REG - Celsius Resources Ld - Silvercorp Metals proposed acquisition

Celsius ResourcesAnnouncement

15/05/2023 07:45

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RNS Number : 3982Z  Celsius Resources Limited  15 May 2023

ASX/AIM RELEASE

15 MAY 2023

Celsius Resources signs Non-Binding Term Sheet with Silvercorp Metals Inc. for proposed acquisition of Celsius Resources and firm subscription by Silvercorp Metals to raise A$5 million

 

Celsius Resources Limited ("CLA", "Celsius" or the "Company") (ASX:CLA,
AIM:CLA) is pleased to announce it has entered into a non-binding term sheet
("Term Sheet") and a binding subscription agreement ("Subscription Agreement")
with Silvercorp Metals Inc., ("SVM" or "Silvercorp") (TSX:SVM, NYSE:SVM) a
Canadian-based mining company engaged in the acquisition, exploration,
development and mining of mineral properties.

 

Highlights

 

Celsius Resources Limited has entered into a non-binding term sheet with
Silvercorp Metals Inc. with the following non-binding terms:

 

·    Silvercorp proposes to acquire all of the outstanding shares of CLA
at a fixed price of A$0.03 per share in exchange for consideration comprising
90% Silvercorp shares + 10% cash.

 

·    The consideration of A$0.030 (GBP0.016) 1  (#_ftn1) per share
represents a 76% premium to the 20-day volume weighted average price of
Celsius shares as of the close of trading on the ASX on 11 May 2023 (86%
premium by similar reference to the trading price on AIM). The implied value
of the proposed acquisition (should it proceed) is approximately A$56 million
(GBP 30.2 million)1. Using Silvercorp's current share price of CA$4.64
(A$5.14 2  (#_ftn2) ) as of the close of trading of Silvercorp shares on TSX
on 12 May 2023, the proposed acquisition will result in Silvercorp issuing
approximately 9.7 million Silvercorp shares and A$5.6 million to the
shareholders of Celsius.

 

·    Concurrent to the proposed acquisition, should it proceed, it is
anticipated that Celsius shareholders will, via an in specie distribution,
receive shares in a new exploration company (the "SpinCo") which will hold all
of Celsius' rights and interests with respect to the Sagay (Philippines) and
Opuwo Cobalt (Namibia) projects via a demerger, subject to Celsius obtaining
the necessary shareholder and regulatory approvals. Should the demerger
proceed, the SpinCo shares are anticipated to be distributed on a 10 Celsius
shares for 1 SpinCo share basis to Celsius shareholders, who taking into
account the proposed investment into Spinco referred to below, will hold
approximately 87% of Spinco. SpinCo will seek listing on the Australian
Securities Exchange ("ASX") or on AIM, a market operated by the London Stock
Exchange, via the demerger and concurrent initial public offering. Silvercorp
has agreed, under the non-binding term sheet, to invest A$4 million in SpinCo,
valued at a post-financed market capitalisation of A$30 million.

 

·    Additionally, Celsius and Silvercorp have executed a binding
subscription agreement for A$5 million at a subscription price of A$0.015 (GBP
0.008(1)), to be primarily used as interim funding for its
Maalinao-Caigutan-Biyog Copper-Gold Project ("MCB Project") in the
Philippines.

 

·    Celsius and Silvercorp will now commence negotiations towards the
execution of the necessary binding transaction documents and agreements which
will implement the proposed acquisition.

 

About Silvercorp Metals, Inc.

 

Silvercorp Metals, Inc. is a Canadian mining company traded on the Toronto
Stock Exchange (TSX: SVM) and the New York Stock Exchange (NYSE American:
SVM). Silvercorp has been profitably mining underground silver, lead, zinc
deposits in China for 17 years and engages in the acquisition, exploration and
development of resource projects globally with a focus on the sustainable,
profitable, and long-term production of precious and nonferrous metals such as
silver, gold, lead, and zinc. Its long-term strategy is focused on expanding
mineral reserves, streamlining mine production management, achieving
sustainable development, and seeking mutually beneficial opportunities
globally.

 

Through the years, it has successfully driven rapid growth and solid silver,
lead and zinc production with

a demonstrated and proven commitment to Environment, Social, and Governance
standards while creating value for its stakeholders and shareholders.
Silvercorp has a market capitalisation of US$607million with a current share
price as of 11 May 2023 on the TSX of CA$4.64, and the NYSE of US$3.44. As of
31 December 2022, Silvercorp's balance sheet is at US$210.3 million in cash
and cash equivalents and short-term investments. Silvercorp holds further
equity investment portfolio in associates and other companies with a total
market value of US$121.8 million.  (See Silvercorp Metals, Inc. website,
http://silvercorpmetals.com (http://silvercorpmetals.com) )

 

Management commentary

 

Julito Sarmiento, Executive Chairman of Celsius Resources commented:

 

"This a positive step and timely development for Celsius and its subsidiaries.
We are happy to have received an offer from Silvercorp which shares Celsius'
corporate values and our vision to develop mining projects in a sustainable,
inclusive and responsible manner. Together, we have the potential to
demonstrate and realise our commitments to all our shareholders and
stakeholders to see the development of Celsius' mineral assets, particularly
our flagship MCB Copper-Gold Project with the Balatoc Indigenous Community in
Kalinga, Philippines, through fruition.

Indeed, this is a strong and favourable endorsement of the Philippines'
minerals industry under the Administration of President Ferdinand R. Marcos,
Jr. in its unrelenting drive as spearheaded by the Department of Environment
and Natural Resources under the stewardship of Secretary Ma. Antonia
Yulo-Loyzaga, a globally-renowned climate change and disaster resilience
expert, towards transformative mining that genuinely protects the environment
and brings about shared prosperity for all stakeholders."

 

Proposed Transaction

 

Pursuant to the non-binding Term Sheet, Silvercorp intends to acquire Celsius
in a 90% scrip and 10% cash transaction that will be implemented by an
Australian scheme of arrangement under the Corporations Act 2001 (Cth)
("Scheme"). The parties have commenced negotiations towards the execution of a
binding scheme implementation agreement to implement the Scheme ("Definitive
Agreement").

 

Simultaneous with the completion of the Scheme, should it proceed, Celsius
intends to spin out its Sagay Project (100% Celsius) and Opuwo Cobalt Project
(95% Celsius) ("Spin-Out Projects") into a new ASX or AIM listed SpinCo via a
demerger, subject to Celsius obtaining the necessary shareholder, ASX/AIM and
regulatory approvals ("Demerger"). The Demerger of the Spin-Out Projects,
will add significant value to shareholders and improve strategic focus on the
development of Sagay and Opuwo.

 

Under the Scheme and Demerger (together, the "Proposed Transaction"), if
implemented, it is anticipated that each Celsius share will be exchanged for
such fractional Silvercorp shares equivalent to A$0.027 plus A$0.003 in cash,
with such fractional Silvercorp share having a fair market value determined
based on the volume weighted average trading price of the Silvercorp shares on
the TSX/NYSE for the 20 business days ending on (and including) the scheme of
record date (the "SVM Exchange Ratio"), and 1/10(th) of a SpinCo share (the
"SpinCo Exchange Ratio"). Silvercorp has agreed, under the non-binding term
sheet, to invest A$4 million in SpinCo, valued at a post-financed market
capitalisation of A$30 million.

 

An application will be made to ASX on the effective date of the Scheme for the
suspension of the Celsius shares from official quotation on ASX. An
application will be made for removal from the official list of ASX following
implementation of the Scheme. Similarly, an application will be made to the
London Stock Exchange prior to the effective Proposed Transaction date, should
it proceed, to cancel the admission of the Celsius shares to trading on AIM
with effect from the effective date.

Implementation of the Proposed Transaction will be contingent on the
completion of successful due diligence by each party (such as Silvercorp
demonstrating its financial capacity to the satisfaction of Celsius and
Silvercorp being satisfied with the legal titles of Celsius' assets in the
Philippines), other documentation and regulatory and shareholder approvals.
The Celsius Board believes the Proposed Transaction, if implemented, could
provide significant benefits to Celsius' shareholders.

 

Anticipated Benefits to Celsius Shareholders

 

§ Exposure to an immediate premium and participation as shareholders of
Silvercorp in a larger entity with greater liquidity and access to funding;

§ Ongoing exposure to future value creating milestones at MCB with reduced
development risk given Silvercorp's track record of operating underground
mines over the last 17 years;

§ Provides Celsius shareholders with ownership in new SpinCo, created to
continue to advance the Sagay and Opuwo projects;

§ Silvercorp's balance sheet reduces the funding risk associated with the MCB
Project, providing access to financing options available to a larger company
during times of uncertain and volatile market conditions; and

§ Provision of immediate interim financing to fund expenditures at the MCB
Project pending closing of the Proposed Transaction.

 

 

SVM-CLA Term Sheet

 

The Term Sheet is non-binding in respect of the above elements of the Proposed
Transaction. The parties intend to proceed with the formalisation of the Term
Sheet in the form of a Definitive Agreement. The Celsius Board cautions that
there is no certainty that the parties will be able to agree the formal
Definitive Agreement. The Definitive Agreement will also be subject to
conditions and there can be no certainty that these conditions will be
satisfied, and that the Proposed Transaction will proceed.

 

The Term Sheet is binding in respect of the following provisions:

 

·      Exclusivity: Celsius and Silvercorp have entered into a one-month
exclusivity period which commenced on 2(nd) of May 2023.

·    Taxes and Costs: All taxes (excluding Celsius shareholders' personal
taxes) and costs relating to the Scheme will be borne by Silvercorp.

·    Termination: The Term Sheet may be terminated:

o  by mutual written consent of Celsius and Silvercorp;

o  by either Celsius or Silvercorp:

§ if at any time, any regulatory or government authority or stock exchange
(or in the case of AIM, the Company's Nominated Adviser) has notified such
party of its determination to not permit the Scheme to proceed, in whole or in
part, and the parties have used commercially reasonable efforts to address or
resolve such determination;

§ if a Definitive Agreement has not been entered into on or before 1 July
2023 or such later date as may be agreed to by the parties in writing; or

§ upon written notice to the other in the event of a material breach of the
Term Sheet by the other party; or

o  automatically, as a result of the signing of the Definitive Agreement.

 

Other standard provisions such as governing law (Western Australia),
amendments, severability of provisions and confidentiality, are also binding.

 

Consideration

 

Should it proceed, the consideration to be paid to Celsius shareholders for
all of the outstanding shares of Celsius shall be Silvercorp consideration and
the in-specie distribution of SpinCo shares to Celsius shareholders. The
deemed offer price of Silvercorp consideration, being A$0.03 per Celsius
share, represents a premium of:

·    50% over the closing price of Celsius shares on 11 May 2023 of A$0.02
(64% premium by similar reference to the trading price on AIM);

·    67% over the 15-day VWAP of Celsius shares as of market close on 11
May 2023 of A$0.02 (83% premium by similar reference to the trading price on
AIM); and

·    76% over the 20-day VWAP of Celsius shares as of market close on 11
May 2023 of A$0.02 (86% premium by similar reference to the trading price on
AIM).

 

Further, Celsius currently has 362,304,915 options (of which 325,304,915
options are quoted), 4,400,000 performance rights and 36,000,000 warrants
(together, the "Celsius Convertible Securities") on issue with various
exercise prices, vesting conditions and expiry dates. The outstanding Celsius
Convertible Securities not exercised by the holders prior to completion of the
Scheme (should it proceed) are intended to be exchanged for warrants,
performance rights or options to acquire Silvercorp shares in accordance with
and subject to adjustment (as to number and exercise price) using the SVM
Exchange Ratio and the rules and policies of applicable stock exchanges, and
shall otherwise continue to vest and/or be exercisable on the schedule and
terms established at the time of grant or issuance. Celsius quoted options
will be exchanged for options to acquire Silvercorp shares in accordance with
and subject to adjustment (as to number and exercise price) using the SVM
Exchange Ratio and the rules and policies of applicable stock exchanges, and
shall otherwise continue to vest and/or be exercisable on the schedule and
terms established at the time of grant or issuance, by a separate Australian
scheme of arrangement under the Corporations Act 2001 (Cth) ("Corporations
Act").

 

Details of the proposed Demerger

 

If the Demerger conditions are satisfied, Celsius shareholders are expected to
receive a pro-rata allocation of fully paid ordinary shares in SpinCo via an
in specie distribution on a record date to be determined by the Celsius Board,
with further details to be provided in due course. In conjunction with the
Demerger, SpinCo intends to undertake an initial public offering ("IPO"), and
apply for admission to the official list of the ASX or AIM.

 

Pursuant to the terms of the Non-Binding Term Sheet, it is intended that
SpinCo's initial board of directors will comprise of five members, of which
three members will be nominees of Celsius and two members will be nominees of
Silvercorp, details of whom to be provided in due course.

 

Should the Demerger proceed by way of an ASX listing, Celsius is aware that it
and SpinCo will require customary ASX in-principle approvals and potentially
waivers of certain ASX Listing Rules in order to implement the transaction on
its contemplated terms. SpinCo has not formally applied to the ASX for
in-principle advice in relation to suitability for admission to the official
list under ASX Listing Rules 1.1 condition 1 and 1.19 for SpinCo and there is
a risk that SpinCo may have to make amendments to the structure of the
proposed transaction or may receive unfavourable in-principle advice from ASX
and therefore be unable to proceed with the Proposed Transaction. Should
changes be required to the Proposed Transaction, this will be discussed
between the parties as part of the Definitive Agreement.

 

Should the Demerger proceed by way of an AIM listing, then similar provisions
to those above will apply.

 

Key steps and indicative timetable

Subject to and conditional on, amongst other things, each condition in respect
of the Scheme and Demerger being satisfied and receipt of the required Court,
regulatory and shareholder approvals, an indicative timetable outlining the
key steps for the Proposed Transaction is provided below (assuming the
Demerger proceeds by way of an ASX listing).

 

 Event                                                                            Indicative timing
 Execution and announcement of Definitive Agreement                               late-June 2023
 Scheme booklet (including notice of meeting seeking the necessary shareholder    late-July 2023
 approvals for the Demerger) provided to ASIC and ASX in draft
 First Court hearing                                                              mid-August 2023
 Lodgement of scheme booklet (including notice of meeting) with ASX and ASIC      late-August 2023
 and made available to Celsius shareholders
 Lodgement of SpinCo Prospectus with ASIC                                         late-August 2023
 Lodgement of application for the admission of SpinCo to the official list of     late-August 2023
 ASX (assuming the Demerger proceeds by way of an ASX listing)
 Opening date for offers under the SpinCo Prospectus (unless the exposure         5 business days after the lodgement of the SpinCo Prospectus
 period for the SpinCo Prospectus is extended)
 Scheme meeting of Celsius shareholders ordered by the Court to be convened       late-September 2023
 under subsection 411(1) of the Corporations Act to consider and vote on the
 Scheme

 Celsius general meeting, at which all requisite shareholder approvals for the
 Demerger are provided
 Closing date for offers under the SpinCo Prospectus                              late-September 2023
 Receipt of conditional approval from ASX for the admission of SpinCo to the      early to mid-October 2023
 official list of ASX (assuming the Demerger proceeds by way of an ASX listing)
 Second Court date for approval of the Scheme                                     mid-October to early-November 2023
 Effective date of the Scheme                                                     mid-October to early-November 2023
 Record date for determining entitlements to the Scheme consideration             late-October to early-November 2023
 Implementation date for the issue of the Scheme consideration to Celsius         late-October to early-November 2023
 shareholders
 In-specie distribution of SpinCo shares to eligible Celsius shareholders         late-October to early-November 2023

 Issue of SpinCo IPO shares
 Termination of official quotation of Celsius shares on ASX and AIM               late-October to early-November 2023

 SpinCo commences trading on ASX

 

Celsius cautions that the dates shown above are indicative only and may be
varied.  There are a number of key items outside of the control of Celsius or
SpinCo, including the receipt of ASX or other regulatory approvals, and
third-party reports (including the independent expert's report for the Celsius
shareholder meeting).  Any material updates to the indicative timetable will
be disclosed by way of ASX and AIM updates. As noted above, there is no
certainty that the parties will be able to agree the formal Definitive
Agreement. The Definitive Agreement will also be subject to conditions and
there can be no certainty that these conditions will be satisfied, and that
the Proposed Transaction will proceed in the manner indicated in the
indicative timetable.

 

Subscription Agreement

 

Pursuant to the Subscription Agreement, Silvercorp has agreed to subscribe for
333,333,333 new Celsius shares (Subscription Shares) at a subscription price
of A$0.015 (GBP0.008(1)) per Subscription Share to raise A$5,000,000 (before
costs).

 

The Subscription Shares will be issued under the Company's existing capacity
under ASX Listing Rules 7.1 and 7.1A, with settlement expected to occur on the
16(th) of May 2023.

 

Application will also be made for the Subscription Shares, which rank pari
passu with all existing ordinary shares in the Company, to be admitted to
trading on AIM, with the date of admission to be on or around 19 May 2023.

 

Following settlement of the Subscription Shares and admission of the
Subscription Shares to AIM, Silvercorp will have a relevant interest of
approximately 15.1% of Celsius' issued share capital at that time.

 

Proceeds of the Interim Funding are intended to be applied towards:

 

·    advance the development of MCB Project; and

·    general working capital.

The issue price of A$0.015 (GBP0.008(1)) per Subscription Share represents a
discount of 25% to the last closing price of A$0.02 on 11 May 2023 and a 15%
discount to the 15-day VWAP of Celsius shares as of ASX market close on 11 May
2023 of A$0.02. (18% and 9% respectively by similar reference to the trading
price on AIM)

 

The Subscription Shares will be issued under the Company's existing capacity
under Listing Rules 7.1 and 7.1A in the following proportions:

 

·    269,036,320 Subscription Shares issued pursuant to Listing Rule 7.1;
and

·    64,297,013 Subscription Shares issued pursuant to Listing Rule
7.1A.

 

Subject at at all times to the ASX Listing Rules and any policy or guidance
published or notified by ASX from time to time, on and from completion of the
issue of the Subscription Shares and provided Silvercorp's relevant interest
in Celsius does not fall below 10%, Celsius agrees that it will give
Silvercorp a reasonable opportunity to participate in future equity offers
(subject to certain excluded issue of equity securities, such as the issue of
equity securities under the Company's employee securities incentive plan) on
equivalent terms to other subscribers for a period of two years from the issue
of the Subscription Shares.

 

 

Total Voting Rights

 

In conformity with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority ("FCA"), at settlement of the Subscription Shares
and admission to trading on AIM, the total number of Ordinary Shares in the
Company with voting rights will be 2,209,051,662.

 

Celsius will make a further announcement on the progress of the Proposed
Transaction in due course and as required.

 

 

This announcement has been authorised by the Board of Directors of Celsius
Resources Limited.

 

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018.

 
Celsius Resources Contact Information

Level 5, 191 St. Georges Terrace

Perth WA 6000

 

PO Box 7059

Cloisters Square PO

Perth WA 6850

 

P: +61 2 8072 1400

E: info@celsiusresources.com.au (mailto:info@celsiusresources.com.au)

W: www.celsiusresources.com (http://www.celsiusresources.com)

 

 

 

 Celsius Resources Limited
 Peter Hume                                   P: +61 2 8072 1400

                                              E: info@celsiusresources.com.au (mailto:info@celsiusresources.com.au)

                                              W: www.celsiusresources.com (http://www.celsiusresources.com)

 Multiplier Media
 Jon Cuthbert                                 M: +61 402 075 707

                                              E: jon.cuthbert@multiplier.com.au (mailto:jon.cuthbert@multiplier.com.au)

 Beaumont Cornish Limited

 (Nominated Adviser)

 Roland Cornish/Felicity Geidt/Andrew Price   +44 (0) 207 628 3396

 SPAngel

 (Broker)

 John Meyer/Ewan Leggat/Harry Davies-Ball     +44 20 3470 0470

 

Further information

This Announcement is for information purposes only and is not intended to and
does not constitute or form part of an offer, invitation or the solicitation
of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities, or the solicitation of any vote or approval in any
jurisdiction, pursuant to the Proposed Transaction or otherwise, nor shall
there be any sale, issuance or transfer of securities of CLA or SVM pursuant
to the Proposed Transaction in any jurisdiction in contravention of applicable
law.

Beaumont Cornish Limited, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority, is acting exclusively for CLA as
Nominated Adviser under the AIM Rules and for no-one else in connection with
the matters described in this announcement and accordingly will not be
responsible to anyone other than CLA for providing the protections afforded to
clients of Beaumont Cornish Limited nor for providing advice in relation to
the matters described in this announcement.

 

In accordance with section 734(5)(b) of the Corporations Act, it is noted
that:

·    SpinCo will be the offeror of fully paid ordinary shares under the
IPO;

·    a prospectus will be issued by SpinCo in accordance with Part 6.2 of
the Corporations Act when the IPO shares are offered;

·    the prospectus is anticipated to be issued in the coming months and
will be made available on the website to be established by SpinCo and to
eligible Celsius shareholders;

·    a person should consider the prospectus in deciding whether to apply
for IPO shares; and

·    anyone who wants to apply for the IPO shares will need to complete an
application form that will be in or will accompany the prospectus.

 

 1  (#_ftnref1) Converted using an exchange rate of 1 AUD:0.54 GBP as at 11
May 2023

 2  (#_ftnref2) Converted using an exchange rate of 1 AUD:1.11 CAD as at 12
May 2023

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