Tintina Mines Limited Provides Supplemental Disclosure Regarding Proposed Transaction with NSR Resources Inc.
November 19 2019 - 9:54AM
Tintina Mines Limited (“
Tintina” or the
“
Corporation”) (TSXV:TTS) wishes to provide
supplemental disclosure to Tintina’s management information
circular dated October 18, 2019 (the “
Circular”)
in respect of the Annual and Special Meeting of the Shareholders of
the Corporation to be held at 10:00 AM (EST) on November 27, 2019.
The supplemental disclosure will deal specifically with the
proposed transaction (the “
Transaction”) with NSR
Resources Inc. (“
NSR”), focusing on (i) the
formation of the special committees for each of the entities
involved in the Transaction, (ii) the calculation of the premium to
the valuation of NSR, and (iii) the background to the Transaction.
This news release should be read in conjunction with the Circular
as a whole. Capitalized terms not otherwise defined herein have the
meanings ascribed to such terms in the Circular.
Formation of the Special
Committee
Given the potential conflict of interest arising
from the fact that the directors and officers of each of Tintina
and NSR Resources Inc. (“NSR”) are the same
individuals, each of the entities attempted to adopt a process that
addressed this concern to the extent possible. Each entity took the
following steps to reduce the conflict of interest associated with
the Transaction:
- On August 12, 2019, the boards of directors of each entity
formed a special committee (each, a “Special
Committee”) with the objective to have each Special
Committee advise its respective entity on the Transaction and
potential alternatives to the Transaction.
- The Special Committee of each entity was comprised on the same
individuals, being Messrs. Carmelo Marrelli and Ricardo Landeta,
because they were the only independent directors of each entity. In
an effort to mitigate this conflict of interest, a determination
was made that the Chairman of each Special Committee should be
different. Thus, Mr. Carmelo Marrelli acted as the Chairman of the
Special Committee of Tintina and Mr. Ricardo Landeta acted as the
Chairman of the Special Committee of NSR.
- The Chairman of each committee was tasked with taking a lead
role in the process for its respective entity in terms of dealing
with external parties.
Calculation of the Premium to
Valuation
Following receipt of the valuation report from
Richter Advisory Group LLP, Tintina’s Special Committee reviewed
and considered several options relating to the premium to be added
to the value of NSR set out therein. In settling on a 30% premium
to be added to that value, Tintina’s Special Committees considered
the following factors:
- CMPG royalty agreement. NSR has an agreement with CMPG pursuant
to which NSR has a 2% royalty over certain properties in Fourniere
Township, Quebec (the “Royalty”). While the
Royalty is not producing value at this time, there is no expiry/end
date to the Royalty that would limit its potential return in the
future. Tintina’s Special Committee thus concluded that while it is
not possible at this time to determine when, and if, the Royalty
would generate value, its value at the present time, is not nil.
Accordingly, Tintina’s Special Committee took the view that NSR
shareholders should receive some value for the Royalty in the
consideration to be provided for their shares of NSR.
- Market practice. Tintina’s Special Committee reviewed the
premiums added in similar other transactions and considered 30% to
be within the range of market practice.
- Cost of raising capital in the market. Due to the difficulty in
obtaining funding for junior mining issuers in recent years, it was
determined that fees associated with raising the equivalent of the
cash presently held in NSR through a brokered private placement
(taking into account selling commissions, due diligence/marketing
allowances, broker/wholesaler fees, organization + offering
expenses, etc.) would result in Tintina spending a significant
amount (in cash) of what the premium would amount to, making the
Transaction that much more valuable in terms of additions to the
book value of Tintina.
- Addition over book value. Tintina took the view that to
incentivize the NSR shareholders to entertain the transaction, it
had to offer them some amount above book value. If Tintina offered
a small premium or none at all, NSR shareholders would likely not
have thought the transaction to be worthwhile and the alternative
was an orderly liquidation where the cash on hand would be
distributed to the shareholders. Tintina’s Special Committees
considered a range of values between 20% and 40% and based on the
factors noted above, determined that 30% was an appropriate
premium.
Background of the
Transaction
Prior to initiating the process of the proposed
transaction with NSR, Tintina’s board of directors and management
discussed the Corporation’s current financial condition in that
Tintina has a potentially viable mineral property but no funds to
advance it and low prospects of funding becoming available in the
near future. Maintaining the status quo means that Tintina would
likely liquidate imminently, resulting in no additional shareholder
value. Instead, it was determined that an assessment of strategic
alternatives was necessary in order to continue the business and
enhance value for its shareholders.
In analyzing its options, Tintina considered the
potential of being acquired by another entity. However, based on
past experience, this was determined not to be a viable option.
Tintina then considered the potential for
acquiring a new target, of which NSR’s circumstances presented a
practical opportunity for this. Tintina was aware of NSR’s cash
position, that NSR recently sold its main mineral property and the
fact that NSR found itself in a complementary position to Tintina
(in possession of funding but with no viable properties to
advance). Furthermore, just like Tintina, maintaining the status
quo for NSR meant that it would likely liquidate imminently,
resulting in no additional shareholder value.
Tintina considered the following potential
benefits of the Transaction:
- The complementary positions of each of Tintina and NSR meant
that Tintina could use NSR’s funds to continue the exploration and
advancement of its existing properties, generating value to
Tintina’s shareholders.
- The costs and fees associated with the maintenance of each
entity, such as audits, insurance, executive/management/board
costs, transfer agent services and legal services would be reduced
as they would need to be conducted for one entity only. In that
regard, an aggregate reduction in costs was estimated to be
approximately $100,000.
- Tintina’s largest shareholder would be diluted, generating a
larger public float that could have positive effects on the
attractiveness and liquidity of Tintina’s shares.
- There was potential to generate additional value through the
Royalty.
Based on this assessment, the Transaction was
determined to be the best possible outcome for the shareholders of
each of the entities involved.
About Tintina
Tintina is a Canadian-based company with over
twenty years of experience in the junior mining industry. Tintina
currently owns two main properties, both of which are located in
Yukon. The common shares of Tintina are listed for trading on the
TSXV under the symbol “TTS”.
For further information, please
contact:
Tintina Mines LimitedMr. Jing
Peng82 Richmond Street EastToronto, Ontario M5C 1P1 Phone:
(416) 848-9888 Email: jpeng@marrellisupport.ca
Forward-looking Statements
This press release contains forward-looking
statements. Forward-looking statements involve known and unknown
risks, uncertainties and assumptions and accordingly, actual
results and future events could differ materially from those
expressed or implied in such statements. You are hence cautioned
not to place undue reliance on forward-looking statements. All
statements other than statements of present or historical fact are
forward-looking statements, including statements with respect to
the LOI and the likelihood that the definitive agreement(s) will be
entered into and that the Transaction will be consummated on the
terms and timeline provided herein or at all, the benefits of the
Transaction to Tintina and NSR and the receipt of all required
approvals including without limitation the shareholders of NSR and
applicable stock exchanges. Forward-looking statements include
words or expressions such as “proposed”, “will”, “subject to”,
“near future”, “in the event”, “would”, “expect”, “prepared to” and
other similar words or expressions. Factors that could cause future
results or events to differ materially from current expectations
expressed or implied by the forward-looking statements include
general business, economic, competitive, political and social
uncertainties; the state of capital markets; risks relating to (i)
the ability of the Tintina and NSR to fulfill the terms of the
Combination Agreement and complete the Transaction (ii) the impact
on the respective businesses, operations and financial condition of
Tintina and NSR resulting from the announcement of the Transaction
and/or the failure to complete the Transaction on terms described
or at all, (iii) a third party competing bid materializing prior to
the completion of the Transaction, (iv) delay or failure to receive
board, shareholder regulatory or court approvals, where applicable,
or any other conditions precedent to the completion of the
Transaction, (v) unforeseen challenges in integrating the
businesses of Tintina and NSR, (vi) failure to realize the
anticipated benefits of the Transaction, (vii) other unforeseen
events, developments, or factors causing any of the aforesaid
expectations, assumptions, and other factors ultimately being
inaccurate or irrelevant; and other risks described in Tintina’s
and NSR’s documents filed with Canadian securities regulatory
authorities. You can find further information with respect to these
and other risks in filings made with the Canadian securities
regulatory authorities and available at www.sedar.com. We disclaim
any obligation to update or revise these forward-looking
statements, except as required by applicable law.
Neither the TSXV nor its Regulation Services Provider
(as that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this press
release.
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