NovaGold Resources Inc. and Copper Canyon Resources Ltd. March 7 announced they have entered into a binding letter agreement providing for NovaGold to acquire all of the outstanding common shares of Copper Canyon by way of a plan of arrangement under the Business Corporations Act (Alberta).
Under the arrangement, Copper Canyon shareholders will receive common shares of NovaGold on the basis of 0.0735 of a NovaGold common share for each common share of Copper Canyon, plus one common share of SpinCo, a newly incorporated company, for every four Copper Canyon common shares. SpinCo will hold substantially all of Copper Canyon's assets other than certain cash and Copper Canyon's 40 percent joint venture interest in the Copper Canyon copper-gold-silver property.
The Copper Canyon property is a multi-million-ounce copper-silver-gold deposit located adjacent to the Galore Creek property being advanced by NovaGold and Teck Resources Ltd. NovaGold had previously earned a 60 percent interest in the Copper Canyon project, by completing C$3 million in exploration expenditures, issuing a total of 296,000 of NovaGold shares and making property payments totaling C$250,000.
Copper Canyon President and CEO Tim Termuende said, “We are very pleased with the outcome of our negotiations with NovaGold. In addition, the creation of a new exploration company gives Copper Canyon shareholders the ability to participate in additional growth opportunities during a robust bull market commodities cycle.”
The NovaGold share consideration being offered represents an effective purchase price of C$1.05 per Copper Canyon common share based on the 20-day volume-weighted average price of NovaGold common shares on the Toronto Stock Exchange for the period ending March 4. The NovaGold share consideration being offered represents a 28.7 percent premium to the 20-day volume-weighted average price of Copper Canyon common shares on the TSX Venture Exchange ending March 4 and a 150 percent premium based on the closing price of the Copper Canyon common shares on the TSX-V on Dec.17, the last trading day prior to NovaGold's announcement of its intention to make an offer for Copper Canyon.
The boards of directors of both NovaGold and Copper Canyon have unanimously approved the transaction. The board of directors of Copper Canyon, acting on the recommendation of its special committee of independent directors, after consultation with Copper Canyon’s financial and legal advisors, has determined that the transaction is fair and in the best interests of Copper Canyon and its shareholders. Primary Capital Inc. has provided a fairness opinion to the Copper Canyon board advising that the transaction is fair, from a financial perspective, to the Copper Canyon shareholders other than NovaGold. Copper Canyon’s board of directors unanimously recommends that Copper Canyon shareholders vote in favor of the proposed arrangement.
“We are pleased to have reached agreement with Copper Canyon on a proposed transaction,” said NovaGold President and CEO Rick Van Nieuwenhuyse, President and CEO of NovaGold. “We believe the acquisition of Copper Canyon shares in accordance with the Arrangement will benefit the shareholders of both NovaGold and Copper Canyon.”
Upon entering into definitive agreements, NovaGold will make available to Copper Canyon a loan of up to C$500,000 to be advanced to Copper Canyon to pay for operating expenses.
At the effective time of the arrangement, Copper Canyon will transfer to SpinCo substantially all of Copper Canyon's assets other than certain cash and its 40 percent interest in the Copper Canyon property. This includes its interests in the Harrison Lake (Abo) gold property, the Severance Project and the Kiwi Project as well as all share positions in other companies held by Copper Canyon, including 50,000 common shares of NovaGold and any other related information, data and contracts. SpinCo will assume the associated liabilities of the transferred exploration properties as well as the outstanding balance under the loan made by NovaGold.
At or immediately prior to the effective time of the Arrangement, NovaGold will subscribe for common shares of Copper Canyon, for an aggregate subscription price of C$2.5 million less the outstanding balance of the NovaGold loan. This cash amount will be transferred by Copper Canyon to SpinCo. Immediately following the effective time, NovaGold will own, directly or indirectly, 9.9 percent of the issued and outstanding shares of SpinCo.
Full details of the transaction will be included in an information circular to be mailed to Copper Canyon shareholders in accordance with applicable securities laws. The transaction is expected to close in May 2011.
