Mega Precious Metals Inc.

TSX VENTURE : MGP


Mega Precious Metals Inc.

December 04, 2013 16:37 ET

Mega Precious Metals Announces Convertible Note Financing Agreement With Pacific Road Resources Funds for Up to US$40 Million With an Initial Tranche of US$3.0 Million

THUNDER BAY, ONTARIO--(Marketwired - Dec. 4, 2013) - Mega Precious Metals (TSX VENTURE:MGP) ("Mega" or the "Company") and the Pacific Road Resources Funds ("PRRF" or "Pacific Road") are pleased to announce that they have entered into an agreement (the "Definitive Agreement") pursuant to which Pacific Road has agreed to invest approximately US$3.0 million in Mega. Pursuant to the terms of the Definitive Agreement, Pacific Road will have the right to invest three additional tranches for a total investment of up to US$40 million as the Company advances the Monument Bay Project. The cumulative funding from Pacific Road, should each tranche be exercised, will allow the Company to fully fund the technical studies required to advance the project to feasibility, including a preliminary economic assessment in 2014 and a pre-feasibility study thereafter.

Pacific Road will purchase unsecured zero coupon convertible notes (the "Tranche 1 Convertible Notes"), which are convertible into Mega common shares ("Common Shares") at a conversion price of $0.112, which equates to the Company's 20-day volume weighted average closing price ("VWAP") at the time of signing the Definitive Agreement. Subsequent options to purchase additional convertible notes will be exercisable by PRRF following the achievement of certain milestones by the Company in advancing its Monument Bay Project. The closing of the Tranche 1 Convertible Notes is subject to the satisfaction of certain conditions, including approval of the TSX Venture Exchange ("TSX-V") for the Tranche 1 Convertible Notes and the subsequent tranches, and is expected to occur on or about December 20, 2013. Mega has worked with Paradigm Capital Inc. ("Paradigm") as the Company's financial advisor to negotiate and structure this arrangement with Pacific Road.

Mega is also pleased to announce it has entered into an agreement with Paradigm to lead a syndicate of agents (collectively, the "Agents") in connection with a concurrent brokered private placement on a best efforts basis of Common Shares and flow-through shares of the Company (the "Offering") for gross proceeds of C$1,500,000. Depending on the ultimate size of the private placement, Pacific Road will have the right to increase the size of the Tranche 1 Convertible Notes to maintain a 19.9% ownership of Mega on an as-converted basis.

Gross proceeds from the Tranche 1 Convertible Notes and the Offering will be used to fund exploration and development on Mega's projects.

Glen Kuntz, President, CEO and Director commented "The significant investment by Pacific Road, a major mining-focused private equity investor, represents strong support and confidence in our flagship Monument Bay Gold and Tungsten Project and management team. Pacific Road is a long-term, committed shareholder that will bring financial and technical expertise as well as representation on the Company's board of directors as we move the project forward. The Tranche 1 Convertible Notes and the potential additional tranches represent a major milestone for Mega as the Company has the financial ability to continue advancing the project to feasibility. In a challenging market where many project developers have not been able to fund work programs, Mega is pleased to have attracted a committed, long-term shareholder."

Pacific Road Financing Details

The Tranche 1 Convertible Notes will be unsecured and bear no interest, will have a term of five years and will be convertible into Common Shares at a conversion price of C$0.112, which represents the 20-day VWAP of the Common Shares on the TSX-V at the time of signing the Definitive Agreement. The purchase of the Tranche 1 Convertible Notes is expected to close on or about December 20, 2013, subject to the satisfaction of certain conditions, including the approval of the TSX-V.

The Tranche 1 Convertible Notes will be convertible at any time in whole or in part into up to 28,797,207 Common Shares at the conversion price, representing approximately 19.9% of the currently outstanding Common Shares of the Company (assuming an exchange rate of US$1.00 = C$1.066). PRRF will have a preferential right, but not an obligation, to participate in any future equity or convertible financings of the Company for aggregate proceeds to the Company of up to US$100 million for so long as Pacific Road holds Common Shares or securities of the Company that would represent at least 10% of the outstanding Common Shares. In addition, PRRF will have the right to participate in any future equity or convertible financings of the Company in order to maintain its proportionate interest in the Company, provided that PRRF holds Common Shares or securities of the Company that would represent at least 10% of the outstanding Common Shares. Upon closing of the purchase of the Tranche 1 Convertible Notes, PRRF will also be entitled to nominate such number of directors as equates to its pro rata percentage interest in Mega on a converted basis, and in any event, at least one nominee. PRRF will have the right to appoint additional nominees if Pacific Road completes the subsequent investments described below. Mega has also agreed to grant PRRF certain registration rights and has made certain covenants in favour of PRRF.

Pursuant to the terms of the Definitive Agreement, Pacific Road has the right, but not the obligation, to participate in three further tranches of unsecured convertible notes. If the completion of any such tranche would result in Pacific Road becoming a new "control person" (holding more than 20% of the issued and outstanding voting shares) of the Company, the Company has agreed to obtain shareholder approval for the purposes of TSX-V policies.

Pacific Road has a right to purchase up to approximately US$7.0 principal amount of unsecured convertible notes (the "Tranche 2 Convertible Notes") within 60 days after an updated internal resource analysis condition is completed with respect to the Monument Bay project. The conversion price of the Tranche 2 Convertible Notes will be based on the VWAP on the TSX-V for the 10 trading days prior to and the 10 trading days following the satisfaction of the Tranche 2 resource analysis condition, subject to approval of the TSX-V.

Under the third tranche, Pacific Road has the right to purchase up to US$10,000,000 principal amount of unsecured convertible notes (the "Tranche 3 Convertible Notes") within 60 days after the successful completion of a preliminary economic assessment in respect of the Monument Bay project. Pacific Road also has the right to purchase up to US$20,000,000 principal amount of unsecured convertible notes (the "Tranche 4 Convertible Notes") within 60 days after the successful completion of a pre-feasibility study in respect of the Monument Bay Project. The conversion prices of the Tranche 3 Convertible Notes and the Tranche 4 Convertible Notes will be based upon the 20-day VWAP of the Common Shares following the public announcement of the respective studies, subject to approval of the TSX-V.

As the number of Common Shares of the Company issuable to PRRF pursuant to the Tranche 2 Convertible Notes, Tranche 3 Convertible Notes and Tranche 4 Convertible Notes is contingent, in part, upon future values and share prices and PRRF has not made any decision to purchase the additional tranches of convertible notes or to convert, the number of such Common Shares which PRRF may acquire should it exercise all of its rights cannot be determined at this time.

Net proceeds from the purchase of the Tranche 2 Convertible Notes, if completed, will be used to fund ongoing drilling, metallurgical work, resource expansion, permitting and working capital, which the Company expects will cumulate into a Preliminary Economic Assessment by the end of 2014. Net proceeds from Tranche 3 Convertible Notes and the Tranche 4 Convertible Notes, respectively, if completed, will be used to fund a Pre-Feasibility Study, permitting and a Feasibility Study.

A copy of the Definitive Agreement will be filed as a material contract of the Company and will be accessible under the Company's SEDAR profile at www.sedar.com.

Best Efforts Private Placement Details

Under the Offering, the Company will offer Common Shares and common shares that are "flow-through shares" within the meaning in the Income Tax Act (Canada) ("Flow Through Shares") by way of private placement exemptions from prospectus requirements for gross proceeds up to C$1.5 million.

As consideration for the services of the Agents in connection with the Offering, the Agents will receive a commission equal to 6% of the aggregate gross proceeds of the Offering and compensation warrants, exercisable at any time for a period of 24 months following the closing of the Offering, to purchase Common Shares for an amount equal to 6% of the total number of Common Shares issued pursuant to the Offering, at an exercise price equal to the offering price for such Common Shares.

The Common Shares and Flow Through Shares offered pursuant to the Offering will be priced in the context of the market in accordance with the policies of the TSX-V. The Offering is expected to close on or about December 20, 2013 and is subject to certain conditions typical for a transaction of this nature and the receipt of all necessary regulatory approvals including the approval of the TSX-V.

The Tranche 1 Convertible Notes (including all underlying securities) and the Common Shares and Flow Through Shares issued pursuant to the Offering will be subject to a hold of four months and one day pursuant to Canadian securities law.

Mega Precious Metals Inc. is a leading Canadian-based exploration company with a high quality pipeline of projects located in the mining friendly jurisdictions of Northwestern Ontario, Manitoba and Nunavut. The Company's significant portfolio includes the flagship Monument Bay Gold Tungsten Project in NE Manitoba as well as the N. Madsen Gold Project in the prolific gold mining district of Red Lake, Ontario. Mega has established a record of delivering rapid growth through their focused and low cost approach to exploration and resource development. The Company's common shares trade on the TSX Venture Exchange under the symbol MGP.

About Pacific Road Resources Funds and Pacific Road Capital Management Pty Ltd.

The Pacific Road Resources Funds are private equity funds investing in the global mining industry. They provide expansion and buyout capital for mining projects, mining related infrastructure and mining services businesses located throughout resource-rich regions of the world. The Pacific Road Resources Funds are managed or advised by Pacific Road Capital Management Pty Ltd. ("PRCM"). The PRCM team, located in Sydney, Australia, San Francisco, USA, and Vancouver, Canada, is comprised of experienced mining investment professionals that have extensive knowledge and experience in the mining and infrastructure sectors, including considerable operating, project development, transactional and investment banking experience. For further information on the Pacific Road Resources Funds and PRCM, please go to their website at www.pacroad.com.au.

PRRF has agreed to purchase the Tranche 1 Convertible Notes for investment purposes and may or may not convert its convertible notes into Common Shares and may or may not purchase or sell convertible notes, Common Shares or other securities of the Company in the future from time to time or at any time from the Company, on the open market, in private transactions or pursuant to other public transactions, in either case, depending on market conditions and other factors.

A copy of the early warning report filed in connection with the investment is available on the Company's profile on SEDAR at www.sedar.com or may be obtained by contacting Greg Dick at +61 2 9241 1000.

For further information and presentation material, please review the Mega website at www.megapmi.com.

Forward-looking Statements

Certain statements in this press release contain information that may constitute forward-looking information under applicable Canadian securities legislation, including but not limited to, information relating to the completion of the issuance of the Tranche 1 Convertible Notes, the completion of the Offering, the full funding of technical studies and the use of net proceeds. These forward - looking statements represent management's best judgment based on current facts and assumptions that management considers reasonable. The Company makes no representation that reasonable business people in possession of the same information would reach the same conclusions. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the strength of the global economy, fluctuations in the price of gold and operational, funding and liquidity risks. Readers should not place undue reliance on forward-looking statements. More information about risks and uncertainties affecting the Company and its business is available in the Company's filings which are posted on sedar at www.sedar.com. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or to update the reasons why actual results could differ from such information unless required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Mega Precious Metals Inc.
    Glen Kuntz, P.Geo.
    President, Chief Executive Officer & Director
    807-766-3380 or Toll-Free: 877-592-3380
    info@megapmi.com
    www.megapmi.com