Offer Saves Tagish Lake from Bankruptcy Risk and offers a 50% Premium to Tagish Lake Shareholders
Vancouver, British Columbia (July 21, 2010) â€” New Pacific Metals Corp. ( TSXV: “NUX.V”) (“New Pacific”), announced today that it has commenced its formal offer to purchase all of the outstanding common shares (the “Offer“) and secured and unsecured debt of Tagish Lake Gold Corp. (“Tagish Lake“, TSXV: TLG.V). New Pacific has filed its take-over bid circular (the “Circular“) on SEDAR and will mail the Circular to all Tagish Lake securities holders today.
Offer to Shareholders: The Offer permits Tagish Lake shareholders, for each Tagish Lake share tendered to the Offer to choose between:
(a) $0.06 per share in cash (the “Cash Election“); or
(b) 0.0822 of a New Pacific share (the “Share Election“), at an implied price of $0.73 per New Pacific share, being the 20 day volume-weighted average closing price (“VWAP“) of New Pacific shares on the TSX Venture Exchange (“TSXV“) on July 2, 2010 (being the last trading day prior to the announcement of New Pacific’s intention to make an offer to acquire Tagish Lake); or
(c) a combination of 50% in cash and 50% in New Pacific shares (the “Combined Election“).
New Pacific is concurrently offering to purchase for cash the approximately $7.4 million in secured and unsecured debt on the books of Tagish Lake, which would enable Tagish Lake to remove itself from Companies Creditors Arrangement Act (“CCAA”) protection from creditors.
Offer to Secured Creditors: New Pacific is offering to pay Secured Creditors 100% of their proven claim amounts in cash with no conditions. Secured Creditors who accept the offer will be paid regardless of the outcome of the takeover bid.
Offer to Unsecured Creditors: New Pacific is offering to pay Unsecured Creditors 100% of the value of their proven claim amounts in cash, subject to certain conditions, including the minimum tender condition under the takeover bid being satisfied and New Pacific taking up and paying for common shares under the Offer.
The Offer for the Tagish Lake common shares represents a premium of 50% over Tagish Lake’s closing share price on July 2, 2010 and a 50% premium to Tagish Lake’s 20-day and year to date VWAP on the TSXV.
The Offer also represents a premium of approximately 860% over the value implied in the failed acquisition proposed by YS Mining Company Inc. (“YS Mining“) for Tagish Lake in 2009. YS Mining is the principal secured creditor and a shareholder of Tagish Lake. The proposed transaction with YS Mining was approved by the Tagish Lake Board of Directors and valued Tagish Lake at $0.00625 per share or $811,375 for the entire company. The transaction did not receive approval from the TSXV and was subsequently terminated.
The Offer also saves Tagish Lake from the potential risk of bankruptcy, or seizure of its Skukum Mineral district properties by secured creditors, and represents a superior alternative to the current situation where Tagish Lake management has petitioned the company into protection under the CCAA. The CCAA protection commenced April 9, 2010, and Tagish Lake management have yet to present a restructuring plan to settle Tagish Lake’s debts.
The Honourable Jack Austin, Chairman of New Pacific said:
“We are offering Tagish Lake shareholders a choice: tender to our offer to receive liquidity, value and certainty today or face a risky future with Tagish Lake, whose plan is expected to involve a debt restructuring or liquidation of Tagish Lake’s principal asset under the CCAA process. Tagish Lake shareholders also have the opportunity to participate in the future development of the Skukum mineral district if they elect to take New Pacific shares under the Offer.”
Some important considerations for Tagish Lake shareholders include:
– YS Mining is a wholly owned subsidiary of Yukon-Shaanxi Mining Company, a joint venture between Yukon-Nevada Gold Corp. (YNG.T), and Northwest Non-Ferrous International Investment Company Limited. In November 2009 YS Mining acquired from Macquarie Bank the $1.5 million credit facility secured against the Skukum Creek gold property that was then in default. YS Mining also owns as of record approximately 10.8% of the outstanding common shares of Tagish Lake.
– In contravention of corporate law and TSXV requirements, an annual general meeting of the Tagish Lake shareholders has not been held since March 2007. Only Robert Chaffee has actually been elected by Tagish Lake shareholders. All other directors were appointed by existing directors.
– Tagish Lake is now effectively controlled by its principal secured creditor, YS Mining. Graham Dickson, the CEO and President of Tagish Lake, is the President and CEO of YS Mining and the COO of Yukon-Nevada Gold Corp, which is a 42% joint venture partner in YS Mining. The Corporate Secretary of Tagish Lake is also the Corporate Secretary of Yukon-Nevada Gold.
– All current Board members of Tagish Lake are connected in some respect to YS Mining or to YS Mining’s 42% shareholder, Yukon-Nevada Gold: Messrs. Dickson and Sun are also directors of YS Mining; Robert Chafee, Neil Steenberg, and Peter Holbek were previously Directors of Yukon-Nevada Gold. On July 6, 2010, Tagish Lake announced the appointment of John H. Resing to the Tagish Lake Board. Messrs. Resing and Chafee were management nominees for director of Yukon-Nevada Gold, as set out in Yukon-Nevada’s April 14, 2010 Information Circular, although it does not appear that either was elected. Tagish Lake later announced, on July 15, 2010, that concurrently with the appointment of Mr. Resing, Ren Xiaohua, who is currently a director of YS Mining, resigned as a director of Tagish Lake. On or about the same day that Mr. Resing was appointed to the Tagish Lake Board and Mr. Ren resigned, the President of Tagish Lake advised New Pacific that an independent committee had been formed to consider the Offer. Mr. Resing was appointed as the chair of the independent committee.
It appears that the Board of Directors and the management of Tagish Lake are closely aligned with YS Mining, the principal creditor and a major shareholder of Tagish Lake. It is the current Board and management team that petitioned Tagish Lake into CCAA protection.
– In April 2010 the Board of Directors of Tagish Lake granted themselves a total of 11,981,725 incentive stock options at the minimum price permitted by the TSXV rules. On July 15, 2010, the Board of Directors of Tagish Lake granted themselves an additional 2,000,000 incentive stock options. Notwithstanding that New Pacific owns approximately 9.9% of the issued and outstanding shares of Tagish Lake, New Pacific has twice requested and been refused a copy of the Tagish Lake stock option plan on the basis of Tagish Lake’s assertion that it is a private document.
– The proposed acquisition of Tagish Lake by YS Mining in 2009 not only destroyed shareholder value, but also consumed almost a full year of management’s time and considerable expense, caused the Company to forgo other opportunities and risked seizure of the Company’s main asset by the secured creditors.
Background to the Offer
From late February 2010 until prior to announcing this Offer on July 5, 2010, New Pacific, through its management and through intermediaries, attempted to engage Tagish Lake’s management or Directors in discussions regarding a possible transaction. No meaningful discussions resulted from these efforts. On July 2, New Pacific presented a written proposal to the Board of Tagish Lake offering to immediately pay off and take an assignment of any outstanding secured loans and to agree not to enforce any security for at least one year, in conjunction with a friendly acquisition of Tagish Lake at $0.06 per common share, pursuant to a statutory Plan of Arrangement. Mr. Dickson advised New Pacific that Tagish Lake was unable to respond within the time contemplated in the proposal, after which New Pacific publicly announced its intentions in order to comply with applicable law and stock exchange rules. Representatives of New Pacific and Tagish Lake have met since July 5 but were unable to progress discussions based on the New Pacific proposal, with the Tagish Lake independent committee taking the position that they were unable to consider the proposal since it was not a formal offer and did not include a term sheet. New Pacific has therefore reluctantly decided to make its proposal directly to Tagish Lake shareholders and creditors, although New Pacific remains open to discussions with the Tagish Lake board, at their discretion.
Once New Pacific is successful in acquiring control of Tagish Lake, its priority will be to have Tagish Lake removed from CCAA protection and direct Tagish Lake to make any related court applications, to call an annual general meeting to elect directors, to replace current management, to settle all of its debts, to arrange financing for operating capital, and to use New Pacific’s recognized financing, development and mining expertise to rapidly advance Tagish Lake’s Skukum mineral district properties towards production.
New Pacific currently holds 14.3 million shares of Tagish Lake, which were acquired in the market at prevailing prices. This represents approximately 9.9% of Tagish Lake’s issued and outstanding shares. New Pacific may acquire additional Tagish Lake shares during the course of the bid and if it does so it will advise the market in accordance with applicable securities laws.
The Offer is open for acceptance until 8:00 pm (Vancouver time) on September 2, 2010 unless it is extended or withdrawn. The Offer, and the offer to Unsecured Creditors, is subject to certain customary conditions including: a minimum tender threshold of 66 2/3% of the Tagish Lake Shares, receipt of all required regulatory approvals and third-party consents, the absence of any material adverse change in Tagish Lake; the absence of certain prohibited activities on the part of Tagish Lake (including share issuances, material debt issuances, acquisitions and dispositions) between the date hereof and the expiry of the Offer; and no untrue statements or omissions in Tagish Lake’s public disclosure.
Investors may obtain a free copy of the Circular and other documents filed by New Pacific with the Canadian securities regulators at www.sedar.com. The Circular and other documents may also be obtained for free from New Pacific’s website or by directing a request to New Pacific’s investor relations department by telephone at 1-888-224-1881, fax 604-669-9387 or e-mail email@example.com or by contacting the Information Agent, Kingsdale Shareholder Services Inc., toll free at 1-888-518-6812.
Secured and Unsecured Creditors of Tagish Lake may obtain more information by contacting New Pacific at the above phone numbers, or by email to: firstname.lastname@example.org
About New Pacific Metals Corp.
New Pacific is engaged in the exploration and development of mineral resources, gold-poly-metallic projects in China and other jurisdictions. New Pacific has extensive experience in implementing high grade resource development projects. For more information about New Pacific, visit the company’s website at www.newpacificmetals.com.
Forward Looking Information
This news release may contain forward looking statements, being statements which are not historical facts, including, without limitation, statements regarding the proposed acquisition of Tagish Lake common shares by New Pacific, the offer to pay out the secured and unsecured creditors ,and discussion of future plans and objectives. There can be no assurance that such statements will prove accurate. Such statements are necessarily based on a number of estimates and assumptions that are subject to numerous risks and uncertainties that could cause actual results and future events to differ materially from those anticipated or projected. New Pacific Metals disclaims any intention or obligations to revise or update such statements. The following factors, among others, could cause actual results or developments to differ materially from the results or developments expressed or implied by forward looking statements: New Pacific cannot determine the number of Tagish Lake shareholders who may accept New Pacific’s Offer; New Pacific may not succeed in acquiring 66 2/3% of the outstanding Tagish Lake shares (on a fully-diluted basis); If the Offer is successful, New Pacific may not be successful in assisting Tagish Lake to obtain, and Tagish Lake may not obtain, the regulatory and other approvals and financing required to develop the Skukum mineral district; Tagish Lake may not be successful in developing the Skukum mineral district.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the release.