, among other things, the
timing and prospects for completion of the Arrangement, which is
subject to a number of conditions precedents, such as the approval
of the Arrangement by the Superior Court of Justice of Ontario, by Galway's shareholders and by
regulatory authorities. Accordingly, there can be no assurances
that the Arrangement will be consummated. Statements in this
release that are forward-looking statements are subject to various
risks and uncertainties concerning the specific factors disclosed
under the heading "Risk Factors" and elsewhere in Galway's periodic
filings with Canadian Securities Regulators. Such information
contained herein represents management's best judgment as of the
date hereof based on information currently available. Galway does
not assume the obligation to update any forward-looking statement,
except as required by law.
The TSX-V has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
SOURCE Galway Resources Ltd.