Panda Capital Inc.
TSX VENTURE : PDA.H

Panda Capital Inc.

April 08, 2011 12:25 ET

Panda Provides Further Details on the Acquisition of Continental Mining and Smelting

TORONTO, ONTARIO--(Marketwire - April 8, 2011) - Further to a press release dated April 27, 2010, Panda Capital Inc. ("Panda" or the "Company") (TSX VENTURE:PDA.H) is providing the following updates concerning its proposed Qualifying Transaction (the "Proposed Transaction") with Continental Mining and Smelting Limited ("Continental").

Panda is also pleased to announce that Continental has completed a private placement with First Canadian Securities (the "Continental Offering") raising aggregate gross proceeds of $1,200,000 with the MineralFields Group.

"We are very pleased to be commencing a relationship with the MineralFields Group", said James Macintosh, President and CEO of Continental. "This is an important milestone in the growth of Continental and we look forward to working with the MineralFields Group as we work to bring the Estrades Mine, in Northern Quebec, back into production."

Continental has also terminated negotiations with 365569 Yukon Inc. to acquire a smelter located in Cobalt, Ontario, allowing Continental to focus its efforts on bringing the Estrades Mine back into production and completing the Proposed Transaction with Panda.

BACKGROUND

On April 26, 2010, the Company entered into an acquisition agreement with Continental pursuant to which the Company agreed to acquire all of the issued and outstanding common shares of Continental (the "Continental Common Shares"). By letter agreement dated February 1, 2011, Panda and Continental amended the terms of the acquisition agreement to:

  1. revise one of the conditions of closing by reducing the minimum gross proceeds to be raised by Continental in one or more financings to be completed in connection with the Proposed Transaction from $4M to $1M based on an analysis of Continental's Net Tangible Assets as a result of financings completed by Continental and the ability of the Resulting Issuer (as defined below) to meet the TSX Venture Exchange (the "TSX-V") minimum listing requirements for a mining issuer;
  2. remove the requirement that Continental complete a National Instrument 43-101 compliant technical report as a condition precedent to the completion of the Proposed Transaction as this condition has been satisfied by Continental;
  3. add a condition of closing requiring Panda, on or immediately prior to the closing of the Proposed Transaction, to consolidate its outstanding share capital on the basis of one new common share of Panda for each one and one-half existing Panda common shares (the "Panda Common Shares"); and
  4. extend the termination date under the acquisition agreement to June 30, 2011.

THE QUALIFYING TRANSACTION

Panda is proposing to acquire all of the issued and outstanding Continental Common Shares by way of a "three-cornered" amalgamation in which a wholly-owned subsidiary of Panda, which Panda shall have incorporated under the CBCA, will amalgamate with Continental to form an entity (the "Resulting Issuer") that will continue as Continental Mining and Smelting Ltd. or such other name as Continental shall determine. The number of Panda Common Shares to be issued to the holders of Continental Common Shares on the closing will be equal to: (a) (i) the number of outstanding Continental Common Shares multiplied by (ii) the price paid per Continental Common Share pursuant to the QT Financing (as defined below) divided by, (b) the deemed price per Panda Common Share of $0.15. There are currently 36,278,000 Continental Commons Shares outstanding.

On or immediately prior to the closing of the Proposed Transaction, Panda is proposing to consolidate its outstanding share capital on the basis of one new common share of Panda for each one and one-half existing Panda Common Share. There are currently 3,300,000 Panda Common Shares issued and outstanding.

It is anticipated that upon completion of the Proposed Transaction, the Resulting Issuer will meet the Tier 2 listing requirements of the TSX-V for a mining issuer.

To the knowledge of the directors and executive officers of the Company, the only persons who currently beneficially own, directly or indirectly, or exercise control or direction over more than 10% of the Continental Common Shares are set forth below:



Name
Jurisdiction of Residence or IncorporationNumber of Continental Common Shares Held% of Shares Held
International Silver Inc.Arizona6,000,00016.7
John & Lynette McKinneyArizona4,800,00013.3
Harold & Eileen ShipesArizona4,000,00011.1

Harold (H. Roy) Shipes is the largest shareholder of International Silver Inc. ("International Silver"), holding 21.5% of the issued and outstanding shares of International Silver. Mr. Shipes exercises control or direction, directly or indirectly, over an aggregate of 5,291,667 Continental Common Shares, representing 14.7% of the issued and outstanding Continental Common Shares. As discussed below, it is proposed that Mr. Shipes will act as Chairman and as a director of the Resulting Issuer following completion of the Proposed Transaction.

Upon completion, the Proposed Transaction will constitute the Company's "qualifying transaction" pursuant to the policies of the TSX-V.

SIGNIFICANT CONDITIONS TO CLOSING

The completion of the Proposed Transaction is subject to a number of conditions precedent, including but not limited to satisfactory due diligence reviews, negotiation and execution of definitive transaction documentation, approval by both boards of directors, approval of Continental's shareholders, obtaining necessary governmental and third party approvals and TSX-V acceptance.

Continental is also proposing to complete one or more financings (the "QT Financing") in connection with the Proposed Transaction with Panda and in addition to the Continental Offering discussed below. The number, type and price of the securities to be issued in the QT Financing will be determined by Continental and the Company in the context of market conditions and the TSX-V minimum listing requirements.

There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

SPONSORSHIP

The Company will apply for an exemption from the TSX-V from the requirement to retain a sponsor in connection with the Proposed Transaction. There can be no assurances that an exemption from sponsorship will be granted.

ARM'S LENGTH QUALIFYING TRANSACTION

The control persons of Continental are not (and their associates and affiliates are not) control persons in the Company. Accordingly, the acquisition by the Company of all the issued and outstanding shares of Continental is not a Non-Arm's Length Qualifying Transaction for the purposes of TSX-V policies. As a result, the Proposed Transaction will not be subject to approval of the shareholders of the Company and therefore no meeting of the shareholders of the Company is required as a condition to the completion of the Proposed Transaction.

DIRECTORS AND OFFICERS OF THE RESULTING ISSUER

The board of directors of the Resulting Issuer upon completion of the Proposed Transaction will be comprised of the following persons: H. Roy Shipes, James Macintosh, Bruce Reid, John McKinney, Robert Munro and Julio DiGirolamo. Brief biographies for the proposed directors and officers of the Resulting Issuer are set out below:

H. Roy Shipes, Chairman - Mr. Shipes has over 30 years' experience in the mining industry in senior management positions with companies around the world. He has worked extensively in copper, zinc and precious metals, as well as engineering, construction and project development. Positions held include General Manager and Chief Executive Officer of Ok Tedi Mining Limited, Vice President and General Manager of Southern Peru Copper Company, Founder and President of American Pacific Mining and Director of Breakwater Resources, Transoceanic Trading Company, Arimetco International, Western States Engineering, Western Gold Resources, Western Chemicals and American International Trading Company. Mr. Shipes is a graduate of the University of Arizona with a B.Sc. in Bio-Chemistry and did post-graduate work in Mining and Metallurgical Engineering.

James Macintosh, President, Chief Executive Officer and Director - Mr. Macintosh has 25 years' experience in the mining industry and as a mining analyst. For the past 18 years he has held various executive and directorial positions with numerous public and private companies in Canada and the United States. Mr. Macintosh spent the last 10 years as the President, Chief Operating Officer and a Director of Innovium Media Properties Corp., an early stage investor. Mr. Macintosh sits on the Board of Directors and Chairs the Audit Committees of U.S. Silver Corporation, GTA Resources and Mining Inc., Acadian Energy Inc. and Seed Media Group LLC. Mr. Macintosh is also a Director of Canuc Resources Corporation and Atlas Precious Metals Inc. Mr. Macintosh graduated from Queen's University with a B.Sc. (Honours, Geological Sciences) and now sits on the Queen's University Geology Council.

Bruce Reid, Director - Mr. Reid brings more than 30 years of corporate finance, mining and mineral exploration experience to Continental. Mr. Reid is the President, Chief Executive Officer and Director of Carlisle Goldfields Ltd. From 2006 to 2009, Mr. Reid was the President and Chief Executive Officer of U.S. Silver Corporation and was Vice-President, Corporate Finance of Research Capital from 2002 to 2006. He is also a Director of Fletcher Nickel Inc., KWG Resources Inc., Noravena Capital Corp. and Atlas Precious Metals Inc. Mr. Reid graduated with a B.Sc. in Geology from the University of Toronto in 1979 and received subsequently a finance degree from the University of Windsor.

John McKinney, Director - Mr. McKinney has performed in senior management positions in the mining industry for the past 20 years. He was president of Arisur, Inc., Senior Vice President and Director of Arimetco International, Director of Breakwater Resources, Transoceanic Trading Company and Western States Engineering. He was Co-Founder of Western States Engineering, Western Capital, Suramco Metals, Western Gold Resource s and Western Manufacturing. Mr. McKinney is a graduate of the University of Arizona with a Bachelor's Degree in Business Administration.

Robert Munro, Director - Mr. Munro is currently Chief Executive Officer of The Chrysalis Capital Group Inc., a private company focussed on all aspects of the TSX-V's Capital Pool Company program. He is also Chief Executive Officer, Chief Financial Officer, Director and Promoter of Chrysalis Capital VIII Corporation and Chief Financial Officer and Secretary of Panda Capital Inc., a NEX listed corporation. Prior to joining The Chrysalis Capital Group Inc., Mr. Munro served as Director, Data Product Management with Rogers AT&T Wireless Inc. ("Rogers"), from February 2003 to March 2006. Prior to joining Rogers, Mr. Munro was the founding Director of Venture Development with Exclamation International Inc. from December 1999 to June 2002. Mr. Munro holds a Bachelor of Arts degree from Huron College, the founding college of the University of Western Ontario (1995), as well as several certificates in Project Management from Ryerson University.

Julio DiGirolamo, CA, Chief Financial Officer and Corporate Secretary - Mr. DiGirolamo has over 16 years of senior-level public company experience including five years with Greenstone Resources Ltd., a TSX and NASDAQ-listed gold mining company with activities focused in four Latin America countries. For the last 11 years, Mr. DiGirolamo has been the Chief Financial Officer and Corporate Secretary of Innovium Media Properties Corp., an early stage investor, during which period he also acted as interim Chief Financial Officer at Seed Media Group LLC and as Chief Financial Officer, Corporate Secretary and Director of Atlantis Systems Corp. Mr. DiGirolamo currently also serves as Chief Financial Officer for two private companies in the process of going public in 2011: Cordillera Gold Ltd., a gold explorer in Colombia; and Great GulfCan Energy Inc., a junior company with offshore oil assets in production in the Gulf of Mexico.

CONTINENTAL PRIVATE PLACEMENT

In connection with the Proposed Transaction, Continental completed the Continental Offering, raising aggregate gross proceeds of $1,200,000 with the MineralFields Group in two tranches.

On closing of the first tranche of the Offering on December 31, 2010, Continental issued 5,000,000 units (the "Flow-Through Units") at a price of $0.20 per Flow-Through Unit for gross proceeds of $1,000,000. Each Flow-Through Unit consists of one Continental Common Share issued on a "flow-through" basis and one-half of one non-flow-through common share purchase warrant (each whole common share purchase warrant, a "Warrant"). Each Warrant entitles the holder to acquire one Continental Common Share at an exercise price of $0.30 per share until December 31, 2011 and at $0.35 per share until December 31, 2012.

On closing the second tranche of the Offering on January 11, 2011, Continental issued 1,000,000 Continental Common Shares at a price of $0.10 per share, 500,000 Continental Common Shares at a price of $0.20 per share and 1,250,000 common share purchase warrants (collectively, the "Common Units"), with 1,000,000 of the warrants being exercisable at $0.20 per share until January 11, 2013 and 250,000 of the warrants being exercisable at $0.30 per share until January 11, 2012 and at $0.35 per share until January 11, 2013.

The gross proceeds derived from the sale of the Flow-Through Units will be used by Continental to fund exploration expenses which qualify as "Canadian Exploration Expenses" (within the meaning of the Tax Act) in connection with the Estrades Mine. Net proceeds from the sale of the Common Units will be used for working capital purposes. Continental paid a finder's fee to First Canadian Securities in connection with the Continental Offering.

Continental is also proposing to complete the QT Financing in connection with the Proposed Transaction with Panda. The number, type and price of the securities to be issued in the QT Financing will be determined by Continental and the Company in the context of market conditions and the TSX-V minimum listing requirements.

INFORMATION ON CONTINENTAL MINING AND SMELTING LIMITED

Continental is a private Canadian company which currently owns 70% of the Estrades Mine, located approximately 125 kilometres north of Val D'Or, Quebec. The Estrades Mine contains a gold, silver, zinc VMS (volcanogenic massive sulphide) deposit with associated copper and lead ore. Breakwater Resources Ltd. put the Estrades Mine into production from 1990 to 1991. Continental believes that in excess of $18 million has been spent to date on the property and, in addition to a full production ramp reaching down to a depth of 300 meters (the "Estrades Production Ramp"), there are several surface buildings and a year round road to access the Estrades Mine. Continental completed a National Instrument 43-101 compliant technical report in respect of the Estrades Mine in September 2010. The following two paragraphs contain excerpts from that report.

The mine is a part of the Joutel complex that hosts the former Joutel, Poirier and Agnico Eagle-Telbel Mines that yielded approximately 9 million tonnes of ore. In 1985, a VMS deposit was discovered on the Estrades property in the sector covered by Mining Lease #795 (the "Estrades Mining Lease"). The deposit consists of a series of massive sulphide lenses hosted by felsic volcanic rocks. The deposit is East-West trending and vertically dipping. The deposit has a drill indicated strike length of over 2 km with an average thickness of 1 to 3 meters. The deposit is made up of three successive Zn-Cu-Pb-Au-Ag bearing sulphide zones, respectively (from West to East): the Main, the Central, and the East Zones.

In 1990, the Main Zone was developed with a ramp by Breakwater Resources to a vertical depth of 300 metres over a strike length of 150 m. From July 1990 to May 1991, a total of 174,946 tonnes of ore were extracted at a grade of 12.9% Zn, 6.4 g/t Au, 172 g/t Ag and 1% Cu.

Continental closed the purchase of 70% of the Estrades Mining Lease on November 30, 2010 and is now initiating the redevelopment and possible re-opening of the Estrades Mine. Continental plans to dewater the mine and access the underground workings via the Estrades Production Ramp. The Company will also be pursuing new permits and fine-tuning the mining and milling plans in order to complete a new feasibility report in 2011. The goal is to bring the mine back into production in 2012. Based on the 43-101 completed in 2008 for Cogitore (which can be found at www.sedar.com), there is an indicated resource of 740,000 tonnes grading 0.16 ounces per tonne ("opt") Gold, 4.94 opt Silver and 9.5% Zinc with 0.9% Copper and 0.9% Lead. Continental will be completing an updated resource estimate as part of its 2011 program.

INSIDERS OF THE RESULTING ISSUER

Other than has been previously referred to in this press release, and to the knowledge of the directors and senior officers of the Company or Continental, no person will become an insider of the Resulting Issuer as a result or upon completion of the Proposed Transaction.

ABOUT MINERALFIELDS, PATHWAY AND FIRST CANADIAN SECURITIES ®

MineralFields Group (a division of Pathway Asset Management), based in Toronto, Montreal, Vancouver and Calgary, is a mining fund with significant assets under administration that offers its tax-advantaged super flow-through limited partnerships to investors throughout Canada as well as hard-dollar resource limited partnerships to investors throughout the world. Pathway Asset Management also specializes in the manufacturing and distribution of structured products and mutual funds (including the Pathway Multi Series Funds Inc. corporate-class mutual fund series). Information about MineralFields Group is available at www.mineralfields.com. First Canadian Securities ® (a division of Limited Market Dealer Inc.) is active in leading resource financings (both flow-through and hard dollar PIPE financings) on competitive, effective and service-friendly terms, and offers investment banking, mergers and acquisitions, and mining industry consulting, services to resource companies. MineralFields and Pathway have financed several hundred mining and oil and gas exploration companies to date through First Canadian Securities ®.

Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to TSXV/ NEX acceptance and if applicable pursuant to TSX-V/NEX requirements, majority of the minority shareholder approval. Where applicable, 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 or filing statement 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. Trading in the securities of a Capital Pool Company should be considered highly speculative.

Certain information in this press release may constitute forward-looking information. This information is based on current expectations that are subject to significant risks and uncertainties that are difficult to predict. Actual results might differ materially from results suggested in any forward-looking statements. The Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward looking-statements, unless and until required by securities laws applicable to the Company. Additional information identifying risks and uncertainties is contained in the Company's filings with the Canadian securities regulators, which filings are available at www.sedar.com.

Gary Lohman, P. Geo, is a Qualified Person under Canadian Securities Administrators National Instrument 43-101, and has reviewed and is responsible for the contents of this news release.

The TSX-V has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release. Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

Contact Information

  • Panda Capital Inc.
    Robert Munro
    Chief Financial Officer
    (888) 448-4946
    contact@tccg.ca

    Continental Mining and Smelting Limited
    James Macintosh
    President and Chief Executive Officer
    (416) 862-7003
    jm@contlmas.com