Agreement to Sell a 51% Interest in Its Chilean Subsidiary for US$17 Million
posted on Jan 20, 2009 12:50PM
|January 20, 2009|
Explorator Enters Into Agreement to Sell a 51% Interest in Its Chilean Subsidiary for US$17 Million
Plans to raise approximately CAD$1.78 Million in Private Placement
|TORONTO, ONTARIO--(Marketwire - Jan. 20, 2009) - Explorator Resources Inc. ("Explorator" or the "Company") (TSX VENTURE:EXO) has entered into an agreement with Sociedad Punta del Cobre S.A. ("SPC") pursuant to which SPC would acquire a 51% interest in Explorator Chile (currently the Company's 100% owned subsidiary) in exchange for a payment of US$17 million (the "Agreement").
Under the terms of the Agreement, SPC is required to make a capital contribution of US$10 million to Explorator Chile on or before March 25, 2009 and to make a further capital contribution of US$7 million to Explorator Chile within 18 months of the execution of a definitive capital contribution agreement for the shares representing a 51% interest in Explorator Chile. Additionally, the Agreement requires SPC to provide additional funds (up to US$1.5 million) that would be required to carry out a bankable feasibility study with respect to the El Espino project, with Explorator retaining a royalty of US$0.10 per ton of ore processed from the El Espino project.
"We are extremely excited about being able to enter into an agreement with SPC, a successful Chilean copper mining company" stated David O'Connor, President and CEO of Explorator. "Its experience, both in developing assets and operating producing assets will bring great value in the development of the El Espino project and success of Explorator."
Added Antonio Ortuzar, Jr., Chairman of the Board of Directors of Explorator "The agreement that was reached with SPC ensures that property payments due in April 2009 will be made and Explorator Chile will complete its earn-in and own 100% of the El Espino property."
On closing, Explorator and SPC would enter into a shareholders' agreement with respect to their respective shares in Explorator Chile (the "Shareholders' Agreement"), which shall include the terms and conditions that are typical in this type of agreement, including: (a) reciprocal rights to the first purchase option on any shares of Explorator Chile; (b) a requirement that if a party chooses to sell its interest in Explorator Chile, it must sell its entire interest; (c) a requirement that two-thirds of the shareholders of Explorator Chile must be in agreement in order to undertake projects not related to the El Espino project or the sale of material assets of Explorator Chile, including the sale of the El Espino project; (d) subject to (e) below, a requirement that capital increases of Explorator Chile must be approved by a simple majority of the shareholders with provisions to ensure that all capital increases are done on the economic value of Explorator Chile's properties and on the basis of pre-determined budgets; (e) that there be no capital increases in Explorator Chile up to and including December 31, 2010, following which capital increases would have a subscription term of 90 days, except in cases where the capital increase was in excess of US$100 million, in which case the subscription term would be 180 days; (f) that the Board of Directors of Explorator Chile be comprised of 5 members, 3 of whom are appointed by SPC and 2 of whom are appointed by Explorator (with the current Chairman of Explorator Chile to remain as Chairman until December 31, 2010); (g) a requirement that all related party transactions be completed on market terms; and (h) the Shareholders' Agreement would remain valid until such time as one of the parties' interests is reduced to less than 25 percent.
Until such time as the conditions of the Agreement are satisfied (or the Agreement is terminated), Explorator and Explorator Chile have agreed not to enter into negotiations of any nature nor initiate any contract whatsoever with any other potential parties interested in shares issued by Explorator or Explorator Chile or in the El Espino Project, with the exception of the potential issuance of commercial paper of Explorator in connection with a financing for purposes other than the financing of the El Espino Project.
The Agreement is subject to certain conditions, including: (1) the completion of due diligence to the satisfaction of SPC with such due diligence to be completed within 60 days; (2) the execution of the Shareholders' Agreement; (3) the receipt of all required regulatory approvals, including the approvals of the TSX Venture Exchange; and (4) the approval of the shareholders of Explorator.
Pursuant to the Agreement, each member of the Board of Directors and certain shareholders of Explorator (representing 47.42% of the issued and outstanding common shares of Explorator) have agreed to irrevocably support the Agreement and, in particular, have agreed to vote favorably on the resolutions approving the terms of the Agreement, at the relevant meetings of the Board of Directors and shareholders.
Additionally, SPC has agreed to purchase CAD$1,779,999.91 worth of common shares of Explorator through its participation in a non-brokered private placement of common shares priced at CAD$0.1475 per common share. The proceeds of the offering will be used for the exploration and development of the Company's properties and for working capital purposes. The proposed private placement is conditional upon the successful completion of due diligence by SPC and remains subject to the receipt of all required regulatory approvals, including the approval of the TSX Venture Exchange. However, in the event that SPC completes the purchase of the shares of Explorator Chile as contemplated hereby, it would be obligated to complete the private placement of common shares of Explorator, subject to the terms and conditions contained in the subscription agreement entered into by SPC and Explorator on the date hereof.
THE COMMON SHARES WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM U.S. REGISTRATION REQUIREMENTS. THIS PRESS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL.
In addition, the Company would like to announce that it received the resignation of John Carlesso from the Board of Directors. The Company would like to thank Mr. Carlesso for his contributions to Explorator and his support for the agreement with Sociedad Punta del Cobre S.A.
About Explorator Resources
Explorator Resources is a Canadian-based mining exploration company focused on advancing its El Espino Copper-Gold Project in Chile. The Company is currently completing a scoping study on the Project. The Project lies within the prolific copper-gold mineral area of the Cordillera de la Costa and is central to an important cluster of "Candelaria-style" copper-gold deposits. It is located 3.5 hours drive north of Santiago. The El Espino project block covers 75 square kilometres and is host to major gold and copper mineralized structures on which nine small operating mines have been developed.
About Sociedad Punta del Cobre S.A.
Sociedad Punta del Cobre S.A. is a Chilean-based company that engages in the development and operation of mining assets, concentrating its activities in copper ore. Currently, SPC operates two underground mines and one open pit mine, processing the ores in its own manufacturing facilities. SPC produces about 40,000 tons of copper per year, both in concentrates and cathodes employing 510 people.
Mr. Michael Schuler, Explorator's Vice President, Exploration is the "Qualified Person" as defined under National Instrument 43-101 and is responsible for the scientific and technical work on Explorator's exploration program and is responsible for reviewing the technical disclosure in this news release. All analytical work has been completed by ALS Chemex of La Serena in Chile; ALS Chemex is a respected international analytical service which is accredited with NATA and complies with standards of ISO 9001:2000 and ISO17025:1999. It employs a variety of international standards for quality control purposes. Samples are transported from the project to the ALS Chemex laboratory in La Serena sample by Company personnel or a reputable commercial carrier. All analytical testing is performed utilizing a variety of industry standard analytical techniques, including: (1) ALS Analytical Code Au-ICP22 (Au 50g fire assay with ICP-AES finish), (2) ALS analytical code Au-GRA22 (Au 50g fire assay with a gravity finish), (3) ALS analytical code ME-ICP61 (33 element analysis using a four acid digestion and ICP-AES analysis), and (4) ALS analytical code Cu-AA62 (ore grade copper analysis using a four acid digestion and an AAS finish. All diamond drill core is geologically logged, cut in half using a diamond saw and sampled by Company geologists in one (1) to three (3) meter sample intervals depending on visual grade estimates; the archive portion of the sample is securely stored at the company's core shed adjacent to the office in the town of Illapel.
The Company has initiated a QA/QC program consisting of utilizing standards, duplicate and blank samples and laboratory cross-checks and routinely repeats sample analysis.