Apogee Silver Ltd.
TSX VENTURE : APE

Apogee Silver Ltd.

November 04, 2014 09:15 ET

Apogee Enters Into Definitive Agreement With Prophecy Coal Corp.

TORONTO, ONTARIO--(Marketwired - Nov. 4, 2014) -

NOT FOR RELEASE IN THE UNITED STATES OR TO U.S. NEWS WIRE SERVICES

Apogee Silver Ltd. ("Apogee" or the "Company") (TSX VENTURE:APE) has entered into a definitive agreement (the "Definitive Agreement") with Prophecy Coal Corp. ("Prophecy") (TSX:PCY), whereby Prophecy has agreed to acquire Apogee's wholly owned subsidiaries Apogee Minerals Bolivia S.A. and ASC Bolivia LDC (the "Subsidiaries"), which in turn hold the Pulacayo-Paca Silver Lead Mining Project in Bolivia (the "Proposed Transaction").

In connection with the Proposed Transaction, which was previously announced on October 15, 2014, Prophecy has agreed to pay Apogee a cash fee in the amount of $250,000, of which $125,000 has been received upon entering into the Definitive Agreement and the remaining $125,000 will be payable upon closing. In addition, Prophecy will issue to Apogee 60 million common shares of Prophecy (the "Consideration Shares") to be placed in escrow. The parties had previously announced that Prophecy would issue 60 million non-voting Class B convertible shares to Apogee but have revised this structure pursuant to the terms of the Definitive Agreement. Upon closing the parties will enter into an escrow agreement whereby the Consideration Shares shall be released from escrow upon certain escrow release conditions being satisfied as follows: (a) over a two year period with the first tranche being released from escrow within 12 months of closing; (b) on an accelerated basis in the event that the Prophecy common shares are trading above certain price thresholds for a period of no less than five consecutive trading days on the TSX; or (c) in the event of certain major triggering events relating to Prophecy. Prophecy has agreed to assume within certain limitations all liabilities, including legal and tax liabilities, associated with the Subsidiaries and the Pulacayo Paca project.

Currently, Prophecy has 251,878,634 common shares issued and outstanding as of the date hereof. Assuming all of the Consideration Shares were released from escrow as of today's date, Apogee would hold a 19.2% interest in Prophecy. Based on the closing price of the Prophecy shares as at November 3, 2014 (being $0.065), the issuance of 60 million Prophecy shares represents an implied value of $3,900,000 to Apogee.

Management remains confident that the Prophecy team will focus on bringing the Pulacayo-Paca project into production in due course, thereby adding value for both the Apogee and Prophecy shareholders. Through its holdings in Prophecy, the Proposed Transaction enables Apogee shareholders to benefit in the potential upside of both the Pulacayo Paca project and Prophecy's coal energy projects located in Mongolia.

Approvals and Summary of the Proposed Transaction

The Proposed Transaction remains subject to the receipt of all necessary regulatory approvals, including the approval of the TSX and the TSX Venture Exchange respectively and necessary shareholder approvals at the special meeting of Apogee shareholders to be held on December 19, 2014. Closing of the Proposed Transaction is set to occur by no later than January 2, 2015.

The terms of the Proposed Transaction will be described in further detail in the Management Information Circular of Apogee to be filed with the regulatory authorities and mailed to shareholders of Apogee in accordance with applicable securities laws. Officers, directors and major shareholders of Apogee, who hold an aggregate of 19.4% of Apogee common shares, have agreed to enter into lock-up and support agreements with Prophecy under which they have agreed to vote in favour of the Proposed Transaction. Apogee shareholders will be granted dissent rights which, if exercised in accordance with applicable requirements, will provide such shareholders the right to be paid the fair value for their Apogee common shares by Apogee. It is a condition of closing that Apogee shareholders holding no more than 10% of the outstanding Apogee shares will have exercised dissent rights with respect to the Proposed Transaction.

The Board of Directors of Apogee has determined to recommend that shareholders of Apogee vote in favour of the Proposed Transaction.

The Definitive Agreement includes a commitment by Apogee not to solicit alternative transactions to the Proposed Transaction. Prophecy has also been provided with certain other rights customary for a transaction of this nature, including the right to match competing offers made to Apogee. Pursuant to the terms of the Definitive Agreement, in the event Apogee accepts a superior offer or fails to complete the Proposed Transaction in certain circumstances, Apogee shall be required to pay to Prophecy a break fee in the amount of $850,000.

Apogee has engaged Cairn Merchant Partners LP ("Cairn") as its financial advisor. Cairn has provided an oral opinion to the Board of Directors of Apogee to the effect that, as of the date of such opinion and subject to certain assumptions, limitations and qualifications set out therein, the proposed transaction is fair, from a financial point of view, to shareholders of Apogee.

ABOUT PROPHECY COAL CORP.

Prophecy Coal Corp. is a Canadian public company listed on the Toronto Stock Exchange that is engaged in developing energy projects in Mongolia. Further information on Prophecy Coal can be found at www.prophecycoal.com. In addition, readers are referred to the Canadian regulatory filings set out in Prophecy's profile on SEDAR at www.sedar.com.

About Apogee Silver Ltd.

Apogee Silver Ltd. is a mineral exploration and development stage company listed on the TSX Venture Exchange under the symbol APE. Apogee targets advanced, high grade silver-zinc-lead projects in South America. Currently its projects are located in the historic silver producing regions of southwest Bolivia and northern Chile.

Apogee's most advanced project is the 100% controlled Pulacayo Paca project in Bolivia for which a positive feasibility study has been completed. The Company also has properties in Chile.

Completion of the Proposed Transaction is subject to a number of conditions, including receipt of regulatory approvals and the receipt of shareholder approval. The Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular of Apogee to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon.

Cautionary Note Regarding Forward-Looking Information

This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian Securities Legislation. Statements containing forward-looking information express, as at the date of this news release, the Proposed Transaction, the Company's plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results and the Company does not intend, and does not assume any obligation to, update such statements containing the forward-looking information. Such forward-looking statements and information include, but are not limited to statements as to: the accuracy of estimated mineral reserves and resources, anticipated results of future exploration, and forecast future metal prices, anticipated results of future electrical sales and expectations that environmental, permitting, legal, title, taxation, socio-economic, political, marketing or other issues will not materially affect estimates of mineral reserves. These statements reflect the company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.

These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this news release and the company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: statements with respect to the future financial or operating performance of Prophecy and Apogee and its projects, statements regarding the prospects for the Proposed Transaction, statements regarding synergies and financial impact of the proposed transaction, the terms and conditions of the transaction, the benefits of the Proposed Transaction, risks related to the technological and operational nature of the company's business; changes in national and local government, legislation, taxation, controls or regulations and political or economic developments in Canada, Mongolia, Bolivia or other countries where the Company may carry on business in the future; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, cave-ins and flooding); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with and claims by local communities and indigenous populations; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits and the presence of laws and regulations that may impose restrictions on mining; diminishing quantities or grades of mineral reserves as properties are mined; global financial conditions; business opportunities that may be presented to, or pursued by, the Company; the Company's ability to complete and successfully integrate acquisitions and to mitigate other business combination risks; challenges to, or difficulty in maintaining, the Company's title to properties and continued ownership thereof; the actual results of current exploration activities, conclusions of economic evaluations, and changes in project parameters to deal with unanticipated economic or other factors; increased competition in the mining industry for properties, equipment, qualified personnel, and their costs.

Investors are cautioned against attributing undue certainty or reliance on forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements or information, other than as required by applicable law.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINTED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

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