Mining vs AI: What’s wrong with this picture?
As the saying from mid-19th century California goes, during a gold rush the easiest way to get rich is selling shovels and picks.
Canada Saccharum Energy Corp, an investment company focused on the resource sector announced on Tuesday that
further to its press releases dated December 21, 2010 and April 4, 2011, it has entered into an arm’s length agreement with Marifil Mines Ltd., a TSX Venture Exchange-listed company.
Under the terms of the Agreement, Saccharum shall purchase all of the outstanding securities of Oxbow Holdings Corp. (“Oxbow”), a subsidiary of Marifil, and enter into a joint venture agreement with Marifil prior to July 15, 2011, such that Saccharum may earn up to a 70% interest in certain of Marifil’s Argentina potash properties, commonly referred to as the K-2, K-3 and K-4 properties (collectively, the “Marifil Properties”) by making certain cash payments, issuing Saccharum common shares (“Saccharum Shares”) and meeting certain exploration expenditures on the Marifil Properties, all as discussed in more details below.
The potash and mining interests in the K-2 property are currently held by Oxbow. Saccharum has agreed to purchase all of the outstanding securities of Oxbow for a total price of US$366,481. Oxbow shareholders may elect to accept either cash or Saccharum Shares at a deemed price of C$0.50 per Saccharum Share. In return, Marifil agrees to restructure its underlying agreement with Oxbow such that Saccharum can earn up to a 70% interest in the K-2 property. Saccharum will also appoint John Hite, a Marifil nominee, to its Board of Directors.
Pursuant to the terms of the Agreement, Saccharum has the option to purchase a 70% undivided interest in the Marifil Properties for a period of not less than three years from July 1, 2011 (the “Effective Date”) by meeting the following obligations:
* making an initial cash payment of US$300,000 upon the execution of a definitive joint venture agreement (the “JV Agreement”) with respect to the K-3 and K-4 properties, subject to certain conditions being met, all as more particularly set forth in the Agreement;
* spending a total of US$4,000,000 on potash exploration expenditures on each of the Marifil Properties (for a total of US$12,000,000);
* making subsequent payments of US$150,000 for each of the Marifil Properties on the first anniversary from the Effective Date (for a total of US$450,000) and US$200,000 for each of the Marifil Properties on the second anniversary from the Effective Date (for a total of US$600,000).
Saccharum has the sole discretion to expend more than US$4,000,000 on exploration expenditures on any one of the Marifil Properties. Provided that all of the other obligations under the Agreement are in good standing at the relevant time, Saccharum will be deemed to have earned a 70% interest in any one of the Marifil Properties when it has completed the minimum US$4,000,000 in exploration expenditures.
Saccharum has also agreed to issue 1,500,000 Saccharum Shares to Marifil upon completion of a positive National Instrument 43-101 (“NI 43-101”) compliant technical report identifying ore resources and a further 1,500,000 Saccharum Shares following completion of a commercially positive feasibility study, subject to certain adjustments.
The parties have also agreed that the JV Agreement shall provide for a 3% net smelter return (“NSR”) on each of the K-3 and K-4 properties to be granted by Saccharum to Marifil. Saccharum has the option to purchase the NSR from Marifil on either of the two properties for 2,000,000 Saccharum Shares per property within 30 days from the completion of a NI 43-101 technical report disclosing a measured or indicated resource with an industry acceptable cut-off grade indicating a level of potential commercially economic viability acceptable to Saccharum. Marifil also has a “put option” to obligate Saccharum to purchase such NSR on the same terms as discussed above.
All of the Saccharum Shares to be issued in connection with this transaction at a later date shall be issued at a price equal to the Discounted Market Price (as such term is defined in the policies of the TSX Venture Exchange) at the time of issuance.
In order to fund the ongoing working capital requirements of Saccharum, it is currently contemplated that one insider of Saccharum will transfer within escrow 1,200,000 Saccharum Shares that are currently held in escrow to another insider of Saccharum at $0.15 per share for aggregate consideration of $180,000 and two current insiders of Saccharum will then lend in aggregate $600,000 to Saccharum via an unsecured loan at a commercial rate of interest, payable on demand. These funds will be applied by the Corporation to initiate potash exploration activities on the properties. These loans will constitute a related party transaction (the “Related Party Transaction”) for the purposes of Multilateral Instrument 61-101 Protection of Minority Holders in Special Transactions (“MI 61-101”). The Corporation is relying on the exemption from the minority shareholder approval requirement contained in Section 5.7(f) of MI 61-101 as the loan is on reasonable commercial terms and is not convertible into or repayable in equity or voting securities of the Corporation. The disinterested directors of the Corporation have determined that the terms of the Related Party Transaction are fair and reasonable insofar as the Corporation’s shareholders are concerned and have approved the loans.
Saccharum will issue up to 100,000 Saccharum Shares at a deemed price of $0.50 per Saccharum Share as a finder’s fee to an arm’s-length third party in connection with and subject to the completion of this transaction.
The completion of the transactions described herein is subject to the approval of the TSX Venture Exchange and all other necessary shareholder or regulatory approvals. The completion of the transactions are also subject to certain other additional conditions precedent, including, but not limited to: (i) entering into the definitive JV Agreement prior to July 15, 2011; (ii) completion of the Oxbow share purchase; (iii) the option agreement with respect to the K-2 property being amended to reflect the terms of the Agreement; (iv) the absence of any material change or change in a material fact which might reasonably be expected to have a material adverse effect on the financial and operational condition or the assets of each of the parties; and (v) certain other conditions typical in a transaction of this nature. In addition, certain of the time horizons associated with the work obligations of Saccharum in relation to the K-3 and K-4 properties are dependent on the receipt by the Corporation of confirmation of title to the leases comprising those properties.
In commenting on the execution of the agreement, Johannes Kingma, President of Saccharum, stated: “We have been working closely with the Marifil team since we signed the first Letter of Intent with this company in December. Now, after extensive negotiations, we have gained access to a significant block of potash exploration lands in Argentina’s Nequan Basin. Also, in Marifil, we have gained a joint venture partner with deep experience in mining activities, and we look forward to implementing an exploration aimed at confirming theories of the potential potash resource contained in this area.”
Trading in Saccharum Shares on the Exchange is currently halted and will remain so until the documentation required by the Exchange has been reviewed and accepted by the Exchange.
