Horizonte Minerals Acquisition Of Teck Cominco -4-

27th Jul 2010 07:30

debt or reducing its cash reserves. With the merger of Horizonte's existing nickel laterite project, Lontra, with Araguaia, the combined exploration land holding will be approximately 730 km² hosting a series of mineralised zones. The Directors believe this will be of sufficient size and scale to allow Horizonte to create a significant nickel project. The Acquisition provides Teck with the opportunity to participate in the development and exploration of Araguaia without incurring significant expenditure. Teck will also benefit from the local expertise and experience of Horizonte's management in developing projects from a grassroots stage. (d) Principal Terms of the Transaction The terms of the Transaction are set out in two principal agreements (the "Transaction Documents"): (i) an acquisition agreement between Horizonte and Teck (the "Acquisition Agreement"). Under the terms of the Acquisition Agreement, Teck agrees to sell the entire issued share capital of Teck Brazil in consideration for Horizonte allotting and issuing to Teck the Consideration Shares, which will amount to 50 per cent. of the Enlarged Share Capital. The Acquisition Agreement is conditional upon, inter alia¸ the Company having raised a minimum of GBP5 million (before expenses) under the Placing. It is intended that on completion of the Acquisition Agreement, Teck Brazil will hold only the assets and liabilities related to Teck's tenements within the Enlarged Group's area of influence, being the area covering a 50km radius around each of the tenements that comprise Araguaia (the "AOI"); and (ii) a relationship agreement between Horizonte and Teck (the "Relationship Agreement"). The Relationship Agreement governs the conduct of both parties as long as Teck is a controlling shareholder in Horizonte. Under the terms of the Relationship Agreement, Teck will, inter alia, not take any action which restricts Horizonte from carrying on its business independently of Teck and its affiliates, and conduct all transactions and relationships with the Company on arm's length terms and on a normal commercial basis. (e) Teck Brazil Shares Pursuant to the Acquisition, the shares of Teck Brazil will be acquired free from all liens, charges, equitable interests, encumbrances and third party rights and, together with all rights now or hereafter attaching thereto, including the right to all dividends and other distributions, if any, declared, made or paid after completion of the Acquisition. (f) Details of the Consideration Shares and Quantom Shares The Consideration Shares will be issued credited as fully paid and will represent 50 per cent. of the Enlarged Share Capital upon Admission. The Quantom Shares will also be issued credited as fully paid. The Consideration Shares and Quantom Shares will rank pari passu with the Existing Ordinary Shares in all respects, including the right to receive all dividends or other distributions declared, made or paid after completion of the Acquisition or the Quantom Transaction, as applicable. The Consideration Shares and Quantom Shares will be acquired free from all liens, charges, equitable interests, encumbrances and third party rights and, together with all rights now or hereafter attaching thereto, including the right to all dividends and other distributions, if any, declared, made or paid after completion of the Acquisition or the Quantom Transaction, as applicable. (g) Financial effects of the Acquisition An unaudited pro forma statement of consolidated net assets of the Enlarged Group, prepared for illustrative purposes only, showing the impact of the Transaction and the Quantom Transaction on the Enlarged Group, is set out in Part VIII of this document. Teck Brazil holds assets and is subject to liabilities which do not relate to Araguaia. Teck will procure that a reorganisation is carried out such that at the end of the reorganisation Teck Brazil will only hold those assets and liabilities which relate to Araguaia (the "Reorganisation"). This will involve transferring into a wholly owned subsidiary of Teck certain contractual arrangements, mineral licences, fixed assets, and employment contracts. The Reorganisation will be effected by way of a demerger and reduction in the share capital of Teck Brazil. A valuation of Teck Brazil's assets (based on acquisition costs) has been carried out by an independent firm of accountants so that the value of the assets to be transferred out can be ascertained. A number of preferred shares are in existence in Teck Brazil which were held by Vale Inco Limited ("Inco"). Under the terms of the arrangements with Inco, Teck is entitled to purchase or redeem the preferred shares. Teck has purchased the preferred shares from Inco and will convert them into ordinary shares in Teck Brazil prior to completion of the Acquisition. It is intended that the Reorganisation will occur prior to completion of the Acquisition. However, should that prove not to be possible the Acquisition Agreement contains covenants given by Teck to procure that the Reorganisation is effected as soon as reasonably practicable after completion of the Acquisition. There is no guarantee that the Reorganisation will be completed before the Acquisition completes. Horizonte is indemnified by Teck in respect of the Reorganisation without limit in time or amount. (h) The Placing (i) Details of the Placing The Company has raised approximately GBP5.1 million (before expenses) through a conditional placing by Westhouse of 51,261,144 Placing Shares at 10 pence per share. The Placing is not being underwritten. The Placing Shares will represent approximately 21 per cent. of the Enlarged Share Capital. The Placing is conditional upon, inter alia, the completion of the Acquisition and Admission, both of which require approval by the Shareholders at a general meeting. Further details of the Placing Agreement are set out in paragraph 8.1 of Part X of this document. The Placing Shares, which will be issued on Admission, will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of Admission in respect of the Ordinary Shares. The Placing is being made on a non pre-emptive basis, as the time and costs associated with a pre-emptive offer, resulting from the introduction of the EU Prospectus Rules (which came into force on 1 July 2005), are considered by the Directors to be prohibitive. The making of a pre-emptive offer would require the production of a prospectus which would have to comply with the EU Prospectus Rules and be pre-vetted and approved by the FSA. (ii) Use of Proceeds The net proceeds of the Placing (approximately GBP4.986 million) will be used to fund infill drilling on the nickel laterite projects at Araguaia and Lontra to produce a JORC or NI 43-101 compliant resource and the development of Horizonte's other gold assets and payment of overhead costs. The net proceeds of the Placing will be split approximately as follows: +-------------------------------------+--------+ | | GBP'm | +-------------------------------------+--------+ | Corporate costs | 0.440 | +-------------------------------------+--------+ | Gold projects and Brazilian | 0.514 | | administration | | +-------------------------------------+--------+ | Araguaia, Lontra and other | 3.218 | | exploration | | +-------------------------------------+--------+ | Movement in bank balances | 0.814 | | (including interest received) | | +-------------------------------------+--------+ | Total | 4.986 | +-------------------------------------+--------+ 3. Directors, Proposed Director and Senior Management On Admission, Mr Alexander Christopher, General Manager of New Ventures at Teck, whom Teck has nominated pursuant to its rights under the Relationship Agreement, will be appointed to the Board. Biographical details of the Directors, including Mr Alexander Christopher, and the Company's senior management are set out below: Directors David J. Hall (aged 51 years), BA (Hons), MSc, Non-Executive Chairman Mr Hall is a graduate in geology from Trinity College Dublin and holds a Masters Degree in Mineral Exploration from Queens University, Kingston, Ontario. He has 29 years of experience in the exploration sector and has worked on and assessed exploration projects and mines in over 40 countries. From 1992, Mr Hall was Chief Geologist for Minorco SA, responsible for Central and Eastern Europe, Central Asia and the Middle East. He moved to South America in 1997 as a consultant geologist for Minorco South America and subsequently became exploration manager for AngloGold South America in 1999, where he was responsible for exploration around the Cerro Vanguardia gold mine in Argentina, around the Morro Velho and Crixás mines in Brazil and establishing the exploration programme that resulted in the discovery of the La Rescantada gold deposit in Peru as well as certain joint ventures in Ecuador and Colombia. In April 2002 he became an executive director of Minmet and operations director in September 2002. Mr Hall led the divestment of Minmet's exploration assets in the Dominican Republic into GoldQuest Mining Corporation, which is listed on the Toronto Stock Exchange's Venture Exchange. Mr Hall is also founder and Chairman of Stratex International Plc, an AIM traded company with exploration assets in Turkey and in which Teck Resources Limited is an equity shareholder. Mr Hall is (MORE TO FOLLOW) Dow Jones Newswires July 27, 2010 02:30 ET (06:30 GMT)