(TSXV: BRZ) Bearing Lithium Corp. (the "
Company"
or "
Bearing") is pleased to announce it has
entered into an arm’s-length definitive agreement (the
"
Agreement") dated June 21st 2022, with Lithium
Power International Limited ("
LPI") (Australian
Securities reimbursement Exchange, (“
ASX”), code
LPI), its joint venture partner in the Maricunga Lithium Brine
Project in Chile (the "
Project"), pursuant to
which LPI has agreed to acquire all of the issued and outstanding
common shares of Bearing in an all share transaction to be
completed by way of a statutory plan of arrangement (the
"
Transaction") under the provisions of the
Business Corporations Act (British Columbia) as part of a three way
transaction that consolidates
100% interest in the
Project into a single entity (the
“
Consolidation”).
HIGHLIGHTS
-
The merger of Bearing will be structured as a plan of
arrangement whereby Bearing shareholders will receive 0.7 of an LPI
share for every one Bearing share held (“Exchange Ratio”) (up to
94.5 million LPI shares) 1, and
in addition Bearing shareholders will receive a cash distribution
(by way of a capital return) estimated at C$0.02 per
share.
-
MSB SpA (a Chilean private entity which owns
31.31% interest in the
Project) has also entered into a merger agreement with LPI
whereby MSB SpA will receive 161.6 million LPI shares pursuant to
the Consolidation. This transaction is subject to
the approval of LPI shareholders.
-
Based on the 1-month volume weighted average share price
(“VWAP”) of Bearing and LPI at June 20th
2022 of C$0.218 and A$0.464 respectively, and current
exchange rates, the value of the share consideration is C$0.293 per
Bearing share, providing a total value of ~C$0.313 per share
(including the capital return estimated at C$0.02 per share) –
representing a 43% premium over Bearing’s 1-month VWAP
price.
-
Pursuant to the Agreement, LPI shares issued to Bearing
shareholders are not subject to any hold period and will be freely
tradable.
-
According to the Transaction, BRZ Options
and Warrants which are not exercised prior to completion of the
Transaction will remain outstanding and will automatically become
exercisable for LPI ordinary shares based on the Exchange Ratio
under their current terms.
-
LPI announced in January 2022 that it intends to spin out
its Western Australian lithium exploration assets into a separate
entity with the expectation of unlocking accretive value for LPI
shareholders. Should the spin-off take place, it will complete
after closing of the Transaction, so Bearing shareholders holding
LPI Shares at the time of the spin-out will then receive a
pro-rated allocation of the shares in this new entity, subject to
the terms of that transaction.
-
Bearing currently has a 17.14% interest in the Project. As
a result of the Consolidation, Bearing shareholders will have a
15.6% interest in LPI, which will hold:
- 100% interest in the
Project.
-
100% interest in LPI’s Western Australian lithium
exploration assets.
-
Consolidating 100% of the Project into a single entity will
eliminate the current fragmented ownership structure of the
Project, which is expected to yield significant financial and
corporate benefits, unlocking value for all of the joint venture
stakeholders by creating one entity focused on advancing the
Project, which will enhance the ability to arrange project
financing, streamline the decision-making process and reduce
overheads.
- Under the Agreement, LPI has agreed to fund 100% of the
cash calls for the Project starting from January 2022 until
completion which has provided approximately C$1 million of cash
saving for Bearing. Consequently, Bearing estimates its
net-cash balance at closing to be approximately C$2.6
million2, which will be
distributed to Bearing shareholders as a capital
return.
-
The Consolidation has been unanimously endorsed by the
Boards of all three shareholders of the Project: LPI, MSB SpA and
Bearing.
Gil Playford, Chairman and CEO of Bearing
stated: “The Bearing Board of Directors are in unanimous agreement
with our MSB Joint Venture Partners, Lithium Power International
(LPI) and Mr. Martin Borda the owner of MSB SpA to consolidate our
ownership in MSB for an equity interest in ASX listed LPI, which
will hold 100% of the Project. The Officers and Directors have
agreed to vote in favor their stock and recommend to the Bearing
Shareholders to vote in favor of the Transaction at the Annual and
Special Shareholders Meeting to be held in September. The Board
firmly believes the Bearing shareholders will benefit from the
numerous advantages of consolidating 100% of the Project into LPI
as well as substantially improved liquidity of LPI3."
Background
Bearing’s principal asset is its 17.14% interest
in the Project. LPI is currently the majority partner in the
Project with a 51.55% interest, along with a third joint venture
partner (MSB SpA), who owns the remaining 31.31% interest (the
"JV Partner"). Concurrently with the Agreement,
LPI has also entered into a definitive agreement to acquire MSB
SpA’s interest in the Project (the "JV Acquisition
Agreement"), thereby consolidating a 100% interest of the
Project into a single entity: LPI, following completion of the
Consolidation.
Maricunga Lithium Brine
Project
The Project is the most advanced, high-grade
lithium salar in the Americas which is located in Salar de
Maricunga, 170km northeast of Copiapó, in the Atacama Region of
northern Chile. In January 2022, LPI announced the results of its
updated Definitive Feasibility Study (“DFS”) for
the Stage One Maricunga Lithium Brine Project, which supports
15,200 t/a production of battery grade lithium carbonate for 20
years. The DFS provides for a Project NPV (leveraged basis) of
US$1.4B (after tax) at an 8% discount rate, providing an IRR of
39.6%, a 2-year payback and estimated steady-state annual EBITDA of
US$324 million.
The study confirmed that Maricunga could be one
of the world’s lowest-cost producers of lithium carbonate with an
operating cost of US$3,718 per tonne not including credits from
potassium chloride by-product. The Project will have an exceptional
Environmental, Social, Governance (ESG) profile, aiming to
achieving carbon neutrality, setting new standards for
social/community relationships.
Fairness Opinion
The independent financial advisor to Bearing,
Sequeira Partners (“Sequeira”), has provided a
fairness opinion to the Board of Directors of Bearing dated June
19th 2022, which concludes that, based upon details of the
Transaction [and such other matters as Sequeira], is of the opinion
that the consideration to be received in the Transaction is fair,
from a financial point of view, to the Bearing shareholders.
Exchange Ratio
Under the terms of the Agreement, Bearing
shareholders will receive 0.7 of an ordinary share of LPI (each, an
"LPI Share") for each one (1) common share in the
capital of Bearing (each, a "Bearing Share") (the
"Exchange Ratio").
The Transaction implies a value of the LPI
Shares to be issued for Bearing of approximately $0.293 per Bearing
Share on a fully-diluted basis (based on 1-month VWAP on June 21st,
2022 for Bearing of C$0.218 per share (excluding the capital
distribution) and LPI of A$0.464 per share on their respective
stock exchanges). In addition, each option and warrant to purchase
a Bearing Share will entitle the holder thereof to receive LPI
Shares upon exercise based upon the Exchange Ratio. Further
discussion on options and warrants is provided under the heading
“Options and Warrants” below
The implied price and premium for Bearing
shareholders is based on a Canadian dollar/Australian dollar
exchange rates using IRESS closing rates during the VWAP
period.
Bearing Cash Distribution
Immediately prior to closing of the Transaction,
Bearing intends to distribute approximately C$2.6 million to its
shareholders, by way of a capital return (representing
approximately C$0.02 per Bearing share)4.
Options and Warrants
Any Option or Warrant which is not exercised
prior to completion of the Transaction shall continue to be
governed by and be subject to the terms of the applicable Option or
Warrant agreements but will automatically become exercisable for
LPI Shares based on the Exchange Ratio.
The distribution of available excess cash to
Bearing shareholders under the Transaction does not include cash
received from the exercise of Options or Warrants post this
announcement of the Bearing Transaction. Any funds received by
Bearing from the exercise of its Options or Warrants between
announcement of the Transaction and completion are to remain in the
business on completion of the Transaction.
Highlights of the Consolidated
Company
- As
consideration for the Transaction, LPI will issue up to 76.3
million LPI Shares for Bearing’s common shares on issue, and up to
a maximum 18.2 million LPI Shares for the Options and Warrants
assuming all Options and Warrants are exercised prior to completion
of the Transaction, for a total of 94.5 million LPI Shares.
- The
consolidation of 100% of the Project into LPI will provide benefits
to Bearing Shareholders from enhanced market positioning, larger
free float and trading liquidity, broader research coverage, deeper
access to debt and equity capital markets and potential inclusion
in relevant ASX indices.
-
The consolidated company will be able to source funding from a
wider range of capital partners than any of the Project partners
would be able to access on their own.
Spin off of LPI’s Western Australian
lithium Exploration assets
On January 12th 2022, LPI announced to the ASX
that it intends to spin out its Western Australian lithium
exploration assets (“WA Spin-off”) into a separate
entity ("DemergeCo") with the intention of
unlocking strategic value of these assets and to allow LPI to focus
on developing the flagship Maricunga project in Chile. LPI have
undertaken that this spin off will occur subsequent to the Closing
of the Transaction with Bearing, and as such, Bearing shareholders
holding LPI Shares at the time of the spin-out will participate in
the WA Spin-off and will receive their pro-rated allocation of
shares in DemergeCo.
LPI’s Western Australian lithium exploration
assets comprise:
-
Greenbushes tenements cover approximately 40,000
hectares located immediately along strike from the Talison mine
which is the world’s largest hard rock lithium producer owned by
Albemarle and Tianqi of China.
-
Pilgangoora tenements cover approximately 14,000
hectares adjacent to assets owned by Pilbara Minerals
Further information can be found on LPI’s website at
https://lithiumpowerinternational.com
Required Approvals and
Timeline
The implementation of the Transaction will be
subject to the approval of at least 66 ⅔% of the votes cast by
holders of Bearing Shares at an annual and special meeting of
Bearing shareholders expected to take place in August or September,
2022. In addition to the shareholder approvals, the Transaction is
also subject to the receipt of certain regulatory, court and stock
exchange approvals and other closing conditions customary in
transactions of this nature. The Transaction is expected to close
in September 2022.
Although under ASX listing rules, the
Transaction would be subject to the approval of LPI shareholders (a
simple majority vote of those shareholders attending being
required), LPI has undertaken to seek a waiver of this requirement
from ASX as soon as practical. If a waiver is not granted, the
directors of LPI have undertaken to enter into voting support
agreements with Bearing committing to vote their shares in favor of
the Transaction at the meeting of LPI shareholders.
The issuance of LPI Shares under the JV
Acquisition Agreement is subject to the approval of the LPI
shareholders and the receipt of certain regulatory, court and stock
exchange approvals, and other closing conditions customary in
transactions of this nature.
Agreement – other
provisions
The Agreement includes a non-solicitation
covenant of Bearing and gives Bearing the right to accept a
superior proposal in certain circumstances and terminate the
Agreement in exchange for a C$2.5 million termination fee. LPI has
a five-business day right to match any superior proposal. The
Agreement also includes the mutual payment of C$1 million in
respect of reimbursement expenses related to the Transaction in
certain circumstances. Bearing has the right to terminate the
Agreement if the JV Acquisition Agreement does not proceed.
The WA Spin-off will be executed after the
Transaction and, as such, should the Transaction complete Bearing
shareholders will receive a pro-rata interest in the DemergeCo.
Further information regarding the Transaction
will be contained in an information circular
("Circular") that Bearing will prepare, file and
mail in due course to its shareholders in connection with the
annual and special meeting of the Bearing shareholders to be held
to consider the Transaction. All shareholders are urged to read the
information circular once available as it will contain additional
important information concerning the Transaction. The Agreement
will be filed on the SEDAR profiles of Bearing on the SEDAR website
at www.sedar.com.
Proforma Holdings
Post Consolidation, Bearing shareholders will
hold a ~15.6%5 interest in the proforma LPI that will hold 100% of
the Project.
Entity |
MaximumNumber of Shares(millions) |
% Interest inProformaLPI |
LPI Current Ordinary Shareholders |
349.1 |
57.7% |
|
MSB SpA |
161.66 |
26.7% |
|
Bearing Shareholders |
94.57 |
15.6% |
|
Total LPI Ordinary Shares Outstanding |
605.2 |
100.0% |
|
Indicative Timetable
LPI Shareholder Meeting to approve the Consolidation
transactions |
August 2022 |
Bearing Shareholder Meeting to approve the
Transaction |
August / September 2022 |
Completion of the Transaction |
September 2022 |
WA Spin-off |
Post completion of the Transaction |
Bearing Board of Directors’
Recommendation and Voting Support
The Transaction has been unanimously approved by
the Bearing Board of Directors, which will be recommending
shareholders to vote in favor of the Transaction at the upcoming
annual and special meeting of Bearing shareholders.
Directors and officers of Bearing, representing
10.3% of the Bearing shares on issue have also indicated their
support for the Transaction, via voting and support agreements,
confirming their intent to vote in favor.
LPI Board of Directors’
Recommendation
The Transaction has been approved by the LPI
Board of Directors (other than Martin Borda who abstained due to
his interest in the JV Acquisition Agreement), which will be
recommending that LPI shareholders vote in favor of the
Consolidation at the upcoming shareholder meeting.
Statement of LPI
LPI’s Chairman, David Hannon said: “We are
extremely pleased to have reached an agreement with both MSB SpA
and Bearing to consolidate 100% ownership of Maricunga. The updated
DFS released on 20 January 2022 demonstrates that Maricunga could
be one of the lowest cost producers of lithium carbonate in the
world, with the Project’s strong economics underpinning a highly
attractive asset.”Statement of MSB SpA
Martin Borda, the owner of MSB SpA (current
31.13% owner of the Project) and a director and substantial
shareholder of LPI, said: “I am excited to consolidate ownership of
Maricunga in a logical transaction that places the Company ideally
to pursue the development of the Project and greatly enhances LPI’s
ability to deliver the full value of the Maricunga project to LPI’s
shareholders.”
Advisors
DS Lawyers Canada LLP acted as legal advisors
and Torretti y Cia acted as Chilean legal advisors to Bearing in
relation to this transaction.
Other
There may be potential tax consequences
associated with the Transaction. See "Forward-Looking Information
and Disclaimers" below.
For more information, please visit
www.bearinglithium.com and www.sedar.com BRZ.V.
For more
Information, please
contact:
Ray BaterinaCorporate
SecretaryInfo@bearinglithium.com604-262-8835
Forward-Looking Information and
Disclaimers
Certain information contained in this news
release may be deemed “forward-looking” within the meaning of
applicable securities laws. Forward-looking statements and
information relate to future events and future performance and
reflect Bearing and LPI’s expectations regarding the execution of
business strategy, future development and construction, future
growth, estimated costs, results of operations, the terms of the
Transaction, the anticipated cash distribution, the anticipated WA
Spin-off, business prospects and opportunities of Bearing, LPI and
the JV Partner. Any statements that express or involve discussions
with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as
"expects" or "does not expect", "is expected", "anticipates" or
"does not anticipate", "plans", "estimates" or "intends", or
stating that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved) are not
statements of historical fact and may be forward- looking
statements.
Forward-looking statements are subject to a
variety of risks and uncertainties which could cause actual events
or results to differ materially from those expressed in the
forward-looking statements and information. They include, among
others, the accuracy of mineral reserve and resource estimates and
related assumptions, inherent operating risks, the failure to
obtain shareholder, regulatory or court approvals in connection
with the Transaction, adverse changes in the construction timetable
or progress at the Project, and those risk factors identified in
Bearing’s Management Discussion and Analysis, prepared and filed
with securities regulators which is available on SEDAR at
www.sedar.com under the Bearing’s name.
Forward-looking statements are not a guarantee
of future performance and involve a number of risks and
uncertainties, some of which are described herein. Such
forward-looking statements necessarily involve known and unknown
risks and uncertainties, which may cause Bearing's actual
performance and financial results in future periods to differ
materially from any projections of future performance or results
expressed or implied by such forward-looking statements. These
risks and uncertainties include, but are not limited to, the risk
that the Transaction is delayed or is not completed for any reason,
the risk that the anticipated benefits of the Transaction are not
realized, the risk that the cash distribution is less than
anticipated or does not become payable for any reason, the risk
that the WA Spin-off is not completed for any reason, the actual
results of Bearing's future operations, factors beyond Bearing's
control, and the risks identified in Bearing's management
discussion and analysis for the period ended January 31, 2022 (the
“MD&A”), which are available for viewing on
SEDAR at www.sedar.com. There is no assurance that any amount will
become payable under the cash distribution. Any forward-looking
statements are made as of the date hereof and, except as required
by law, Bearing assumes no obligation to publicly update or revise
such statements to reflect new information, subsequent or
otherwise.
There may be tax consequences for Bearing
shareholders associated with the Transaction, including: (1)
consequences associated with the exchange of shares of a Canadian
corporation for shares of an Australian corporation; and (2)
additional Chilean tax consequences for Bearing
shareholders who own or control 10% or more of the Bearing
Shares at closing date (inclusive of stock options,
warrants, and Bearing Shares sold within 12 months prior to the
closing of the Transaction). Shareholders should consult with their
tax advisors and refer to the information contained in the
Circular.
The mineral report for the Project dated January
7, 2022 referred to herein (and available on the Corporation's
SEDAR profile) at www.sedar.com was prepared by Worley and Atacama
Water for MSB and was prepared to provide a National Instrument
43-101 (“NI 43-101”) compliant Definitive
Feasibility Study (“DFS”) of the Project. Resource
estimates for the Project are for lithium and potassium contained
in brine. The DFS report was prepared under the guidelines of NI
43-101 and in conformity with its standards.
All items related to geology, hydrogeology,
mineral resources and reserves were prepared by Atacama Water.
Peter Ehren was responsible for preparing all technical items
related to brine chemistry and mineral processing. Capital and
operating expenditures mentioned in the NI 43-101 report were
estimated by Worley, relying on quotations requested from
equipment, chemicals and other suppliers, as well as from its
project data base. Worley relied extensively on Minera Salar Blanco
and its consultants, as cited in the text of the study and the
references, for information on future prices of lithium carbonate,
legislation and tax in Chile, as well as for general project data
and information. The report was reviewed by Mr. Marek Dworzanowski,
CEng., BSc (Hons), HonFSAIMM, FIMMM of Worley, Mr. Peter Ehren,
MSc, MAusIMM and Mr. Frits Reidel, CPG. Mr. Marek Dworzanowski, Mr.
Peter Ehren and Mr. Frits Reidel are “qualified persons” (QP) and
are independent of MSB as such terms are defined by NI 43-101.
This news release does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities
in the United States. The securities have not been and will not be
registered under the U.S. Securities Act or any state securities
laws and may not be offered or sold within the United States or to
U.S. Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such
registration is available
Reader Advisory
NEITHER THE TSX VENTURE EXCHANGE NOR ITS
REGULATION SERVICES PROVIDER ACCEPTS RESPONSIBILITY FOR THE
ADEQUACY OR ACCURACY OF THIS RELEASE.
__________________________
1 Assumes all outstanding options and warrants are exercised
resulting in 135.1 million Bearing Shares. 2 The net-cash balance
excludes any proceeds from the exercise of Bearing options and
warrants.3 Over the last 20 trading days up to and including June
21st, 2022, Bearing averaged 22,585 shares traded daily (including
two days with no trading volume), while LPI averaged 5.405 million
shares traded daily or approximately 239 times more daily trading
volume.4 Based on the fully diluted number of shares on issue.
Assumes all outstanding options and warrants are exercised
resulting in 135.1 million BRZ shares.6 Martin Borda, the owner of
MSB SpA already holds ~16.3m shares in LPI. The number stated in
this table only states the shares issued to MSB SpA as part of the
Transactions. Post completion of the Transactions MSB SpA,
controlled by Martin Borda, will hold an interest in LPI of 177.8m
LPI shares 7 Shows fully diluted Bearing shares including all
Options and Warrants, some Options and Warrants and not currently
in-the-money based on the offer price.
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