Discovery Ventures Inc. ("Discovery") (TSXV: DVN) and Roca Mines Inc. ("Roca") are pleased to jointly announce they have entered into a binding lett
Discovery Ventures Inc. ("Discovery") (TSXV: DVN) and Roca Mines Inc. ("Roca") are pleased to jointly announce they have entered into a binding letter agreement dated November 4, 2013 with each other and FortyTwo Metals Inc., a wholly-owned subsidiary of Roca, whereby Roca granted an exclusive option to Discovery to acquire all of the issued and outstanding common shares of FortyTwo. FortyTwo holds, among other assets, the Max Mine which includes an underground molybdenum mine, crushing, milling and concentrating facilities, tailings storage facilities, mineral claims, mining leases, licenses and other holdings located near Trout Lake in the Revelstoke mining division of the Province of British Columbia. The Max Mine is located approximately 135 kilometres from Discovery's Willa Project and is a formerly producing molybdenum mine that operated from 2007 until November 2011 when depressed metal prices led to its closure. The Agreement and the transactions contemplated therein are subject to approval from the TSX Venture Exchange.
Akash Patel, President of Discovery stated, "We are very excited about the proposed acquisition of the Max Mine and mill complex and the strategic synergies that may result by combining Discovery's existing Willa Project with the Max Mine processing facility."
Summary of the Transaction
Discovery may exercise the option and acquire all of the shares of FortyTwo for a total purchase price of $5.675 million, consisting of cash payments of $5,050,000 and the issuance of 2,500,000 shares of Discovery at a deemed price of $0.25 per share in accordance with the following schedule:
- $50,000 paid to Roca as a non-refundable deposit upon entry into the Agreement;
- $750,000 payable to Roca within 10 days of receipt of conditional approval from the Exchange, following which the first stage of the option will be deemed exercised and Roca will transfer 16% of the share capital of FortyTwo to Discovery;
- $950,000 payable to Roca within 60 days of the Approval Date, following which the second stage of the option will be deemed exercised and Roca will transfer 19% of the share capital of FortyTwo to Discovery (35% in the aggregate); and
- $3.3 million payable to Roca and the issuance of 2.5 million shares of Discovery to Roca within 150 days of the Approval Date, following which the third and final stage of the option will be deemed exercised and Roca will transfer the remaining share capital of FortyTwo to Discovery.
The majority of the purchase price will be used by Roca to maintain the Max Mine in good standing over the next few months until exercise of the option and to retire approximately $3.1 million in secured and unsecured liabilities of FortyTwo. Upon the exercise of the third stage of the option and the transfer of the remaining shares of FortyTwo to Discovery, FortyTwo will have no material liabilities or encumbrances.
In addition to the Max Mine, FortyTwo also holds tax pools accumulated to date of approximately $50 million and the Max Project which consists of 59 mineral claims totalling approximately 5,489 hectares and certain undersurface rights located in Revelstoke mining division of the Province of British Columbia. Due to management's decision to focus on development of the Willa Project and current economic factors, Discovery takes the position that the Max Project is incidental to the proposed acquisition of FortyTwo and, once acquired, will not constitute a material property of Discovery. As a result, Discovery is not required under applicable securities law or policies of the Exchange to prepare a technical report on the Max Project in accordance with National Instrument 43-101 at this time. The Max Project is subject to a 2.5% NSR in favour of a third party, 60% of which (1.5%) may be repurchased at the price of $1 million for each 30% of the NSR (or 0.75%).
Discovery intends to finance the acquisition of FortyTwo through one or more private placements on terms to be determined. In the event the first stage or the second stage of the option is exercised and subsequent stages are not exercised by Discovery for any reason, the parties have agreed to enter into a shareholders' agreement on terms as set out in the Agreement. Under such circumstances, the provisions of the shareholders' agreement are intended to protect Discovery's investment in FortyTwo by restricting certain corporate transactions and share transfers and to ensure that Discovery's investment in FortyTwo is protected in the event of a business combination involving FortyTwo.
