Great Bear Resources

Solitario Exploration & Royalty to Acquire Zazu Metals in Friendly Transaction

DENVER & VANCOUVER, British Columbia--(BUSINESS WIRE)--Solitario Exploration & Royalty Corp. (NYSE MKT:XPL; TSX:SLR) ("Solitario") and Zazu Metals Corporation (TSXV:ZAZ) ("Zazu") are pleased to announce that they have entered into a definitive arrangement agreement (the "Arrangement Agreement") pursuant to which Solitario has agreed to acquire all of the issued and outstanding common shares of Zazu (the "Zazu Shares") by way of a statutory plan of arrangement (the "Arrangement") under the Canada Business Corporations Act.

Highlights of the Combined Company

  • Creation of a leading zinc focused explorer and developer during a time of encouraging supply and demand fundamentals
  • Significant joint venture interests in two large, high-grade zinc development projects with world-class partners:
    • Solitario’s Bongará project in Northern Peru is a high-grade development asset held jointly with Compañía Minera Milpo ("Milpo"), one of the largest zinc producers in Peru
    • Zazu’s Lik project represents a large-tonnage, high-grade and potentially open-pittable development project in Alaska in partnership with Teck Resources Limited ("Teck")
  • Additional portfolio of high quality exploration properties and royalties in the Americas
  • Well-financed, with approximately US$16.5 million in cash and cash equivalents
  • Experienced management team with a track-record of creating value for shareholders by moving assets through feasibility and permitting
  • Enhanced capital markets profile and trading liquidity in combination with strong shareholder support

Chris Herald, Chief Executive Officer of Solitario, stated: “We are very pleased to announce this exciting opportunity that will create value for both Solitario and Zazu shareholders. Since the sale of the Mt. Hamilton project in 2015, Solitario has remained extremely disciplined in its evaluation of growth initiatives while preserving a robust balance sheet and tight capital structure. We are confident that we have both the technical and financial capabilities to significantly increase the value of Zazu’s Lik project by moving the asset through feasibility and permitting. We look forward to working with Zazu’s world-class joint venture partner Teck to pursue a development path beneficial to all parties.”

Gil Atzmon, Founder, Chairman and Chief Executive Officer of Zazu, stated: “This combination represents a unique opportunity to create a leading zinc development company with two high quality assets in the Americas. Zazu shareholders will benefit from increased diversification and access to capital, while importantly maintaining a focus on high-grade resources. We see significant potential in Solitario’s asset base and believe the combined company will be well positioned to take advantage of increased interest in zinc.”

Particulars of the Transaction

Under the terms of the Arrangement Agreement, holders of Zazu Shares ("Zazu Shareholders") will receive, on closing, 0.3572 of a common share of Solitario (the "Exchange Ratio") in exchange for each Zazu Share held. Based on the trailing 20-day volume weighted average price ("VWAP20") of Solitario on the NYSE MKT as of the close on April 26, 2017, the Exchange Ratio implies an offer price of C$0.41 per Zazu Share1, representing a premium of 41% over the VWAP20 of Zazu on the TSX Venture Exchange as of the same date. Following the completion of the Arrangement, former Zazu Shareholders are expected to hold approximately 34% of the issued and outstanding shares of the combined company.

The Arrangement will be carried out by way of a court-approved plan of arrangement and will require the approval of at least 66 2/3 percent of the votes cast by Zazu Shareholders at a special meeting expected to take place in June 2017 (the "Zazu Meeting"). Zazu directors, officers and certain significant shareholders representing a total of approximately 47% of the issued and outstanding Zazu Shares have entered into voting and support agreements with Solitario agreeing to vote in favour of the Arrangement. The board of directors of Zazu has unanimously approved the Arrangement and will recommend that Zazu Shareholders vote in favour of the Arrangement. Full details of the Arrangement will be included in a management information circular of Zazu describing the matters to be considered at the Zazu Meeting, which is expected to be mailed to the Zazu Shareholders in May 2017 and made available on SEDAR under Zazu’s issuer profile at www.sedar.com.

The Arrangement will also require the approval of a majority of the votes cast by holders ("Solitario Shareholders") of issued and outstanding common shares of Solitario ("Solitario Shares") at a meeting of Solitario Shareholders expected to take place in June 2017 (the "Solitario Meeting"). Solitario directors, officers and certain significant shareholders representing approximately 7% of the issued and outstanding Solitario Shares have entered into voting and support agreements with Solitario agreeing to vote in favour of the Arrangement. The board of directors of Solitario has unanimously approved the Arrangement and will recommend that Solitario Shareholders vote in favour of the Arrangement. Full details of the Arrangement will be included in a definitive proxy statement of Solitario describing the matters to be considered at the Solitario Meeting, which is expected to be mailed to the Solitario Shareholders in May 2017. Solitario’s proxy statement, when it becomes available, and any other documents filed by Solitario with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov. The proxy statement will also be made available on SEDAR under Solitario’s issuer profile at www.sedar.com.

The Arrangement Agreement includes customary provisions, including with respect to non-solicitation, a right granted to Solitario to match superior proposals and fiduciary-out provisions, as well as representations, covenants and conditions which are customary for transactions of this nature. In addition, Zazu and Solitario have each agreed to pay a termination fee in the amount of US$0.75 million to the other party upon the occurrence of certain termination events.

The Arrangement is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions.

Upon completion of the Arrangement, Zazu will be entitled to nominate two directors to be appointed to the board of directors of Solitario.

Convertible Debenture Financing

Concurrent with the signing of the Arrangement Agreement, Solitario will provide Zazu interim debt financing through a secured convertible debenture issued by Zazu in the principal amount of US$1.5 million (the "Debenture"). The Debenture is secured by way of a general security and pledge agreement and bears interest at a rate of 5% per annum. If the Arrangement Agreement is terminated prior to the effective date of the Arrangement, all principal amounts outstanding and any interest payable thereon will become payable two years following the issuance of the Debenture. In certain circumstances, the Debenture is convertible at the option of Solitario into Zazu Shares at a price of US$0.22 per Zazu Share. Completion of the convertible debenture financing is not contingent on completion of the Arrangement.

Advisors and Legal Counsel

Maxit Capital LP is acting as financial advisor to Solitario. Additionally, Mackie Research Capital Corp. ("Mackie") has provided an oral opinion to the board of directors of Solitario that, based upon and subject to certain assumptions, limitations and qualifications in the opinion, the consideration being offered by Solitario in respect of the Arrangement is fair, from a financial point of view, to Solitario and the Solitario Shareholders. Solitario expects to receive a written opinion from Mackie prior to the mailing of the proxy statement to Solitario Shareholders. Solitario’s Canadian legal counsel is Fogler, Rubinoff LLP, and its US legal counsel is Polsinelli PC.

Haywood Securities is acting as financial advisor to Zazu. Additionally, Evans & Evans Inc. ("Evans & Evans") has provided an oral opinion to the board of directors of Zazu that, based upon and subject to certain assumptions, limitations and qualifications in the opinion, the consideration being offered by Solitario in respect of the Arrangement is fair, from a financial point of view, to Zazu and the Zazu Shareholders. Zazu expects to receive a written opinion from Evans & Evans prior to the mailing of the management information circular to Zazu Shareholders. McCullough O’Connor Irwin LLP is acting as legal counsel to Zazu.

About Solitario

Solitario is an exploration and royalty company traded on the NYSE MKT ("XPL") and on the Toronto Stock Exchange ("SLR"). The company has three exploration properties in Peru, and one royalty in each of Peru, Brazil, the United States and Mexico.

Solitario’s core asset is a 39% interest in the advanced, high-grade, Bongará zinc project located in northern Peru. The project has a significant mineral resource and SRK Consulting has been retained to complete a preliminary economic assessment on the project by mid-2017. Solitario is fully carried to production by its joint venture partner Milpo, one of the largest zinc producers in Peru. Solitario also holds an 85% interest in the Chambara exploration project in Peru (Milpo holds the remaining 15%) and a 9.5% equity interest in Vendetta Mining.

Solitario is well financed and has approximately US$16.5 million in cash and cash equivalents. Additional information about Solitario is available online at www.solitarioxr.com

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