Toronto, Ontario--(Newsfile Corp. - January 10, 2017) - Royal Road Minerals Limited (TSXV: RYR) ("Royal Road Minerals" or the "Company") is pleased to announce and reaffirm its continued intention to make a friendly offer to acquire all of the outstanding common shares of Caza Gold Corp. ("Caza") on the same terms described in its news release dated December 6, 2016, and to provide an update on its planned timing for making its proposed offer.
Since issuing the above-mentioned news release, Royal Road Minerals has made substantial progress in its preparations for making the proposed offer and, assuming the satisfactory completion of its ongoing due diligence review of Caza and other pre-bid items, Royal Road Minerals now expects to make a formal offer for the Caza common shares by mailing the offer, together with an associated take-over bid circular, to the registered holders of Caza's common shares and convertible securities on or before January 20, 2017. Royal Road Minerals and Caza have amended their previously announced support agreement to reflect Royal Road Mineral's current intended timing for making the proposed offer.
Royal Road Minerals is also pleased to announce that the proposed offer continues to have the full support of Caza's board of directors. Under the amended support agreement, Caza confirmed that Caza's board of directors has unanimously determined that the Royal Road Minerals proposed offer is in the best interests of Caza's shareholders, and resolved to unanimously recommend that the Caza shareholders tender their common shares to the offer, if and when made by Royal Road Minerals in accordance with the amended support agreement. Royal Road Minerals also entered into amended lock-up agreements with Caza's largest shareholder and its directors and officers that hold Caza common shares, whereby these shareholders have each agreed to tender all of their Caza common shares to the offer, if and when made by Royal Road Minerals in accordance with the amended support agreement. Collectively, these supporting shareholders beneficially hold an aggregate of 115,879,351 Caza common shares representing approximately 82% of the outstanding Caza common shares on both a non-diluted and fully-diluted "in the money" basis.
Readers should note that Royal Road Minerals has not yet commenced the offer and should carefully review the cautionary statements set out below in this news release respecting the status of the offer and the factors that may cause Royal Road Minerals not to make the offer.
Highlights of the Transaction
For each Caza common share, Royal Road Minerals intends to offer 0.16 of a Royal Road Minerals ordinary share. Royal Road Minerals expects to issue approximately 22,608,321 ordinary shares pursuant to the transaction (assuming no exercise of any Caza options or warrants), representing approximately 34% of Royal Road Minerals' current outstanding ordinary shares.
Management of Royal Road Minerals expects that the following factors, among others, would be relevant to Caza shareholders in their assessment of the proposed offer, if made by Royal Road Minerals as described herein:
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Opportunity for participation in Royal Road Minerals' exploration projects in Colombia. Since the proposed offer would be a share exchange transaction, Caza shareholders would, upon the successful completion of the proposed offer through their ownership of Royal Road Minerals shares, benefit from any future increases in value associated with the continued exploration of Royal Road Minerals' portfolio of assets in Colombia.
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Continued participation in the Caza's projects in Nicaragua. Shareholders would continue to participate in any increase in value of the Caza's projects in Nicaragua by holding approximately 25.3% of the outstanding Royal Road Minerals shares following any successful completion of the proposed offer, if made (based on the number of Caza common shares and Royal Road Minerals' shares currently outstanding).
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Proven leadership team in place. Following any successful completion of the proposed offer, if made, Royal Road Minerals would continue to be guided by an experienced board of directors and management team, which collectively has extensive project exploration and development, acquisition, corporate finance and other relevant industry experience, all of which is necessary to discover, evaluate and acquire prospective mineral projects, advance projects from the exploration stage to development, and to create shareholder value by doing so.
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Financial Status of Caza. Caza's public disclosure shows that it is consuming, rather than generating, cash and that Caza currently has a substantial working capital deficit. Caza and its board of directors have, over the past twelve months, conducted a strategic review process and no buyers for Caza or its assets or alternative transactions have emerged. Given Caza's serious financial difficulty, its inability to source additional financing, and the lock-up agreements with supporting shareholders, there is no realistic probability of a "white-knight" emerging and completing a transaction that is superior to the proposed offer, if made by Royal Road Minerals shares as described herein.
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Accretive Assets; Enhanced Liquidity. Caza's current active exploration projects are all located in Nicaragua. The proposed offer, if made, would allow Royal Road Minerals and Caza to aggregate high quality mineral properties, all in Latin America, and would be intended to help each company to geographically diversify its assets, benefit from combined exploration exposure, reduce single-project risk and allow for improved financing and growth opportunities. Caza's controlling shareholder now beneficially owns 77.5% of the Caza common shares and Caza warrants to purchase up to 88,160,000 Caza common shares, which, if fully exercised on the date hereof, would increase such beneficial ownership to approximately 86% of the outstanding Caza common shares. Because of this concentration of ownership, there is limited liquidity for Caza common shareholdings and associated challenges for Caza to raise additional financing and enter into certain transactions. The proposed offer, if made, would be intended to create a combined company with a more diversified shareholder base and result in more liquidity for investors and improved financing opportunities.
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Unanimous Recommendation of the Caza Board. Caza's board of directors has unanimously approved the proposed offer and, currently intends to recommend that Caza shareholders accept the proposed offer, if made by Royal Road Minerals shares as described herein.
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Support of Shareholders. Caza's largest shareholder and a secured creditor, as well as all of the directors and officers of Caza have entered into the above-mentioned lock-up agreements pursuant to which they have agreed to deposit to the proposed offer, if made, all Caza common shares held by them, representing approximately 82% of the Caza common shares, subject to the terms and conditions of such agreements. As a result, there is no impending prospect of a competing offer for the Caza common shares by a third party.
Royal Road Minerals anticipates that the proposed offer, if made, will be subject to a number of customary conditions, including: (i) there being deposited under the offer, and not withdrawn, at least 90% of the outstanding Caza common shares (calculated on a fully diluted basis), excluding Caza common shares held by Royal Road Minerals; (ii) receipt of all governmental, regulatory and third party approvals that Royal Road Minerals considers necessary or desirable in connection with the offer; and (iii) no material adverse change having occurred in the business, affairs, prospects or assets of Caza.
Caza has agreed that it will issue a "deposit period news release" as contemplated under applicable Canadian securities laws stating an initial deposit period for the proposed take-over bid of 35 days from the date that Royal Road Minerals commences the take-over bid by making the offer and delivering the required take-over bid circular to Caza's shareholders, or such other initial deposit period as Royal Road Minerals and Caza may otherwise agree of not more than 105 days and not less than 35 days from such date.
The support agreement between Royal Road Minerals and Caza provides that Caza's board of directors may, under certain circumstances, terminate the agreement in favour of an unsolicited superior proposal, subject to a right by Royal Road Minerals to match the superior proposal in question.
Full details of the Royal Road Minerals intended offer, including any conditions thereof, will be included in the takeover bid circular that is expected to be mailed to Caza shareholders.
