Silver Bear Resources Inc.
TSX : SBR

Silver Bear Resources Inc.

December 04, 2015 17:43 ET

Silver Bear Completes Note Restructuring and Agrees to A Private Placement Promissory Note Financing of C$9.9 Million

TORONTO, ONTARIO--(Marketwired - Dec. 4, 2015) - Silver Bear Resources Inc. ("Silver Bear" or the "Company") (TSX:SBR) is pleased to announce that the Company's major shareholders, A.B. Aterra Resources Ltd. ("Aterra") and Inflection Management Corporation ("Inflection" and together with Aterra, the "Investors") have agreed to a series of transactions through which the maturity date of previously issued US$7,000,000 non-convertible promissory notes has been extended to March 31, 2016, and other existing convertible debt and interest thereon (together with the new funding of C$6,600,000 provided today) has been consolidated into two instruments issued to Inflection and Aterra with principal amounts of C$12,350,769.86 and C$5,669,806.85, respectively. Inflection has agreed to provide a further C$3,300,000 by way of a non-convertible promissory note the issuance of which is subject to shareholder approval at a special meeting of shareholders to be held on January 11, 2016.

These transactions have been negotiated on an arm's-length basis and unanimously approved by the Company's independent directors. It is the view of the Company's management and directors that these transactions will provide Silver Bear with additional financing to bridge ordinary course liabilities as they become due and defer payment of certain principal amounts in order to allow the Company to maintain its development activities at the Mangazeisky Silver Project site as they seek the remaining project financing.

Silver Bear's CEO, Graham Hill commented: "As we prepare for the next phase of development at Mangazeisky, that will involve the transportation of construction supplies and the long-lead items via our 2016 resupply winter road, we are once again very grateful to our two major shareholders for their continued support. The extensions granted today, and additional funding, will provide the means and time to implement a full project financing solution in 2016 for the benefit of all shareholders of Silver Bear."

Details of the Transactions

Aterra, Inflection and Silver Bear have agreed to: (i) amend the terms of certain non-convertible promissory notes issued by the Company to the Investors on February 27, 2015, as previously announced by the Company on March 2, 2015, in the principal amounts of US$3,500,000 each (the "March 2015 Notes"), which bear interest at a rate of 15% per annum; (ii) restructure the existing outstanding convertible notes of the Company held by the Investors (the "Note Restructuring"); (iii) supply the Company with additional loans in the aggregate principal amount of C$6,600,000 (the "Additional Financing"); and (iv) Inflection has agreed to supply the Company with an additional loan in the principal amount of C$3,300,000 (the "2016 Contingent Financing", and together with the non-convertible note extension, Note Restructuring and Additional Financing, the "Transactions"), all pursuant to a note exchange, amendment and placement agreement (the "Note Exchange Agreement") dated and executed December 4, 2015 between the Company and the Investors.

Non-Convertible Note Extension

The Company and the Investors have extended the maturity date of the March 2015 Notes from December 31, 2015 to March 31, 2016. The March 2015 Notes continue to bear interest at a rate of 15% per annum and will now become due and payable on March 31, 2016.

The Company has obtained Toronto Stock Exchange ("TSX") conditional approval for the maturity date extension.

Note Restructuring and Additional Financing

Inflection has agreed to exchange certain unsecured contingent convertible promissory notes of the Company in the principal amounts of C$3,300,000 and C$5,610,000 previously issued by the Company for a new consolidated contingent convertible note in the principal amount of C$8,910,000, and Aterra has agreed to exchange the unsecured contingent convertible note of the Company in the principal amount of $2,310,000 previously issued by the Company for a new consolidated contingent convertible note in the principal amount of C$2,310,000. The exchanged notes have been cancelled. Additionally, the Investors converted C$200,576.71 of accrued and unpaid interest outstanding under the old exchanged notes into additional principal under the new consolidated contingent convertible notes (each, a "New Consolidated Contingent Convertible Note").

As part of the Additional Financing, each of Inflection and Aterra agreed to make additional loans to the Company in the principal amounts of C$3,300,000 each. The loans were evidenced by the issuance by the Company of additional New Consolidated Contingent Convertible Notes in the principal amounts of C$3,300,000 to each of Inflection and Aterra.

All of these outstanding New Consolidated Contingent Convertible Notes were then consolidated for each of the Investors, with Inflection ultimately being issued a single New Consolidated Contingent Convertible Note in the principal amount of C$12,350,769.86 and Aterra ultimately being issued a single New Consolidated Contingent Convertible Note in the principal amount of C$5,669,806.85. These consolidated notes bear no interest and are not convertible into common shares of the Company until such time as the Company obtains the necessary minority and disinterested shareholder approvals (the "Note Exchange Shareholder Approvals"), as more particularly described below. If the Note Exchange Shareholder Approvals are obtained, the New Consolidated Contingent Convertible Notes will bear interest at a rate of 15% per annum, be convertible into common shares at a conversion price of C$0.045 per common share and have a maturity date of December 31, 2016.

The Company has obtained TSX conditional approval for the Additional Financing, which is subject to, among other things, receipt of the Note Exchange Shareholder Approvals.

Additional Convertible Note Financing by Inflection

Inflection also agreed to make an additional loan to the Company in the principal amount of C$3,300,000 to be advanced by Inflection upon receipt by the Company of the necessary minority and disinterested shareholder approvals for the 2016 Contingent Financing (the "2016 Contingent Financing Approvals"), as described in more detail below, and which loan will be evidenced by the issuance to Inflection of a non-convertible promissory note in the principal amount of C$3,300,000 (the "2016 Inflection Promissory Note"). The 2016 Inflection Promissory Note will have a maturity date of December 31, 2016, and if the 2016 Contingent Financing Approvals are obtained, the 2016 Inflection Promissory Note will bear interest at a rate of 15% per annum. The 2016 Inflection Promissory Note will not be convertible into common shares.

The Company has obtained TSX conditional approval for the 2016 Contingent Financing, which is subject to, among other things, receipt of the 2016 Contingent Financing Approvals. The TSX has also conditionally approved the issuance of the New Consolidated Contingent Convertible Notes on November 27, 2015, subject to, among other things, receipt of the Note Exchange Shareholder Approvals

These transactions have all been conducted on a non-brokered basis. No fee is payable by the Company in respect of the issuance of securities in connection with these transactions.

Shareholder Approvals

The Company has called a special meeting of shareholders for January 11, 2016 (the "Meeting") to consider the two matters set out below.

Approval of Conversion and Interest Features of New Consolidated Contingent Convertible Notes

The New Consolidated Contingent Convertible Notes pay no interest are not convertible into common shares until such time as the Company obtains the Note Exchange Shareholder Approvals, being minority and disinterested shareholder approval (as required by Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") and under the TSX Company Manual) for the payment of interest thereon and conversion of the New Consolidated Contingent Convertible Notes into common shares.

Accordingly, the Company will be seeking the Note Exchange Shareholder Approvals at the Meeting, and if they are obtained, the New Consolidated Contingent Convertible Notes will bear interest at a rate of 15% per annum and be convertible into common shares at an exercise price of C$0.045 per common share, for a total of 400,457,259 common shares being issuable, assuming no accrued interest is paid in common shares.

Both Inflection and Aterra are insiders and related parties of the Company. Mr. Boris Granovsky, a director of the Company is also a managing partner of Aterra. Mr. Alexey Sotskov, a director of the Company is also a director of Inflection. Accordingly, the issuances of the New Consolidated Contingent Convertible Notes are considered "related party" transactions pursuant to MI 61-101. The Company is relying on the exemption available under Section 5.5(c) of MI 61-101 from the formal valuation requirements. The New Consolidated Contingent Convertible Notes were unanimously approved by the board of directors of the Company with Mr. Sotskov and Mr. Granovsky abstaining from participating in the vote.

Approval of 2016 Contingent Financing

Since Inflection is an insider of the Company, the issuance of the 2016 Inflection Promissory Note requires the Company to obtain the 2016 Contingent Financing Approvals, being minority and disinterested shareholder approval (as required by MI 61-101 and under the TSX Company Manual) for the issuance of the 2016 Inflection Promissory Note to Inflection. The issuance of the 2016 Inflection Promissory Note is also considered a "related party" transaction pursuant to MI 61-101. The Company is relying on the exemption available under Section 5.5(c) of MI 61-101 from the formal valuation requirements. The 2016 Inflection Promissory Note was unanimously approved by the board of directors of the Company with Mr. Sotskov abstaining from participating in the vote. Accordingly, at the Meeting, the Company will be seeking the 2016 Contingent Financing Approvals.

Resulting Share Ownership

The following table sets out the maximum number of common shares issuable to each of Inflection and Aterra in connection with the proposed transactions, on a non-diluted basis, using the 161,327,017 common shares issued and outstanding as of the date hereof, and assuming no interest under any instrument is converted to common shares.

Number and Percent (non-diluted) of Common Shares(1)(2)
Name of Insider Share Ownership at date of Press Release Common Shares Issuable upon conversion of the New Consolidated Contingent Convertible Notes (3)
Ownership Following Conversion of New Consolidated Contingent Convertible Notes
(non-diluted)
(4)
Inflection 41,176,471
common shares (25.5% - basic)
274,461,552 common shares or 170.12% of the currently issued and outstanding common shares 315,638,023 common shares or 56.18% of the then issued and outstanding common shares
Aterra 40,468,579
common shares (25.08% - basic)
125,995,707 common shares or 78.10% of the currently issued and outstanding common shares 166,464,286 common shares or 29.63% of the then issued and outstanding common shares
(1) Assumes no payment of common shares in lieu of interest. The maximum number of common shares that could be issued in lieu of interest on the New Consolidated Contingent Convertible Notes is 64,676,589.
(2) The 2016 Inflection Promissory Note is a non-convertible promissory note and no common shares are issuable in respect thereof.
(3) Assumes conversion at C$0.045 per share.
(4) Assumes all instruments are actually converted. If so, 561,784,276 common shares would then be issued and outstanding on a non-diluted basis (and assuming no exercise of warrants).

About Silver Bear

Silver Bear (TSX:SBR) is focused on the development of its wholly-owned Mangazeisky Silver Project, covering a licence area of ~570 sq. km that includes the high grade Vertikalny deposit (amongst the highest grade silver deposits in the world) located 400 km north of Yakutsk in the Republic of Sakha (Yakutia) within the Russian Federation. The Company was granted a 20-year mining licence for the Vertikalny deposit in September 2013 and completed a Preliminary Economic Assessment in February 2014. The Feasibility Study, scheduled for completion in 2H 2015, is contracted to Tetra Tech in the UK with SRK and ERM as subcontractors for the mining and environmental studies respectively. Other information relating to Silver Bear is available on SEDAR at www.sedar.com as well as on the Company's website at www.silverbearresources.com.

Cautionary Notes

This release and subsequent oral statements made by and on behalf of the Company may contain forward-looking statements, which reflect management's expectations. Wherever possible, words such as "intends", "expects", "scheduled", "estimates", "anticipates", "believes" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, have been used to identify these forward-looking statements. Although the forward-looking statements contained in this release reflect management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, Silver Bear cannot be certain that actual results will be consistent with these forward-looking statements. A number of factors could cause events and achievements to differ materially from the results expressed or implied in the forward-looking statements. Such risk factors include, but are not limited, to the possibility that necessary regulatory approvals are not received or other conditions to completion of the Transactions are not satisfied, the possibility that we have to allocate proceeds to other uses or reallocate proceeds significantly differently among the anticipated uses, and to risk factors identified by Silver Bear in its continuous disclosure filings filed from time to time on SEDAR. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions and uncertainties that may cause Silver Bear's actual results, events, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Although Silver Bear has attempted to identify important risks and factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date of this release, and Silver Bear assumes no obligation to update or revise them to reflect new events or circumstances, unless otherwise required by law.

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