Hemlo Explorers Inc. (the “Company” or “Hemlo”) (CSE: HMLO) is
pleased to announce that it has entered into binding share purchase
agreements (“Purchase Agreements”) with shareholders of Rocky Shore
Metals Ltd. (“Rocky Shore”) pursuant to which the Company has
agreed to acquire all of the issued and outstanding common shares
of Rocky Shore (“Rocky Shore Shares”) in exchange for the issuance
of an aggregate of 49,999,704 common shares (“Hemlo Shares”) in the
capital of the Company (the “Transaction”). Pursuant to the terms
of the Transaction, each Rocky Shore Share will be exchanged for
2.832 Hemlo Shares. After closing of the transaction, Hemlo will
have 100,724,624 shares outstanding.
Transaction Highlights:
- Acquisition of
100% ownership of six (6) grass roots gold projects in a Tier 1
jurisdiction (Newfoundland, Canada) with no underlying royalties.
(see map 1 below);
- All properties
were staked for their potential to host widespread, high grade gold
mineralization in structurally complex geological
environments;
- Rocky Shore’s
flagship Gold Anchor Project, is a district scale asset in a
significantly underexplored area that totals over 2,100 claims and
533 square kilometres. No systematic exploration or drilling has
ever been completed for gold over the entire property;
- The Gold Anchor
Project features approximately 50 kilometres of strike length of
favorable metasediments bounded by two crustal faults (Dog Bay Line
and Grub Line faults) hosting an interpreted “Major Fault and Splay
Structural Corridor” on trend to New Found Gold Corp’s significant
gold discoveries at it’s Queensway Project in Central Newfoundland;
and
- Further
geological and structural maps are included in Appendix A to this
news release and on the Company’s website at
www.hemloexplorers.ca.
Map 1 – Rocky Shore Metals Property
Portfolio (in red)
Brian Howlett, the President and Chief Executive
Officer of Hemlo said, “We are extremely pleased that we can
acquire Rocky Shore and its Gold Anchor Project. We believe the
combination of the Hemlo gold projects and Rocky Shore’s
early-stage gold properties in central Newfoundland will generate
significant value for all stakeholders as we advance these projects
forward toward discovery.”
“This is an excellent opportunity that allows us
to advance our district scale Gold Anchor Project; an underexplored
and strategically located on trend to significant high grade gold
discoveries in a potential emerging gold district. I am delighted
to be able to work with the Hemlo team and look forward to
completing our summer field program presently in full swing at Gold
Anchor,” said Ken Lapierre President and Chief Executive Officer
Rocky Shore.
In connection with the Transaction, Ken
Lapierre, President and Chief Executive Officer of Rocky Shore,
will be appointed Vice President, Exploration of Hemlo. Mr.
Lapierre brings forty plus years of experience to the management
team at Hemlo. He is an exploration, mine geologist and financier
with experience in the precious and base metals sectors. There will
be no other changes to the board of directors or management of the
Company.
Transaction Summary
The Purchase Agreements contain customary
representations, warranties and agreements, conditions to closing
and other obligations of the parties. Closing of the Transaction is
anticipated to be completed as soon as reasonably possible
following receipt of all necessary regulatory approvals and upon
receipt of the approval of the Transaction by shareholders of
Hemlo.
The Transaction is a related party transaction
under the rules of the Canadian Securities Exchange
(“CSE”) as the Company’s largest shareholder,
Northfield Capital Corporation (“Northfield”),
which owns approximately 26.14% of the issued and outstanding Hemlo
Shares, is also a greater than 20% shareholder of Rocky Shore,
accordingly, there will be no change of control in connection with
the Transaction. Michael Leskovec is a member of the board of
directors of the Company and the Chief Financial Officer of
Northfield and Ernie Eves is a member of the board of directors of
the Company and a member of the board of directors of Northfield.
As a result, the Company intends to rely on the exemption in CSE
Policy 4.6(1)(b) whereby the CSE's requirement for shareholder
approval may be satisfied by a written consent signed by
disinterested shareholders owning more than 50% of the outstanding
Hemlo Shares. Completion of the Transaction is subject to the
approval of the CSE.
The Transaction will be exempt from prospectus
requirements pursuant to Section 2.16 of National Instrument 45-106
– Prospectus Exemptions (the “take-over bid and issuer bid”
Transaction Exemption). In connection with the Transaction, certain
of the shareholders of Rocky Shore who hold greater than 10% of the
Rocky Shore Shares have entered into Purchase Agreements with the
Company containing standard closing conditions for a transaction of
this nature including all requisite corporate approvals and
approval by the CSE for the consummation of the Transaction. Each
of the remaining shareholders of Rocky Shore have entered into
Purchase Agreements, substantially similar to the Purchase
Agreements entered into by the 10% or greater holders, however, the
representations and warranties contained therein only relate to the
shareholders’ ownership of Rocky Shore Shares and not with respect
to Rocky Shore itself.
Related Party
Considerations
As a “reporting issuer” that is listed on the
CSE, the Company is subject to Multilateral Instrument 61-101 –
Protection of Minority Security Holders in Special Transactions
(“MI 61-101”). The Company has determined that the
Transaction constitutes a related party transaction under MI 61-101
as Northfield beneficially owns, controls or has direction over,
directly or indirectly, 13,258,787 Hemlo Shares (representing
approximately 26.14% of all outstanding Hemlo Shares), and
beneficially owns, controls or has direction over, directly or
indirectly, 5,350,000 of the Rocky Shore Shares (representing
approximately 30.3% of all outstanding Rocky Shore Shares).
MI 61-101 requires that an issuer obtain
approval of a majority of the disinterested shareholders as well as
a formal valuation for a transaction that constitutes a related
party transaction, absent an exemption from such requirements.
Valuation Requirement Exemption
MI 61-101 provides an exemption from the
valuation requirement under Section 5.5(b) of MI 61-101 for a
related party transaction if an issuer’s securities are not listed
on certain identified stock exchanges. Since the Hemlo Shares are
listed on the CSE, and not listed on any other specified stock
exchange in Canada or the United States (or outside of Canada and
the United States), this exemption is available to the Company, and
a formal valuation is not required in respect of the
Transaction.
Minority Approval Requirement Exemption
MI 61-101 provides an exemption from the
minority shareholder approval requirement under Section 5.7(e) of
MI 61-101 if there is no other requirement, corporate or otherwise,
to hold a meeting to obtain shareholder approval, and the following
conditions are satisfied:
(i) the issuer is
insolvent or in serious financial difficulty,
(ii) the transaction
is designed to improve the financial position of the issuer,
(iii) paragraph (f) of Section
5.5 of MI 61-101 [Bankruptcy, Insolvency, Court Order] is not
applicable,
(iv) the
issuer has one or more independent directors in respect of the
proposed Transaction, and
(v) the
issuer’s board of directors, acting in good faith, has determined,
and at least two-thirds of the issuer’s independent directors,
acting in good faith, have determined that: (a) subparagraphs (i)
and (ii), noted above, apply, and (b) the terms of the transaction
are reasonable in the circumstances of the issuer.
The Company has satisfied the above conditions.
Hemlo established a special committee of independent directors that
was comprised of Chris Hodgson and John Harvey (the
“Special Committee”), to consider the Transaction
and alternative transactions that could improve the Company’s
financial health. The Special Committee was responsible for
reviewing, evaluating and negotiating the terms of the Transaction
as well as identifying, considering and evaluating other strategic
acquisitions with the objective of enhancing shareholder value and
improving the financial position of the Company. Rocky Shore has
also recently completed a non-brokered financing and raised
approximately $500,000 which can be used for the continued
operations of the Company following the completion of the
Transaction. Further, the Transaction provides the Company with a
new prospective project to continue to focus its efforts on
projects located in Eastern Canada. The Special Committee
considered engaging a financial advisor but it was determined that
due to a lack of financial resources and given its in house
expertise that such an advisor was not necessary as the Special
Committee was able to adequately consider the financial merits of
the Transaction.
The Transaction was the result of a
comprehensive negotiation process with Rocky Shore and its
shareholders that was undertaken by management with the supervision
and involvement of the Special Committee and in particular its
chair Chris Hodgson, with the assistance of John Harvey. The board
of directors of the Company (the “Board”), based
on the unanimous recommendation of the Special Committee,
determined that the Transaction is fair to shareholders of the
Company and that the Transaction is in the best interests of the
Company, and the Purchase Agreements were approved by the Board by
way of unanimous consent resolution at a Board meeting of the
Company. There were no disagreements between the Board and the
Special Committee in respect of the Transaction, nor did any of the
directors have an interest in the Transaction or a materially
contrary view, except as stated in in this news release. In
connection with their review and approval of the Transaction, the
Board and the Special Committee also considered the fact that
disinterested shareholders will be asked to consent to the
Transaction in accordance with the CSE policies. No director or
senior officer of the Company was aware of any prior valuation in
respect of Rocky Shore that related to the Transaction that was
made in the 24 months prior to the date hereof.
Qualified Person
Dr. Lesley Rose, P.Geo., Senior Exploration
Geologist for the Company, a Qualified Person in accordance with
Canadian regulatory requirements as set out in National Instrument
43-101, has reviewed and approved the scientific and technical
information that forms the basis for the disclosure contained in
this news release.
About Hemlo Explorers Inc.
Hemlo is a Canadian-based mineral exploration
company with a portfolio of properties in Ontario, Newfoundland and
Nunavut. Hemlo is focused on generating shareholder value through
the advancement of its main Hemlo area projects, including Project
Idaho, the Pic Project (under option to Barrick Gold Inc.), and
North Limb Project, as well as advancing its Newfoundland
claims.
For more information please contact:
Brian Howlett, President & CEOHemlo
Explorers Inc.brian@hemloexplorers.ca1-647-227-3035
http://www.hemloexplorers.ca
Forward-Looking Information
This news release contains “forward-looking
information” within the meaning of applicable Canadian and United
States securities exchange and interest rates, actual results of
current production, development and exploration activities,
government legislation. Generally, forward-looking information can
be identified by the use of forward-looking terminology such as
“plans”, “expects”, or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or
“does not anticipate”, or “believes” or variations of such words
and phrases or state that certain actions, events or results “may”,
“could”, “would”, “might”, or “will be taken”, “occur”, or “be
achieved”. Certain information set forth in this news release may
contain forward-looking information that involves substantial known
and unknown risks and uncertainties, including, but not limited to:
statements relating to the completion of the Transaction and the
shareholders’ approval thereof, the final approval of the
Transaction by the CSE, the anticipated benefits of the Transaction
to Hemlo and its shareholders, the future growth potential of the
Company on a post-Transaction basis, the financial outlook of the
Company on a post-Transaction basis, the possible impact of any
potential transactions referenced herein on the Company’s
shareholders, and any potential future arrangements and engagements
in regards to any such potential transactions. The forward-looking
information is based on reasonable assumptions and estimates of the
management of the Company at the time such statements were made and
is subject to known and unknown risks, uncertainties and other
factors that may cause the actual results, level of activity,
performance or achievements of Hemlo to be materially different
from those expressed or implied by such forward-looking
information, including risks associated with the exploration,
development and mining such as economic factors as they effect
exploration; future commodity prices; changes in foreign or
domestic regulation; political or economic developments;
environmental risks; permitting timelines; capital expenditures;
operating or technical difficulties in connection with development
activities; employee relations; the speculative nature of mineral
exploration and development including the risks of diminishing
quantities of grades of resources, contests over title to
properties, the Company’s limited operating history, future capital
needs and uncertainty of additional financing, and the competitive
nature of the mining industry; the need for the Company to manage
its future strategic plans; global economic and financial market
conditions; uninsurable risks; and changes in project parameters as
plans continue to be evaluated. Although Hemlo has attempted to
identify important factors that could cause actual results to
differ materially from those contained in the forward-looking
information, there may be other factors that cause results not to
be as anticipated, estimated or intended. Although the
forward-looking information contained in this news release are
based upon what management of the Company believes, or believed at
the time, to be reasonable assumptions, Hemlo cannot assure
shareholders that actual results will be consistent with such
forward-looking information, as there may be other factors that
cause results not to be as anticipated, estimated or intended.
Accordingly, readers should not place undue reliance on
forward-looking information. There can be no assurance that
forward-looking information, or the material factors or assumptions
used to develop such forward-looking information, will prove to be
accurate. Hemlo does not undertake any obligations to release
publicly any revisions for updating any voluntary forward-looking
information, except as required by applicable securities law.
Appendix A
Map 2 – All projects owned by Rocky
Shore
Appendix A – Gold Anchor
Maps
Map 3 – Regional Geology Surrounding Gold
Anchor
Appendix A – Gold Anchor
Maps
Map 4 – Regional Magnetic Intensity
Map
Appendix A – Gold Anchor
Maps
Map 5 –Fault and Splay Structural
Corridor Map
Appendix A – Gold Anchor
Maps
Map 6 – Project Geology
Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/5f029586-8e6d-44e2-add0-90543f8c32bb
https://www.globenewswire.com/NewsRoom/AttachmentNg/74242aea-9e6c-47c6-8cad-beab2ce5150c
https://www.globenewswire.com/NewsRoom/AttachmentNg/27c8de27-5c80-4ba5-a1c1-6c1fc51ee316
https://www.globenewswire.com/NewsRoom/AttachmentNg/71b474bf-0a17-4951-a5b6-fbbc8dbe534f
https://www.globenewswire.com/NewsRoom/AttachmentNg/31b30953-054e-4561-ae64-7dcd2b13866f
https://www.globenewswire.com/NewsRoom/AttachmentNg/79af5c3e-e2f9-4cdf-a517-0c7f94d630f7
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