East Africa and Tigray Enter Into Arrangement Agreement
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb 24, 2014) - East
Africa Metals Inc. ("East Africa") (TSX-VENTURE:EAM) and Tigray
Resources Inc. ("Tigray") (TSX-VENTURE:TIG) today jointly announce
that they have entered into a definitive agreement (the
"Arrangement Agreement") pursuant to which East Africa has agreed
to acquire all of the issued and outstanding common shares of
Tigray (other than the Tigray shares it currently owns). The
transaction will be implemented by way of a statutory Plan of
Arrangement (the "Arrangement") under the Canada
Business Corporations Act.
Under the terms of the Arrangement Agreement, on completion of
the Arrangement East Africa will issue to each holder of a Tigray
common share 0.55 of an East Africa common share and 0.40 of an
East Africa warrant. Each full warrant will entitle the holder to
acquire one common share of East Africa at a price of $0.23 for a
period of three years from the closing date.
The Arrangement Agreement is conditional on, among other things,
each of East Africa and Tigray being satisfied with its legal due
diligence investigations as against the other party and its
subsidiaries and their respective business and operations by no
later than March 7, 2014. In addition, the obligation of East
Africa to complete the Arrangement is subject to Tigray acquiring
for cancellation for no consideration, a sufficient number of
common share purchase warrants of Tigray and options of Tigray,
such that after such acquisition, upon completion of the
Arrangement, the former holders of common shares of Tigray shall
hold no more than 49.9% of the issued and outstanding shares of
East Africa on a partially diluted basis.
Following the completion of the Arrangement, current
shareholders of Tigray, excluding East Africa, will hold
approximately 34.4% of the issued and outstanding shares of East
Africa (prior to the exercise of the East Africa warrants to be
issued in connection with the Arrangement) and no more than 49.9%
of the issued and outstanding shares of East Africa assuming the
exercise of the East Africa warrants to be issued in connection
with the Arrangement.
The consideration to be provided as part of the Arrangement
represents a 10.0% premium over the closing price of the Tigray
common shares on the TSX Venture Exchange ("TSXV") on February 21,
2014, the last day of trading prior to the announcement of the
Arrangement, based on the closing price of the East Africa common
shares of $0.165 on February 21, 2014, and based on a Black-Scholes
valuation of the East Africa warrant of $0.0344 per warrant (based
on a forecast volatility of East Africa shares of 45% (derived
having consideration for historical East Africa trading
volatility), a risk free rate of 1.39%, as well as other
assumptions), or an implied value of $0.0138 for the 0.40 warrant
consideration per Tigray share.
Andrew Lee Smith, CEO of East Africa and Tigray, commented, "We
are pleased to announce the combination of these two businesses
which represents an opportunity for both East Africa and Tigray
shareholders. East Africa shareholders benefit from exposure to
Tigray's high-grade exploration assets in the Arabian Nubian
Shield. Tigray shareholders benefit from certainty of capital that
will allow continued exploration of Tigray's properties while
providing additional upside through exposure to East Africa's
Magambazi asset. The Arrangement provides Tigray shareholders with
a further implied premium based on East Africa's cash per share
value of $0.25."
As a result of the fact that a control person of East Africa is
also a control person of Tigray, the Arrangement is considered a
"related party transaction" pursuant to Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special
Transactions ("MI 61-101"). The Arrangement is exempt from the
requirements under MI 61-101 to obtain a formal valuation pursuant
to Section 5.5(e) of MI 61-101 and minority shareholder approval
from the shareholders of East Africa pursuant to Section 5.7(c) of
MI 61-101.
The members of the Board of Directors of Tigray who are entitled
to vote, acting on the recommendation of its Independent Special
Committee, after consultation with its financial advisor, have
unanimously approved entering into the Arrangement Agreement and
recommends that Tigray shareholders vote their shares in favour of
the Arrangement. GMP Securities L.P., the financial advisor to
Tigray's Independent Special Committee, has provided an opinion to
the effect that, as of the date of such opinion and subject to the
assumptions, limitations, and qualifications stated in such
opinion, the consideration to be paid on completion of the
Arrangement is fair, from a financial point of view, to Tigray
shareholders.
The members of the Board of Directors of East Africa who are
entitled to vote, acting on the recommendation of its Independent
Special Committee, after consultation with its financial advisor,
have unanimously approved entering into the Arrangement Agreement.
Cairn Merchant Partners LP, the financial advisor to East Africa's
Independent Special Committee, has provided an opinion to the
effect that, as of the date of such opinion and subject to the
assumptions, limitations, and qualifications stated in such
opinion, the consideration to be paid on completion of the
Arrangement is fair, from a financial point of view, to East Africa
shareholders.
Tigray's Board of Directors and management team will enter into
lock-up agreements with East Africa agreeing to vote their shares
to support the Arrangement. Other insiders, including SinoTech
(Hong Kong) Corporation Limited and its affiliates, are expected to
enter into lock-up agreements. As of the date of this press
release, holders of a total of 25.9 million shares of Tigray,
representing 36% of the basic shares outstanding, are expected to
enter into lock-up agreements. All parties that enter into a
lock-up agreement will agree to vote in favour of the Arrangement
Agreement.
The Arrangement will require the approval of 66 2/3% of the
votes cast by Tigray shareholders, and will require minority
approval in accordance with MI 61-101, at an annual and special
meeting which is expected to take place in April 2014. The
Arrangement is subject to other customary conditions, including
court approvals and the receipt of all necessary regulatory and
third party approvals, including the approval of the TSXV. Assuming
Tigray shareholders approve the transaction at the annual and
special meeting and all court and regulatory approvals are
obtained, the transaction is expected to close in the second
quarter of 2014.
As of February 18, 2014, Tigray has a working capital
(deficiency) of approximately ($1.9M) and liabilities of
approximately $2.9M ($2M of which is a loan from East Africa and is
due and payable on June 3, 2014). In the event any of the condition
precedents are not met, including shareholder approval, and the
Arrangement is terminated, Tigray will have to seek alternative
financing.
The Arrangement Agreement provides for, among other things, a
non-solicitation covenant on the part of Tigray (subject to
customary fiduciary out provisions). In the event of a superior
proposal, East Africa has the right to either match such superior
proposal or receive a termination fee in the amount of $250,000.
The termination fee is also payable to East Africa under certain
other scenarios.
Details of the Arrangement, including a summary of the terms and
conditions of the Arrangement Agreement, will be disclosed in a
Management Information Circular of Tigray which will be mailed to
shareholders of Tigray and will also be available on SEDAR at
www.sedar.com.
Advisors and Legal Counsel
GMP Securities L.P. is acting as financial advisor to the
Independent Special Committee of Tigray and Beadle Raven LLP is
acting as legal counsel to Tigray and its Board of Directors. Cairn
Merchant Partners LP is acting as financial advisor to the
Independent Special Committee of East Africa and Cassels Brock
& Blackwell LLP is acting as legal counsel to East Africa and
its Board of Directors.
About Tigray Resources
Tigray is a Canadian mineral exploration company focused on
discovery through advancing early-stage mineral projects in
Ethiopia. Tigray's key property is the 70%-owned Harvest
polymetallic VMS exploration project, which covers 155 square
kilometres in the Tigray region of Ethiopia, 600 kilometres
north‐northwest of the capital city of Addis Ababa. The company has
an option to earn an 80% interest in the Adyabo property covering
418 square kilometres immediately west of the Harvest project.
Tigray's shares trade on the TSX Venture Exchange under the symbol
TIG.
More information on Tigray Resources Inc. can be viewed at the
company's website www.tigray.ca.
About East Africa Metals
East Africa Metal's principal asset is the Handeni Property
located in north-eastern Tanzania. The Handeni Property includes
the Magambazi Project, a gold deposit discovered in 2009.
More information on East Africa Metals Inc. can be viewed at the
company's website www.eastafricametals.com.
This news release contains "forward-looking information"
within the meaning of applicable Canadian securities legislation.
Generally, forward-looking information can be identified by the use
of forward-looking terminology such as "anticipate", "believe",
"plan", "expect", "intend", "estimate", "forecast", "project",
"budget", "schedule", "may", "will", "could", "might", "should" or
variations of such words or similar words or expressions.
Forward-looking information is based on reasonable assumptions that
have been made by East Africa and Tigray as at the date of such
information 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 East Africa and
Tigray to be materially different from those expressed or implied
by such forward-looking information, including but not limited to:
risks associated with completion of the Arrangement, including
obtaining all shareholder, regulatory and third party approvals,
mineral exploration and development; metal and mineral prices;
availability of capital; accuracy of East Africa's and Tigray's
respective projections and estimates; interest and exchange rates;
competition; stock price fluctuations; availability of drilling
equipment and access; actual results of current exploration
activities; government regulation; political or economic
developments; environmental risks; insurance risks; foreign
taxation risks, capital expenditures; operating or technical
difficulties in connection with development activities; personnel
relations; the speculative nature of strategic metal exploration
and development including the risks of diminishing quantities of
grades of reserves; contests over title to properties; and changes
in project parameters as plans continue to be refined, as well as
those risk factors set out in East Africa's listing application
dated July 8, 2013 and Tigray's listing application dated August
18, 2011. Forward-looking statements are based on assumptions
management believes to be reasonable, including but not limited to
completion of the Arrangement, receipt of all shareholder,
regulatory and third party approvals, the business of the resulting
issuer on completion of the Arrangement, the price of gold; the
demand for gold; the ability to carry on exploration and
development activities; the timely receipt of any required
approvals; the ability to obtain qualified personnel, equipment and
services in a timely and cost-efficient manner; the ability to
operate in a safe, efficient and effective manner; and the
regulatory framework regarding environmental matters, and such
other assumptions and factors as set out herein. Although East
Africa and Tigray have attempted to identify important factors that
could cause actual results to differ materially from those
contained in forward-looking information, there may be other
factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such information will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information.
Accordingly, readers should not place undue reliance on
forward-looking information. East Africa and Tigray do not
undertake to update any forward-looking information that is
included herein, except in accordance with applicable securities
laws.
None of the securities to be issued pursuant to the
Arrangement Agreement have been or will be registered under the
United State Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any state securities laws, and any securities
exchanged pursuant to the Arrangement are anticipated to be issued
in reliance upon available exemptions from such registration
requirements pursuant to Section 3(a)(10) of the U.S. Securities
Act and applicable exemptions under state securities laws. This
press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities
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 news release.
East Africa Metals Inc.Nick WattersBusiness Development(604)
488-0822investors@eastafricametals.comTigray Resources Inc.Andrew
Lee SmithPresident & C.E.O.(604)
488-9582investors@tigray.ca
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