|
Stornoway Diamond Corporation
(TSX-SWY; "Stornoway")
is pleased to report that it has entered into an agreement with DIAQUEM Inc.
("DIAQUEM") for the acquisition of DIAQUEM's 50% interest in the
Renard Diamond Project ("Renard"), Stornoway's feasibility-stage
diamond project in north-central Québec (the "Acquisition").
Under the terms of the Acquisition, DIAQUEM will become a significant
shareholder of Stornoway, and will receive a direct royalty interest on
future diamond production. DIAQUEM is a wholly-owned subsidiary of SOQUEM
INC., itself a wholly-owned subsidiary of Société
générale de financement du Québec ("SGF"), the
Québec government's main industrial and financial holding company. In
conjunction with the Acquisition, SGF has further agreed to enter into a
credit support agreement with Stornoway with respect to future project debt
financing of a minimum of $100 million. Upon closing of the Acquisition,
which is subject to shareholder approval, Stornoway will have acquired sole
ownership of Renard, a major undeveloped diamond deposit, and will have
established a firm foundation for the project's future financing and
development.
Stornoway is also pleased to announce that it has
entered into an agreement with a syndicate of underwriters led by RBC Capital
Markets Ltd. ("RBC") who have agreed to purchase, on a bought deal
basis, 57,400,000 common shares of Stornoway at a price of $0.61 per common
share for aggregate gross proceeds of $35 million (the
"Offering"). The net proceeds of the Offering will be used
for Renard feasibility and pre-development costs, and for general corporate
purposes. Closing of the bought deal offering is anticipated to occur on or
about January 6, 2011 and is subject to the receipt of applicable regulatory
approvals, including approval of the Toronto Stock Exchange
("TSX").
Details of the proposed transactions are as follows:
- Stornoway
to issue common voting shares to DIAQUEM equal to 25% of Stornoway's
issued and outstanding common shares.
- Stornoway
to also issue newly created non-voting convertible shares to DIAQUEM
such that DIAQUEM's total interest in Stornoway will be equal to 37% on
a fully diluted basis.
- DIAQUEM's
interest in Stornoway to be calculated on a pro-forma basis following
completion of the $35 million Offering.
- Stornoway
to grant DIAQUEM a 2% gross revenue royalty on life of mine production
from Renard.
- SGF to
provide Stornoway with C$100 million of credit support towards the
establishment of a project debt facility to fund project construction
and development costs. The credit support will bear an annual commitment
fee of 175 bps undrawn, and will take the form of a direct project loan
ranking pari passu
with concurrent senior lenders or, as appropriate, on a stand alone
basis on terms no less favourable than prevailing commercially
reasonable market terms.
- Stornoway
to expand the size of its Board of Directors to 11 members and SGF to
nominate three candidates.
Matt Manson, President and CEO of Stornoway,
commented: "The agreement announced today establishes several key
pillars for the future growth of Stornoway: 100% ownership of the Renard
Diamond Project, credit support for future project debt, and a new,
sponsoring shareholder strongly motivated to assist in the development of
Québec's first diamond mine. In the past eighteen months we have
established Renard as a large diamond resource with compelling economics.
With today's news, Stornoway and SGF are demonstrating the platform upon
which this project will now be advanced."
For his part, Pierre Shedleur, President and General
Manager of SGF commented: "For the past several years, SGF has supported
Québec's diamond exploration and development activities through
SOQUEM, one of its wholly-owned subsidiaries. We are proud to support
Stornoway's future growth and contribute to the Renard diamond development
project in Québec. The realization of this considerable project
and the support we offer Stornoway are true to SGF's mission.
Agnico Eagle Mines Limited and the Lundin family
(indirectly via Lorito Holdings), representing approximately 20.8% of the
issued and outstanding shares of Stornoway, have entered into agreements to
vote their shares in favour of the Acquisition at a forthcoming extraordinary
meeting of shareholders.
The Acquisition has been approved by the boards of
directors of both Stornoway and SGF following consultation with their
respective financial and legal advisors. Stornoway's Board of Directors
undertook a comprehensive review and analysis of the proposed transaction and
concluded that it is fair to Stornoway's shareholders and is in the interest
of Stornoway, and has unanimously resolved to recommend that Stornoway's
shareholders vote their shares in favour of the proposed transaction.
The decision and recommendation of the Board of
Directors is based, in part, on fairness opinions received from RBC and NCP
Northland Capital Partners Inc., which are to the effect that the
consideration to be paid by Stornoway in connection with the Acquisition is
fair, from a financial point of view, to the shareholders of Stornoway.
Investor Conference Call
Stornoway will host a conference call to answer
questions on the transactions announced today on Tuesday, December 14, 2010
at 4:30 pm Eastern Standard Time. To participate in the call, dial
1-866-696-5910 within North America (local access 416-340-2217) or
800-8989-6336 internationally, participant access code 7272863. A playback
will be made available until December 28, 2010 by dialing 1-800-408-3053
(local access 416-695-5800) with the access code 4675200.
Additional Details of the Acquisition
In connection with the Acquisition, Stornoway has
agreed to assume and perform and be bound by all of the obligations and
liabilities accruing to DIAQUEM as the former owner of a 50% interest in
Renard, or arising under any agreement to which DIAQUEM or SGF is a party or
bound by virtue of being a party in the Renard joint venture. SGF has
agreed to a standstill obligation as a result of which SGF will not be
permitted to increase, directly or indirectly, its ownership interest in
Stornoway beyond 25% of the issued and outstanding common shares, except in
certain limited circumstances, including in the context of a take-over bid
for, or merger involving, Stornoway for the purposes of making a superior
proposal, or otherwise with the prior consent of Stornoway. In addition,
DIAQUEM will be entitled to a pre-emptive right in respect of common shares
issued by Stornoway so as to maintain its percentage of common share
ownership. The pre-emptive right will end on the date of commencement of
commercial operations at Renard.
Closing Conditions of the Acquisition
In addition to customary closing conditions for
transactions of this nature, completion of the proposed Acquisition is
subject to the receipt of any regulatory and other approvals required to finalize
the Acquisition, including TSX approval, and to the condition that the
parties shall have entered into the credit support agreement, an investor
agreement and a royalty agreement substantially in the forms appended as
schedules to the acquisition agreement. DIAQUEM and SGF may elect not to
complete the Acquisition if, among other things, there shall have been or
occurred a material adverse change with respect to Stornoway, or if the
Offering is not completed.
Shareholder Approval
Completion of the proposed Acquisition is also
subject to the receipt of requisite shareholder approval.
The issuance of Stornoway shares to DIAQUEM pursuant
to the acquisition agreement and the creation of non-voting convertible
shares, among other things, will need to be approved by a simple majority of
the Stornoway shareholders.
Stornoway will issue common shares and non-voting
convertible shares to DIAQUEM under the acquisition agreement by way of
private placement which, calculated on a pro-forma basis following completion
of the Offering, will comprise an aggregate 37% interest of Stornoway's
issued and outstanding equity on a fully-diluted basis. As such, under the
rules of the TSX, Stornoway will be required to obtain the approval of a
simple majority of its shareholders for the issuance of such number of common
shares pursuant to the Acquisition. In connection with such approval,
shareholders will also be asked to approve the increase in the size of the
Board of Directors from 8 to 11 members in order to allow for the nomination
of the three SGF designees.
Stornoway will call an extraordinary meeting of
shareholders to consider the proposed transaction, which is currently
expected to be held in Toronto in early February 2011 (the
"Meeting"). Proxy materials, including Stornoway's management proxy
circular, providing additional details relating to the proposed Acquisition
and the agreements being entered into in connection with the transaction are
currently anticipated to be mailed to Stornoway shareholders in early January
2011.
Subject to the approval of Stornoway shareholders
and satisfaction of other closing conditions, closing of the Acquisition is
expected to occur as soon as possible following the Meeting.
Share Consolidation
Concurrently with the Acquisition, Stornoway intends
to further propose to shareholders a consolidation of Stornoway's issued and
outstanding shares on a basis of up to five for one, consistent with the
transformative nature of the proposed transaction and the new phase of
Stornoway's development that it represents.
Additional Details of the Offering
The common shares will be offered by way of short
form prospectus to be filed in all of the provinces of Canada, and in the
United States on a private placement basis pursuant to an exemption from the
registration requirements of the United States Securities Act of 1933, as
amended. This press release is not an offer or a solicitation of an
offer of securities for sale in the United States. The common shares
have not been and will not be registered under the United States Securities
Act of 1933, as amended, and may not be offered or sold in the United States
absent registration or an applicable registration exemption. Closing of
the Offering is not subject to shareholder approval and is not contingent
upon closing of the Acquisition.
Advisers
Stornoway's financial adviser is RBC Capital Markets
and its legal counsel for the transaction are Ogilvy Renault LLP and DuMoulin
Black LLP. SGF's financial adviser is GMP Securities L.P. and its legal counsel
is McCarthy Tétrault LLP.
The TSX has neither approved nor disapproved the contents of this press
release.
The common shares referred to herein have not been
registered under the U.S. Securities Act of 1933, as amended, and may not be
offered or sold in the United States absent registration or an applicable
exemption from the 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 offer, solicitation or sale of the securities in any state in
which such offer, solicitation or sale would be unlawful.
About Stornoway Diamond Corporation
Stornoway Diamond Corporation is one of Canada's
leading diamond exploration and development companies, involved in the discovery
of over 200 kimberlites in seven Canadian diamond districts. The Company
benefits from a diversified diamond property portfolio, a strong financial
platform and management and technical teams with experience in each segment
of the diamond "pipeline" from exploration to marketing.
About
SGF
Société générale de
financement du Québec (sgfqc.com), an industrial and financial holding
company, has a mission to carry out economic development projects,
particularly in the industrial sector, in cooperation with partners and in
compliance with accepted profitability requirements and with the economic
development policy of the Québec government. As part of its new
mandate, SGF is authorized by the Québec government to go beyond its
traditional role as an equity investor by offering complementary solutions,
such as loans, debentures or preferred or convertible shares.
SOQUEM, a wholly-owned subsidiary of
Société générale de financement du Québec,
is to undertake exploration, development and mining activities throughout the
province of Québec.
About the Renard Diamond Project
The Renard Diamond Project is located approximately
250 km north of the Cree community of Mistissini and 350 km north of
Chibougamau in the James Bay region of North-Central Québec. In May
2010, Stornoway filed a National Instrument 43-101 compliant technical report
for the Preliminary Assessment at Renard that estimated the project to have
the potential to produce approximately 30 million carats of diamonds over a
25 year mine life, with a pre-tax Net Present Value of C$885 million (at an
8% discount rate) and an Internal Rate of Return of 24.8%. Total capital
investment was estimated at C$511 million. National Instrument 43-101
compliant Indicated and Inferred Mineral Resources currently stand at 23.0
and 13.3 million carats respectively, with a further 12 to 26 million carats
classified as a "potential mineral deposit". All kimberlites remain
open at depth. Pending the completion of all ongoing mine feasibility and
environmental and social impact assessments, and the receipt of all
regulatory approvals, Stornoway currently anticipates being able to make a
potential production decision at Renard by the end of 2011. Readers are
referred to the technical report in respect of the Renard Diamond Project for
further details and assumptions relating to the project.
On behalf of the Board
STORNOWAY DIAMOND CORPORATION
/s/ "Matt
Manson"
Matt Manson
President and Chief Executive Officer
For more
information, please contact Matt Manson (President and CEO) at 416-304-1026
or Nick Thomas (Manager Investor Relations) at 604-983-7754, toll free at
1-877-331-223
Pour plus d'information, veuillez contacter M. Ghislain
Poirier, Vice-président Affaires publiques de Stornoway au 418-780-3938, gpoirier@stornowaydiamonds.com ou
**
Website: www.stornowaydiamonds.com Email: info@stornowaydiamonds.com **
This document contains "forward-looking
information" within the meaning of Canadian securities legislation and
"forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995. This
information and these statements, referred to herein as "forward-looking
statements" are made as of the date of this document and the Company
does not intend, and does not assume any obligation, to update these
forward-looking statements, except as required by law.
Forward-looking statements relate to future events
or future performance and reflect current expectations or beliefs regarding
future events and include, but are not limited to, statements with respect
to: (i) the completion of each of the elements of the Acquisition
(including shareholder approval) and the Offering and the timing thereof;
(ii) the benefits anticipated to be received from the proposed transactions;
(iii) the handling and use of the proceeds of the Offering; (iv) the number
of common shares Stornoway will issue under the Acquisition; (v) the amount
and classification of indicated and inferred mineral resources and potential
mineral deposits; (vi) the amount of future production over any period; (vii)
estimates of Net Present Values and Internal Rates of Return for Renard;
(viii) mine expansion potential and expected mine life; (ix) exploration
potential at the Project; and (vi) expected time frames for completion of
permitting and regulatory approvals, completion of a Feasibility Study and
putting Renard into production. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future events or performance (often,
but not always, using words or phrases such as "expects",
"anticipates", "plans", "projects",
"estimates", "assumes", "intends",
"strategy", "goals", "objectives" or variations
thereof or stating that certain actions, events or results "may",
"could", "would", "might" or "will"
be taken, occur or be achieved, or the negative of any of these terms and
similar expressions) are not statements of historical fact and may be
forward-looking statements.
All forward-looking statements are based on
Stornoway's or its consultants' current beliefs as well as various
assumptions made by and information currently available to them. Many
of these assumptions are set forth in the news release and include: (i) the
presence of and continuity of diamonds in its host rocks at the Renard
Project at modeled grades; (ii) the geological interpretation of drilling
results and the expected impact on project resources, conceptual mine plans
and mine life; and (iii) the anticipated incorporation of new information
into existing geological models, feasibility study work and an updated NI
43-101 compliant mineral resource estimate. Although management considers
these assumptions to be reasonable based on information currently available
to it, they may prove to be incorrect. Many forward-looking statements
are made assuming the correctness of other forward looking statements, such
as statements of net present value and internal rate of return, which are
based on other forward-looking statements and assumptions. The cost
information is also prepared using current values, but the time for incurring
the costs will be in the future and it is assumed costs will remain stable
over the relevant period.
By their very nature, forward-looking statements
involve inherent risks and uncertainties, both general and specific, and
risks exist that estimates, forecasts, projections and other forward-looking
statements will not be achieved or that assumptions do not reflect future
experience. We caution readers not to place undue reliance on these
forward-looking statements as a number of important factors could cause the
actual outcomes to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates assumptions and intentions expressed
in such forward-looking statements. These risk factors
include, without limitation, risks that the Acquisition will not proceed due
to failure to obtain shareholder or regulatory approvals or other events
occur which result in a party deciding to terminate the agreement, the
Offering not completing as anticipated, risks relating to variations in the
grade, kimberlite lithologies and country rock content within the material
identified as mineral resources from that predicted, variations in rates of
recovery and breakage; the greater uncertainty of potential mineral deposits,
developments in world diamond markets, slower increases in diamond valuations
than assumed, risks relating to fluctuations in the Canadian dollar and other
currencies relative to the US dollar, increases in the costs of proposed
capital and operating expenditures, increases in financing costs or adverse
changes to the terms of available financing, if any, tax rates or royalties
being greater than assumed, results of exploration in areas of potential
expansion of resources, changes in development or mining plans due to changes
in other factors or exploration results of Stornoway or its joint venture
partners, changes in project parameters as plans continue to be refined,
risks relating to receipt of regulatory approvals or settlement of an Impact
and Benefits Agreement, the effects of competition in the markets in which
Stornoway operates, operational and infrastructure risks and the additional
risks described in Stornoway's most recently filed Annual Information Form,
annual and interim MD&As, and Stornoway's anticipation of and success in
managing the foregoing risks. Stornoway cautions that the foregoing list of
factors that may affect future results is not exhaustive. When relying on our
forward-looking statements to make decisions with respect to Stornoway,
investors and others should carefully consider the foregoing factors and
other uncertainties and potential events. Stornoway does not undertake to
update any forward-looking statement, whether written or oral, that may be
made from time to time by Stornoway or on our behalf, except as required by
law.
|
|