Andor Mining Inc.

September 26, 2011 13:34 ET

Andor Mining Inc. Agrees to a Business Combination With ESI Exploration Syndicate Inc. as a Qualifying Transaction

TORONTO, ONTARIO--(Marketwire - Sept. 26, 2011) -


Andor Mining Inc. (TSX VENTURE:AMI.P) ("Andor") is pleased to announce that it has signed a non-binding letter of intent (the "LOI") with ESI Exploration Syndicate Inc., a corporation existing under the laws of British Columbia ("ESI"), which outlines the general terms and conditions pursuant to which Andor and ESI would be willing to complete a transaction that will result in a reverse take-over of Andor by the shareholders of ESI (the "Transaction"). The LOI was negotiated at arm's length and is effective as of September 21, 2011.

The LOI is to be superseded by a definitive merger, amalgamation or share exchange agreement (the "Definitive Agreement") to be signed on or before October 21, 2011 (or such other date as may be mutually agreed in writing between Andor and ESI). The Transaction is subject to requisite regulatory approval, including the approval of the TSX Venture Exchange (the "TSXV") and standard closing conditions, including the approval of the directors of each of Andor and ESI of the Definitive Agreement and completion of due diligence investigations to the satisfaction of each of Andor and ESI, as well as the conditions described below. The legal structure for the Transaction will be determined after the parties have considered all applicable tax, securities law, and accounting efficiencies.

Andor is incorporated under the provisions of the Business Corporations Act (Ontario) with its registered and head office in Toronto, Ontario. It is a capital pool company and intends for the Transaction to constitute its "Qualifying Transaction" as such term is defined in the policies of the TSXV. Andor is a "reporting issuer" within the meaning of the Securities Act (Ontario), Securities Act (British Columbia) and Securities Act (Alberta).

Since the Transaction is not a non-arm's length transaction, Andor is not required to obtain shareholder approval for the Transaction. However, Andor intends to hold a special meeting of shareholders to approve certain matters ancillary to the Transaction, including a consolidation of its shares.

Trading in the common shares of Andor is halted at present. It is unlikely that the common shares of Andor will resume trading until the Transaction is completed and approved by the TSXV.

Conditions to Transaction

Prior to completion of the Transaction (and as conditions of closing):

  • ESI must complete a subscription receipt financing (the "Offering") for minimum gross proceeds of not less than Cdn.$2,500,000 at an issue price to be determined in the context of the market (the "Issue Price"). It is expected that the gross proceeds of the Offering will be held in escrow by a third party escrow agent, and the subscription receipts will convert into common shares ("ESI Shares"), or units consisting of ESI Shares and warrants, of ESI (or such other securities as may be agreed between ESI and Andor in the context of the market) immediately prior to the closing of the Transaction and exchanged into corresponding securities of Andor in accordance with the Exchange Ratio (as defined herein). The net proceeds of the Offering will be released to the combined entity (the "Resulting Issuer") upon completion of the Transaction. In the event the Transaction is not completed, the subscription receipts will be cancelled and the gross proceeds from the Offering will be refunded to investors in the Offering. The net proceeds from the Offering will be used for working capital and for general corporate purposes. Further details regarding the Offering will be included in a subsequent press release once additional details become available.

  • Andor shall, with appropriate shareholder approval, consolidate (the "Andor Consolidation") its existing common shares (each an "Existing Andor Share") at a ratio of 0.344 new common shares of Andor (each an "Andor Share") for every one Existing Andor Share.

  • Andor will prepare a filing statement in accordance with the rules of the TSXV, outlining the terms of the Transaction. ESI will provide assistance and details as to the business, assets, properties and operations of ESI and will be responsible for any and all audited financial statements related to its business and operations (and pro forma financial statements) as well as the National Instrument 43-101 compliant technical report with respect to ESI's McKenzie Lake Property, located in Saskatchewan.

  • ESI and Andor will enter into a Definitive Agreement in respect to the Transaction.

  • ESI will obtain the requisite shareholder approvals for the Transaction and the ancillary matters contemplated in the Definitive Agreement.

  • All requisite regulatory approvals relating to the Transaction, including, without limitation, TSXV approval, will have been obtained.

The Proposed Transaction

Pre-Closing Capitalization of Andor

As of the date hereof, Andor has 5,300,000 Existing Andor Shares and options to acquire an aggregate of 830,000 Existing Andor Shares at an exercise price of Cdn.$0.20 per Existing Andor Share. Upon completion of the Andor Consolidation, Andor will have 1,823,200 Andor Shares and options to acquire an aggregate of 285,520 Andor Shares at an exercise price of Cdn.$0.58 per Andor Share.

Pre-Closing Capitalization of ESI

As of the date hereof, ESI has (a) 27,362,624 ESI Shares issued and outstanding (comprised of 24,653,724 ESI Shares currently issued and outstanding and 2,708,900 ESI Shares issuable immediately upon completion of the Transaction on conversion of certain special warrants of ESI without further action or consideration), and (b) warrants to acquire an aggregate of 6,535,135 ESI Shares at exercise prices ranging from $0.80 to $2.50 per ESI Share.

Terms of the Transaction

Andor proposes to acquire all of the ESI Shares pursuant to the terms of a Definitive Agreement. It is expected that each shareholder of ESI will receive one Andor Share (on a post-consolidation basis) for each ESI Share held (the "Exchange Ratio") resulting in the Andor Shareholders holding approximately 6.25% of the common shares of the Resulting Issuer and the former ESI Shareholders holding approximately 93.75% of the common shares of the Resulting Issuer upon completion of the Transaction (immediately prior to giving effect to the Offering). In addition, all ESI Shares underlying the ESI Warrants will be exercisable into Andor Shares on the same terms and conditions as the original outstanding ESI warrants.

Upon completion of the Transaction, and subject to receipt of all requisite approvals for the Transaction, it is expected that the board of directors of the Resulting Issuer shall consist of seven directors, as further discussed below.

About ESI

ESI is a corporation existing under the laws of the province of British Columbia and was formed on June 22, 2011 upon the continuance under the Business Corporations Act (British Columbia) of Exploration Syndicate, Inc., a Delaware corporation formed on March 30, 2005. Its registered office is located at 2200–1055 West Hastings Street, Vancouver, British Columbia V6E 2E9.

ESI is a privately-held exploration and development company focused on identifying and exploring concealed base metal deposits using airborne geophysical technologies and proprietary data interpretation methods. ESI's exploration activities have historically been targeted on the McKenzie Lake Project in Saskatchewan, Canada.

The McKenzie Lake Project is located in the Flin Flon Greenstone Belt, the largest Proterozoic VMS district in the world, hosting 27 significant deposits containing over 154 Mt of copper-zinc ore. The McKenzie Lake Project covers 41 mineral dispositions totalling 53,490 hectares, 100% of which are owned by ESI. ESI acquired 20 of these mineral dispositions in 2006, 8 in 2007, 11 in 2008 and 2 in 2010. ESI has expended $14,266,507 on the McKenzie Lake Project to June 30, 2011.

  • Drilling of 14 of 20 high priority VTEM targets in 2007/08 resulted in the discovery of four zones of base metal mineralization, the most significant being the M2-Suggi Lake.

  • Nine out of a total of 11 holes drilled to date at M2-Suggi Lake returned significant mineralization, ranging from 0.7m @ 5.0% Cu and 1.1% Zn to 16m @ 4.4% Cu and 4.8% Zn. The zone contains small high grade Cu-Zn sulphide bodies and several zones of low grade disseminated mineralization.

  • The mineralized system and associated alteration explored to date has minimum dimensions of approximately 200m X 250m X 500m depth, and remains open laterally and to depth.

  • Although an economic ore body has not been outlined yet, the grades and dimensions of the zones intersected, and the large size of the mineralization and alteration system indicate that the M2-Suggi Lake Zone still holds potential for economic mineralization, and more drilling is necessary to define that potential.

  • A work program in two phases has been recommended to be carried out at the M2-Suggi Lake Zone and at untested VTEM targets pursuant to a National Instrument 43-101 compliant technical report dated August 26, 2011 prepared by Strathcona Mineral Services Limited. A total of five holes with a combined length of 1900 metres is planned to be drilled in the first phase of the program in 2012 with a budget estimated at $2,000,000. If the results of this program are favourable, approximately 4000 metres of infill drilling are planned to be carried out in a second phase with a budget estimated at $3,500,000. Depending on ice conditions, that drilling would follow Phase I in 2012, with the remaining holes drilled in the winter of 2013, together with other targets in the McKenzie Lake Project area.

In addition, ESI is assessing other mineral exploration projects in the Yukon Territory, Canada and Arizona, United States. These projects are currently in the assessment stage only and ESI does not hold a land interest in either project as at the date hereof.

  • The Yukon Project is in the Selwyn Basin where 19 SEDEX deposits are known and another 89 occurrences are described as SEDEX-type mineralization. In 2008, ESI conducted a 24,675 line kilometer Z-TEM survey over prospective ground in the Selwyn Basin and in 2009 started anomaly evaluation and target identification. ESI plans to complete the interpretation of the Z-TEM survey data.

  • The Arizona Project is in the Arizona porphyry belt and is planned to detect and delineate large porphyry Cu/Mo deposits similar to the Bagdad, Resolution and Morenci deposits. In 2008, ESI conducted a 13,650 line kilometer Z-TEM survey in two flying blocks and in 2009 completed a first phase anomaly evaluation and target identification. Field reconnaissance of Z-TEM targets commenced in September 2011. ESI may stake claims in the future based on this prior exploration work if it determines doing so would be economically advantageous.

Upon completion of the Transaction, it is the intention of the parties that the Resulting Issuer will continue to focus on the exploration and development of the McKenzie Lake Project as well as other projects in the Yukon and Arizona.

Bob Lo, M.Sc., MBA, P.Eng., ESI's consulting geophysicist, a Professional Engineer and a qualified person as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects, has reviewed the technical information in this news release.

Financial Information Concerning ESI

The table below sets out certain selected financial information regarding ESI as at, and for the 6 months ended, June 30, 2011 (unaudited), and as at and for the 12 months ended December 31, 2010 (unaudited). The selected information was prepared in accordance with International Accounting Standard 34, Interim Financial Reporting for the 6 months ended June 30, 2011 and for the 12 months ended December 31, 2010.

Balance Sheet As at June 30, 2011 As at December 31, 2010
(CAD$) (CAD$)
(unaudited) (unaudited)
Cash, prepaid expenses and other $ 3,360,124 $ 4,427,845
Equipment $ 62,722 $ 82,078
Total Assets $ 3,422,846 $ 4,509,923
Current liabilities $ 2,922,030 $ 884,750
Share purchase warrants $ 1,491,220 $ 1,718,762
Total Liabilities $ 4,423,249 $ 2,603,512
Shareholders' equity $ (1,000,403 ) $ 1,906,411
Total liabilities and equity $ 3,422,846 $ 4,509,923
Statement of Operations For the six months ended June 30, 2011 For the year ended December 31, 2010
(CAD$) (CAD$)
(unaudited) (unaudited)
Sales - -
Gross Profit - -
Net Loss for the Period $ (3,519,725 ) $ (3,421,990 )

Insiders, Officers and Board of Directors of the Resulting Issuer

Upon completion of the Transaction, it is anticipated that the board of directors of the Resulting Issuer shall be comprised of: Charles Bass, Robert Boaz, George Elliott, Robin Goad, Donald Lowe, Robert Metcalfe and Ronald Smith. In addition, it is expected that Charles Bass will serve as Chief Executive Officer, George Elliott will serve as Executive Chairman and Ann Dumyn will serve as Chief Financial Officer and Secretary of the Resulting Issuer.

On closing, it is expected that certain funds managed by Seamans Capital Management, LLC will, in the aggregate, exercise control or direction over more than 10% of the then issued and outstanding Andor Shares.

The following sets outs the names and backgrounds of all persons who are expected to be considered insiders of the Resulting Issuer.

Charles Bass, Chief Executive Officer and Director

Charles B. Bass is the current Chief Executive Officer and a director of ESI. Mr. Bass has over 35 years experience in the mining and exploration industries. Mr. Bass has been actively involved as an executive and director of Australian-listed companies since the early 1990s. In March 2001 Mr. Bass co-founded Aquila Resources Limited and served as a director and a substantial shareholder in the coal and iron ore company. Between 1993 and 1997 Mr. Bass was co-founder, substantial shareholder and managing director of Eagle Mining Corporation Pty Ltd. which discovered, developed and built the Nimary gold mine and plant in Western Australia currently owned by Newmont Mining Corporation. Mr. Bass is also an executive director of Geopacific Resources NL.

George Elliott, Chairman and Director

George W. Elliott, B.A. (Hons.), LLB is the current Chairman and Chief Executive Officer of Andor and the Chairman of ESI. Mr. Elliott is a corporate director with over 40 years experience in corporate finance, new business development and relationship management. He has been a senior partner of McCarthy Tétrault LLP and senior counsel to Gowling Lafleur Henderson LLP. He has been executive vice-president of MCAP Financial and Chairman of the executive committee of the PLM Group Ltd. now part of Transcontinental Printing. He was formerly Chairman and Chief Executive Officer of Titanium Corporation Inc., interim Chief Executive Officer of Augen Capital Corp., director of Integrated Asset Management Corp. and a director of AuRico Gold Inc. Mr. Elliott is a director of Candente Copper Corp., Urbana Corporation, Esperanza Resources Corp. and Medworxx Solutions Inc. and is a Special Advisor to AuRico Gold Inc. Mr. Elliot has a Bachelor of Laws from Osgoode Hall Law School and a Bachelor of Arts (Hons) from McGill University.

Ann Dumyn, Chief Financial Officer

Ann M. Dumyn is the current Chief Financial Officer and Corporate Secretary of ESI and Andor. She also serves as a director and member of the audit committee of Kaskattama Inc. Mrs. Dumyn served as a director and officer of a number of resource sector joint venture companies and with Aeroquest International Limited between 2004 and 2006. She served as Secretary/Treasurer and Chief Financial Officer for American Paramount Gold Corp between 2010 and 2011. Mrs. Dumyn is a graduate of the ICD Corporate Governance College, Directors Education Program (February 2006). From 2000 to 2004, Mrs. Dumyn was Vice-President, Aboriginal and Northern Affairs with SNC-Lavalin Inc., and previous to that, from 1968 to 2000, she held senior positions with Bank of Montreal, including Director, Aboriginal Banking. Mrs. Dumyn served on numerous not-for-profit boards including the Board of Governors of Lakehead University in Thunder Bay, Ontario between 2004 and 2010 and as Vice-Chair, Board of Trustees of the Royal Ontario Museum between 2005 and 2011.

Robert Boaz, Director

Robert Boaz, B.A. (Hons), M.A., serves as a current director of Andor. Mr. Boaz has 20 years of experience in the investment business after a career in the power and natural gas industry working in management positions for Ontario Hydro, Saskatchewan Power and Consumers Gas. During that time he provided testimony to a number of regulatory bodies in Canada regarding business policy, rate design, capital structure issues and fair rate of return on equity. He has held senior management positions in a number of firms in the investment industry with direct responsibilities related to research, portfolio management, institutional sales and investment banking. Mr. Boaz' former responsibilities and associations have been as referee for the Journal of Energy Economics, Vice President of the Canadian Chapter of the International Energy Economics Association, Chairman of the Statistics Committee of the Canadian Gas Association and as a member of the External Advisory Committee for Ontario Hydro on economic and load forecasting matters. More recently, Mr. Boaz was Managing Director of Investment Banking with Raymond James Ltd. in Toronto. In this capacity, he was primarily responsible for the financing of (and mergers and acquisitions for) mining, real estate, and special situations companies.

Mr. Boaz is currently President and CEO of Aura Silver Resources Inc., an exploration company targeting silver and gold properties in Mexico and Canada. He is also Chairman of Southern Andes Energy Inc., (formerly Solex Resources Corporation), an exploration company involved in uranium and base metal properties in Peru; director of Renaissance Gold Inc., a gold exploration company in Nevada, Argentina and Spain; and former director of AuEx Ventures and former director of Ur-Energy Inc., a uranium exploration company with near term production prospects in Wyoming and Canada. Mr. Boaz has a Master of Arts Degree in Economics from York University and an Honours Bachelors Degree in Economics from McMaster University.

Robin Goad, Director

Robin E. Goad, M.Sc., P.Geo., serves as a current director of Andor. Mr. Goad is a mining executive and professional geologist with approximately 30 years of experience in mineral exploration, development and mining. Mr. Goad is President, Chief Executive Officer and a director of Fortune Minerals Limited ("Fortune Minerals"), a TSX listed company involved in mineral development in Canada and internationally, and in the process of transitioning into a mid-tier producer. Mr. Goad oversees three mining and refinery projects currently undergoing environmental assessments for permitting in the Northwest Territories, British Columbia and Saskatchewan. Mr. Goad was a founding director of Fortune Minerals. Mr. Goad is also a director of Klondex Mines Inc. and previously served as President, Chief Executive Officer and a director of other TSX and TSX Venture listed mineral resource companies. He is also a Director of the Northwest Territories & Nunavut Chamber of Mines and is actively engaged in various fundraising activities for the Department of Earth Sciences at the University of Western Ontario, including serving on private sector committees for student bursaries in Economic Geology. He has authored and co-authored several scientific papers in mineral deposits geology and process metallurgy.

Donald Lowe, Director

Donald C. Lowe, B.A., Sc., M. Sc., serves as a current director of Andor. Mr. Lowe is a corporate director with over 40 years of experience as a senior executive. He has served as President and Chief Executive Officer, Pratt & Whitney Canada, Chairman, President and Chief Executive Officer, Allied Canada, President and Chief Executive Officer, Kidd Creek Mines, President and Chief Executive Officer, Canadair, Deputy Chairman, Bombardier, President and Chief Executive Officer, Fleet Industries and Chairman, Sedgwick Limited. He has formerly served as director of Airshow Canada, Alberta Natural Gas, Bayridge Resources, Butler Service Group, Devtek Corporation, Innocan Inc., Intek Diversified Corporation, Magnesium Company of Canada, Norr Partnership Limited, Scott's Hospitality, Canadian Tire Corporation, Acanthus Real Estate Corporation, Algoods Inc., Ingersoll Rand Canada, Teklogic Inc., Bombardier Inc., HSBC Bank of Canada, Strongo Equipment Corporation, Kicking Horse Resources and Haley Industries Limited.

Currently, Mr. Lowe serves as a director of Blumont Capital Corporation, Conundrum Capital Corporation, Integrated Asset Management Corporation, Magellan Aerospace Corporation, Ornge, Ornge Air, Ornge Foundation, Ornge Peel Ltd. and Orngeco. Mr. Lowe obtained his B.A. Sc. from the University of Toronto and his M. Sc. from the University of Birmingham.

Robert Metcalfe, Director

Robert J. Metcalfe serves as a current director of ESI. Mr. Metcalfe has been counsel to Metcalfe, Blainey & Burns LLP since 2001 and prior to that he was a senior partner with the law firm Lang Michener LLP for 20 years. He currently serves as director of Gran Colombia Gold Corp., PetroMagdalena Energy Corp., Xinergy Corp. and Axmin Inc. Mr. Metcalfe is the former President and Chief Executive Officer of Armadale Properties and also a former director of numerous natural resource companies, including Central Patricia Gold Mines Limited, Iron Bay Trust Inc., Faraday Resources (Uranium) Ltd. and Chimo Gold Mines Inc., as well as Canada Lands Company Limited and past director and chairman of CN Tower Limited.

Ronald Smith, Director

Ronald E. Smith, FCA, ICD.D, serves as a current director of Andor. Mr. Smith is a corporate director with an extensive background in the financial, telecommunications and energy sectors. Mr. Smith is a former Chief Financial Officer of Aliant Telecom Inc. and its predecessor, Maritime Telephone & Telegraph Ltd. He has also served as Senior Vice President and Chief Financial Officer of Emera Inc. and its major subsidiary, Nova Scotia Power Inc. and is a former partner of Ernst & Young LLP. Mr. Smith is currently a member of the board of directors of AuRico Gold Inc. and the Canada Pension Plan Investment Board and serves as trustee of the Nova Scotia Association of Health Organizations Pension Plan. He also serves as a member of the Canadian Accounting Standards Oversight Council and is the former Chair of the Acadia University Board of Governors, former National President of the Canadian Association for Community Living and former Chair of the Atlantic Provinces Economic Council. Mr. Smith has a Bachelor of Business Administration Degree from Acadia University and is a graduate of the ICD Corporate Governance College, Director Education Program at the Rotman School of Business, University of Toronto.

Seamans Capital Management, LLC, 10% Shareholder

Seamans Capital Management, LLC is a U.S. based registered investment advisor focused on investments in global bonds and resource equities. The firm offers four investment products with specifically targeted financial objectives including global bonds, global income, global energy income and global opportunities. Its clients include foundations, endowments, pensions and high net worth individuals.

Non-Arm's Length Party Disclosure

George Elliott is the current Chairman and Chief Executive Officer and a director of Andor. Mr. Elliott also serves as the Chairman of the board of directors of ESI. Mr. Elliot, together with his associates and affiliates, owns an aggregate of 1,010,000 Existing Andor Shares (on a pre-consolidation basis), representing 19.05% of the Existing Andor Shares, and options to acquire 265,000 Existing Andor Shares (on a pre-consolidation basis). Mr. Elliott also owns 200,380 ESI Shares, representing 0.01% of the currently issued and outstanding ESI Shares.

Ann Dumyn is the current Chief Financial Officer and Secretary of Andor. She also serves as the Chief Financial Officer and Secretary of ESI. Ms. Dumyn, together with her associates and affiliates, owns an aggregate of 70,000 Existing Andor Shares (on a pre-consolidation basis), representing 1.32% of the Existing Andor Shares. Ms. Dumyn, together with her associates and affiliates, also owns 1,057,747 ESI Shares representing 3.87% of the currently issued and outstanding ESI Shares.

Notwithstanding the foregoing, the Transaction constitutes a Non-Arm's Length Transaction (as such term is defined under the policies of the TSXV) since no party (together with its respective associates or affiliates) (a) holds more than 20% of the outstanding voting securities of Andor and ESI, or (b) holds a sufficient number of securities of both Andor and ESI so as to affect materially the control of both Andor and ESI.


Sponsorship of a qualifying transaction of a capital pool company is required by the TSXV unless exempt in accordance with TSXV policies. Andor is currently reviewing the requirements for sponsorship and may apply for an exemption from the sponsorship requirements pursuant to the policies of the TSXV; however, there is no assurance that Andor will ultimately obtain this exemption. Andor intends to include any additional information regarding sponsorship in a subsequent press release.

Further Information

All information contained in this news release with respect to Andor and ESI was supplied by the parties respectively, for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.

Completion of the transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to the requirements of the TSXV, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Offering; future exploration and testing; use of funds; and the business and operations of the Resulting Issuer after the proposed transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; and the results of current exploration and testing. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Andor and ESI disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Contact Information

  • Andor Mining Inc.
    Ann Dumyn
    Chief Financial Officer and Secretary
    (905) 838-1252
    (905) 838-5681 (FAX)