Well, here's the deal. I haven't got my head around it yet. Any analysis would be welcome.
CANADIAN DEALING NETWORK SYMBOL: CANC
MAY 8, 1997
Canuc Resources Corporation - Company Announcement
TORONTO, ONTARIO--
CANUC ANNOUNCES:
- OPTION AND JOINT VENTURE WITH PLACER DOME INC. TO DEVELOP
ECUADOREAN PROPERTY
- ACQUISITION OF THE 40 PERCENT MINORITY INTEREST IN COMPANIA
MINERA MININGANDOS S.A. ("ANDOS")
Canuc Resources Corporation ("Canuc" or the "Company") announced
today that it has entered into an option and joint venture
agreement (the "Placer Agreement") with Placer Dome Inc.
("Placer"), which calls for the further exploration and
development of the Nambija gold deposit in southeastern Ecuador.
Canuc's directors are particularly pleased with this agreement
because Placer has extensive knowledge of the Nambija gold belt
and was very generous in sharing it with Canuc.
The agreement, spread over a five-year period, grants four options
which, when exercised, will earn Placer a 60 percent interest in
the Property. In order to exercise the four options, Placer must:
(i) contribute US$10,000,000 to Canuc's treasury through purchase
of stock and cash payments, (ii) spend a minimum of US$6,000,000
on exploration, and (iii) complete a bankable feasibility study
and finance 70 percent of Canuc's share of mine development costs.
Canuc also announced that it has entered into the following
agreements:
(a) a share purchase agreement (the "Share Purchase Agreement")
with the owners (the "Vendors") of the minority interest in the
Ecuadorean company, Compania Minera Miningandos S.A. ("Andos"),
that owns the Property to purchase 40 percent of the issued shares
of Andos; and
(b) an agreement with the Vendors pursuant to which the Vendors
have agreed to accept a cash payment of US$500,000 and the issue
of 500,000 Common Shares of Canuc in satisfaction of the
US$1,000,000 option payment due to the Vendors on May 15, 1997
pursuant to the April 19, 1996 Option Agreement under which Canuc
received an option to purchase 60 percent of the issued shares of
Andos.
Further details of the Placer Agreement and the Share Purchase
Agreement are outlined below.
Placer Agreement
Under the Placer agreement, Placer has the right to earn, in
stages, up to a 60 percent interest in the Property. Under the
agreement, Canuc has agreed to issue 900,000 Common Shares of
Canuc to Placer and to make available to Placer certain
information relating to the Property for US$2,000,000.
In order to earn an initial 10 percent interest in the Property,
Placer is required to (i) incur a minimum of US$1,500,000 of work
costs on the Property in each of the first two years of the
agreement, (ii) subscribe, at any time prior to February 1, 1998,
for additional US$2,000,000 of Common Shares of Canuc at a price
equal to the higher of $4.00 per share or the weighted average
market price of the Common Shares of Canuc during the 30 day
period prior to the subscription, (iii) make cash payments to
Canuc of US$1,000,000 at the end of the first year of the
agreement, and US$1,500,000 at the end of the second year of the
agreement.
Placer may acquire an additional 20 percent interest in the
Property upon (i) the expenditure of a minimum of US$1,500,000
during the third and fourth year of the agreement, and (ii) making
cash payments of US $1,000,000 to Canuc at the end of each of the
third and fourth years of the agreement and US$500,000 at the end
of the fifth year of the agreement.
Placer may increase its interest in the Property to a 50 percent
interest by (i) completing a bankable feasibility study, and (ii)
making a payment of US$1,000,000 to Canuc prior to the end of the
fifth year of the Placer Agreement.
Placer may increase its interest in the Property to a 60 percent
interest by (i) making a decision to place the Property into
commercial production, (ii) commencing production of the mine on
the Property within two years of acquiring a 50 percent interest
in the Property, and (iii) agreeing to finance 70 percent of all
construction and development costs in connection with placing any
mines to be constructed on the Property into commercial
production. Canuc would then be required to finance only 12
percent of the construction and development costs of any such
mines, being its 40 percent interest in the remaining 30 percent
of such costs.
Share Purchase Agreement
Pursuant to the Share Purchase Agreement, Canuc will acquire the
remaining interest in Andos in consideration for the issue of (i)
US$3,750,000 promissory notes of Canuc which will be issued in
installments over a two year period ending on May 31, 1999, (ii)
7,000,000 Common Shares of Canuc, (iii) 4,000,000 Share Purchase
Warrants exercisable at a price of $4.50 per share at any time on
or before May 31, 1999, and (iv) additional Common Shares (the
"Additional Shares") of Canuc in installments having a total
market value of US$1,250,000 at the respective dates of issue.
The Promissory notes will be payable in installments of US$375,000
on each of May 31, 1997, November 30, 1997, May 31, 1998 and
November 30, 1998 and of US$2,250,000 on May 31, 1999. Canuc has
the right to pay all or any part of installments due under the
promissory note through the issue of Common Shares at a price of
US$1.00 per share in respect of the May 31, 1997 installment and
at a price based upon the weighted average closing market price of
Canuc shares during a 10 day period prior to the date of issuance
in respect of the subsequent installments.
The Vendors have agreed to enter into a shareholders agreement
with Canuc which will place certain restrictions on the ability of
the Vendors to resell such shares of Canuc being acquired under
the Share Purchase Agreement. The Vendors have agreed to vote all
of their shares in favor of management at all shareholders
meetings held prior to May 31, 1999 and the Company has agreed to
use its best efforts to cause one representative of the Vendors to
be elected to the board of directors at meetings held prior to
such date.
As at April 30, 1997, Canuc had 26,856,332 Common Shares issued
and outstanding.
The Common Shares of Canuc are traded on Canadian Dealing Network
("CDN") under the symbol "CANC".
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