Canadian Royalties Inc.
TSX : CZZ

Canadian Royalties Inc.

August 27, 2009 16:55 ET

Canadian Royalties Notes Jien Has Confirmed Today That its Offer Is Entirely Opportunistic and Will Be Permitted to Expire

MONTREAL, QUEBEC--(Marketwire - Aug. 27, 2009) - Canadian Royalties Inc. (TSX:CZZ)

- Jien Offers Intended to Thwart Value Creation Opportunities

- Jien Incorrect About Shareholder Rights Plan

- Canadian Royalties Concerned About True Jien Offer Terms

- Canadian Royalties Continues to Execute its Plan to Maximize Shareholder Value

- Key Securityholders Supportive of Canadian Royalties

Canadian Royalties Inc. (the "Company", or "Canadian Royalties") (TSX:CZZ) today noted that in a press release issued today Jilin Jien Nickel Industry Co., Ltd. ("Jilin Jien"), Goldbrook Ventures Inc. ("Goldbrook") and Jien Canada Mining Ltd. ("Jien") have confirmed that their unsolicited offers (the "Jien Offers") to acquire the Company's outstanding common shares and outstanding convertible senior unsecured debentures are entirely opportunistic and do not represent fair value to securityholders.

Glenn Mullan, Chief Executive Officer and Chairman of the Board of Directors, stated, "Today's press release by Jien irrefutably confirms our view that the Jien Offers are totally opportunistic and intended to deprive securityholders of their interest in the significant upside potential of this commodity and company. Furthermore, their refusal to allow securityholders sufficient time to consider their offers confirms our view that the offers are intended to be coercive"

Jien Offers Intended to Thwart Value Creation Opportunities

Jien states that if the Canadian Royalties shareholder rights plan (the "Rights Plan") is not waived or terminated prior to the time of expiry of the Jien Offers, "the Offers will terminate in accordance with their terms." Canadian Royalties is surprised to learn that the Jien Offers, which Jien is so confident "represent full and fair value", are unsustainable for a period of 60 days. This is particularly offensive as Jien has stated that it has been contemplating an acquisition of Canadian Royalties since at least November 2008. They have had almost 300 days - Canadian Royalties, on behalf of its securityholders, is seeking only 60 days.

The admission of Jien that the Jien Offers are unsustainable only confirms Canadian Royalties' conclusions that the Jien Offers are totally opportunistic as an attempt to take advantage of recent low commodity prices and markets.

Jien Incorrect About Shareholder Rights Plan

The Rights Plan was adopted unanimously by the Board of Directors of Canadian Royalties to ensure the fair treatment of all Canadian Royalties' securityholders in connection with any take-over bid. The Rights Plan provides the Board of Directors of the Company with additional time to consider any take-over bid and to explore alternative transactions in order to maximize shareholder value.

The adoption of a Rights Plan is a normal course response in the Canadian capital markets for a target that is the subject of a hostile transaction. There is nothing unique or offensive about this action - the Board of Directors is solely and legitimately concerned with maximizing securityholder value.

In addition, Canadian Royalties corrects today's misinformation from Jien noting that the full text of the Rights Plan was made public by the Company yesterday, well before Jien issued its press release. In addition, Canadian Royalties was advised by the Toronto Stock Exchange (the "TSX") late yesterday that the TSX has determined, as is its practice in relation to hostile take-over bids, to defer its consideration of acceptance for filing of the Rights Plan pending any review that securities commissions may undertake.

The full text of the Rights Plan is available for public viewing via the internet at www.sedar.com.

Canadian Royalties Concerned About True Jien Offer Terms

Canadian Royalties is concerned that Jien has failed to comply with Canadian securities laws in making the Jien Offers and appears to include among the offerors parties which are as of yet unknown.

In the documents filed in connection with the Jien Offers (the "Jien Offering Documents") there are statements about Jien acting "through (its) affiliates (including the Offeror)". Based upon this disclosure, it is impossible to understand the true nature or extent of the group formed to make the Jien Offer. Canadian Royalties is concerned that undisclosed parties may be intended to participate in the Jien Offer.

Of greater concern, is the disclosure of holdings and trading in securities of Canadian Royalties by persons in a special relationship with the offerors. Canadian securities laws directly contemplate that this disclosure will state ownership and trading by the offeror, its directors, associates, insiders and persons acting jointly or in concert with the offeror. Jien has avoided proper transparent disclosure by failing to itemize who owns securities of Canadian Royalties and who has traded in such securities. Canadian Royalties is concerned that this failure to make proper disclosure is predicated on concealing the true nature of the holdings and trading in its securities.

Canadian Royalties has also noted that there was a significant increase in the trading volumes of its shares in the days leading up to the Jien Offers and is taking steps to review that trading activity.

The Jien Offering Documents also appear to fail to comply with Canadian securities laws where they state that its soliciting agent will be paid "reasonable and customary compensation". Canadian securities laws require the particulars of any such compensation arrangements to be publicly disclosed by offerors to securityholders.

In the section of the Jien Offering Documents describing the purpose of the Jien Offers there is a statement to the effect that "since the business of the Target is complementary,"; however the Jien Offering Documents do not offer any statement as to what it is complementary to. Given this vagueness Canadian Royalties is unable to understand what Jien's intentions for the Nunavik Nickel Project are beyond today's admission that the intention is to make a coercive bid, contrary to the terms of the Rights Plan, to take advantage of opportunistic market conditions.

It appears from the statement of approval in the Jien Offering Documents that the making of the Jien Offers to holders of the Company's debentures has not been authorized by the offerors. It is unclear whether the offerors will subsequently authorize the Jien Offers to be made to debentureholders or will be bound to such offers.

Canadian Royalties Continues to Execute its Plan to Maximize Shareholder Value

Canadian Royalties announced on March 9, 2009 that it was implementing a new business plan with a view to future production, once metal prices and capital markets recover. Canadian Royalties is clearly executing a plan intended to begin production as soon as possible, supported by the fact that the Company has proceeded with the sale of only non-critical items so as to ensure that those items essential to resuming operations are retained. Canadian Royalties has since worked at implementing its plan by actively seeking partners, through various discussions, as well as site visits. The Company believes that market conditions will soon support the Nunavik Nickel Project recommencing development, and unlock significant value for Canadian Royalties' securityholders. Jien expressly does not want to pay securityholders for this value.

In the face of the coercive and opportunistic Jien Offers, Canadian Royalties has, as previously announced, formed a Special Committee of independent directors to pursue alternative transactions that would enhance securityholder value. Canadian Royalties has received inquiries, and has initiated discussions with, a number of third parties who have expressed an interest in considering alternative transactions. While it is impossible to predict whether any transaction will emerge from these efforts, it is clear that Jien is desperate to cut these efforts short to complete its opportunistic Offers.

Key Securityholders Supportive of Canadian Royalties

Canadian Royalties has had the opportunity to discuss the directors' response with securityholders that hold significant positions in the Company and they are strongly opposed to the hostile Jien Offers. Securityholders have stated unequivocally that they are supportive of Canadian Royalties executing its plan to maximize shareholder value. Securityholders are supportive of the Rights Plan and appreciate that the September 30th date to ratify the Rights Plan was the earliest possible given securities regulation notice requirements.

A number of securityholders expressed concern over a number of the Jien conditions, in particular why Chinese government approval remains a condition and why it was not obtained prior to submitting the Jien Offers given Jien has repeatedly stated it expects to receive the Chinese government approval prior to the expiry of their bid on September 15th.

The Board of Directors, together with the management team at Canadian Royalties, wishes to thank its securityholders for continuing to support Canadian Royalties through this process. We note that the Board's full analysis and recommendation are contained in a Directors' Circular filed with Canadian securities regulators on SEDAR at www.sedar.com. Securityholders are encouraged to read the Directors' Circular in its entirety. Should securityholders have any questions or concerns, please contact our information agent, Laurel Hill Advisory Group, at the contact number below.

About Canadian Royalties and the Nunavik Nickel Project

Canadian Royalties, based in Val-d'Or - Quebec, is a mineral exploration company whose principal active area is along the South Trend located in the Raglan mining district of Northern Quebec's Nunavik Region. Since 2001, the Company has discovered and delineated several potentially mineable nickel-copper-cobalt-platinum-palladium-gold deposits which collectively form the Nunavik Nickel Project (the "Project"). The Company has completed a Bankable Feasibility Study and has received its Environmental Certificate of Authorization; it has also received mine leases for four sites, namely the Ivakkak, Mequillon, Expo, and Mesamax deposits. An Impact and Benefits Agreement ("IBA") has been entered into between the Company, three (3) Inuit communities, and Makivik Corporation, the non profit legal representative of the Inuit; the IBA constitutes the Company's formal commitment to ensure a fair and sustainable distribution of the economic benefits stemming from the Project. Development of the Project was initiated in 2007; the Project was subsequently put on care and maintenance as a result of the 2008 financial crisis. The Company's objective is to develop and exploit the mineral resources comprising the Project either independently or through a partnership.

Forward-looking Statement

This news release contains certain forward-looking statements or forward-looking information. These forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability and control, which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. Some of these risks and uncertainties are identified and disclosed under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2008. Accordingly, all of the forward-looking information contained in this press release is qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Company, as expressed or implied by the forward-looking information, will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business operations,. All forward-looking statements speak only as of the date of this news release and the Company does not undertake any obligation to update or publicly disclose any revisions to such forward-looking statements to reflect events, circumstances or changes in expectations after the date hereof, except as required by applicable securities law. Accordingly, readers should not place undue reliance on forward-looking statements.

Contact Information

  • Canadian Royalties Inc.
    Glenn J. Mullan
    Chairman of the Board, and Chief Executive Officer
    1-514-879-1688, ext. 1222
    glenn.mullan@canadianroyalties.com
    www.canadianroyalties.com
    or
    Shareholders / Debentureholders:
    Laurel Hill Advisory Group
    North American Toll Free Number: 1-888-298-1523
    Outside of North America: 1-416-637-4661
    or
    Media Relations:
    NATIONAL Public Relations Inc./
    Cabinet de relations publiques NATIONAL inc.
    Roch Landriault
    1-514-843-2345
    rlandriault@national.ca