In the past month, Royal Road Minerals said it had made substantial progress in its preparations for making the proposed offer and, assuming the satisfactory completion of its ongoing due diligence review of Caza and other pre-bid items, Royal Road Minerals now expects to make a formal offer on or before January 20. Royal Road Minerals and Caza have amended their previously announced support agreement to reflect Royal Road Mineral’s current intended timing for making the proposed offer.
Highlights of the Transaction
For each Caza common share, Royal Road Minerals intends to offer 0.16 of a Royal Road Minerals ordinary share. Royal Road Minerals expects to issue approximately 22,608,321 ordinary shares pursuant to the transaction (assuming no exercise of any Caza options or warrants), representing approximately 34% of Royal Road Minerals’ current outstanding ordinary shares.
Management of Royal Road Minerals expects that the following factors, among others, would be relevant to Caza shareholders in their assessment of the proposed offer, if made by Royal Road Minerals as described herein:
Opportunity for participation in Royal Road Minerals’ exploration projects in Colombia. Since the proposed offer would be a share exchange transaction, Caza shareholders would, upon the successful completion of the proposed offer through their ownership of Royal Road Minerals shares, benefit from any future increases in value associated with the continued exploration of Royal Road Minerals’ portfolio of assets in Colombia.
Continued participation in the Caza’s projects in Nicaragua. Shareholders would continue to participate in any increase in value of the Caza’s projects in Nicaragua by holding approximately 25.3% of the outstanding Royal Road Minerals shares following any successful completion of the proposed offer, if made (based on the number of Caza common shares and Royal Road Minerals’ shares currently outstanding).
Proven leadership team in place. Following any successful completion of the proposed offer, if made, Royal Road Minerals would continue to be guided by an experienced board of directors and management team, which collectively has extensive project exploration and development, acquisition, corporate finance and other relevant industry experience, all of which is necessary to discover, evaluate and acquire prospective mineral projects, advance projects from the exploration stage to development, and to create shareholder value by doing so.
Financial Status of Caza. Caza’s public disclosure shows that it is consuming, rather than generating, cash and that Caza currently has a substantial working capital deficit. Caza and its board of directors have, over the past twelve months, conducted a strategic review process and no buyers for Caza or its assets or alternative transactions have emerged. Given Caza’s serious financial difficulty, its inability to source additional financing, and the lock-up agreements with supporting shareholders, there is no realistic probability of a “white-knight” emerging and completing a transaction that is superior to the proposed offer, if made by Royal Road Minerals shares as described herein.
Accretive Assets; Enhanced Liquidity. Caza’s current active exploration projects are all located in Nicaragua. The proposed offer, if made, would allow Royal Road Minerals and Caza to aggregate high quality mineral properties, all in Latin America, and would be intended to help each company to geographically diversify its assets, benefit from combined exploration exposure, reduce single-project risk and allow for improved financing and growth opportunities. Caza’s controlling shareholder now beneficially owns 77.5% of the Caza common shares and Caza warrants to purchase up to 88,160,000 Caza common shares, which, if fully exercised on the date hereof, would increase such beneficial ownership to approximately 86% of the outstanding Caza common shares. Because of this concentration of ownership, there is limited liquidity for Caza common shareholdings and associated challenges for Caza to raise additional financing and enter into certain transactions. The proposed offer, if made, would be intended to create a combined company with a more diversified shareholder base and result in more liquidity for investors and improved financing opportunities.
Unanimous Recommendation of the Caza Board. Caza’s board of directors has unanimously approved the proposed offer and, currently intends to recommend that Caza shareholders accept the proposed offer, if made by Royal Road Minerals shares as described herein.
Support of Shareholders. Caza’s largest shareholder and a secured creditor, as well as all of the directors and officers of Caza have entered into the above-mentioned lock-up agreements pursuant to which they have agreed to deposit to the proposed offer, if made, all Caza common shares held by them, representing approximately 82% of the Caza common shares, subject to the terms and conditions of such agreements. As a result, there is no impending prospect of a competing offer for the Caza common shares by a third party.
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