Talon Metals Corp. Announces Interim Loan and Heads of Agreement with Saber Energy Corp. regarding Potential Merger
Thu Sep 25, 5:34 PM
ca.news.finance.yahoo.com
TSX:TLO
ROAD TOWN, Tortola, British Virgin Islands, Sept. 25 /CNW/ - Talon Metals Corp. ("Talon") (TSX: TLO.TO) is pleased to announce that it has entered into a binding heads of agreement (the "HOA") with Saber Energy Corp. ("Saber"), a private coal bed methane exploration company with extensive land holdings and an active exploration program in Botswana. Under the HOA, Talon and Saber (each a "Company" and together the "Companies") have agreed to negotiate a pre-merger agreement (the "Pre-Merger Agreement") in respect of a business combination of the Companies (the "Merger"), subject to the approval of the Toronto Stock Exchange (the "TSX"). In addition, Talon has agreed to lend up to $6 million to Saber. (All dollar figures are in Canadian dollars.)
"The proposed Merger with Saber would allow Talon to participate in a large, rapidly developing project," said Mr. Stuart Comline, President and CEO of Talon Metals Corp. "Talon shareholders stand to benefit from Saber's plans to further explore and develop its gas project to the feasibility stage, and then into production. With its experienced management team and large land holdings, Saber is a key strategic player in coal bed methane and shale gas in southern Africa, a region facing significant energy shortages."
Proposed Merger
Under the terms of the HOA, Talon and Saber have agreed, among other things, that, upon the Merger, the common shares of each of the Companies will be exchanged for securities of the company resulting from the Merger ("MergeCo") on the following basis:
(a) each outstanding common share of Talon shall be exchanged for that
number of common shares of MergeCo (each, a "MergeCo Share") equal to
the Talon Ratio (as defined in the HOA) and one (1) preference share
of MergeCo (each, a "MergeCo Preference Share"); and
(b) each outstanding common share of Saber shall be exchanged for one
MergeCo Share.
Talon continues to assess the optimum way to realize value for its gold exploration projects in Brazil. Talon shareholders will benefit from the realization of value for these gold projects should they only be divested after the Merger, through the MergeCo Preference Shares. Each MergeCo Preference Share will entitle Talon shareholders to participate in the net proceeds of disposition of each of Talon's Brazilian mineral projects, provided that, in respect of each such project, the net proceeds of disposition exceed $500,000.
Pursuant to the terms of the HOA, the total number of MergeCo shares to be issued to Talon shareholders, should a merger be consummated, will be calculated as follows: the sum of Talon's Net Realizable Value (as such term is defined in the HOA) divided by the subscription price paid per common share or unit of Saber (the "Saber First Subscription Price") under the first arm's length private placement by Saber completed after September 24, 2008 (the "Saber Private Placement") and 2% of the outstanding common shares of Saber at the applicable time.
Additionally, the HOA provides that when Saber completes the Saber Private Placement, under which warrants are issued, the Talon shareholders will receive one (1) common share purchase warrant for each common share of Talon held by such shareholder. The warrants will entitle the holder thereof to purchase one (1) common share of Talon at an exercise price equal to the exercise price and terms of the warrants distributed in the Saber Private Placement. Should the Merger occur, such Talon warrants will be exchanged at the Talon Ratio for common share purchase warrants of MergeCo.
As part of the Merger, the outstanding options and warrants of Talon and Saber, as applicable, will be exchanged for options and warrants of MergeCo.
Significant conditions that must be satisfied on or before March 24, 2009 in order for the Pre-Merger Agreement to be entered into include:
(a) certain regulatory or government approval;
(b) Talon having received an opinion from its financial advisors that the
Merger is fair, from a financial point of view, to its shareholders;
(c) no material adverse change shall have occurred in respect of each of
Saber and Talon;
(d) Saber shall have met certain funding requirements; and
(e) the Net Realizable Value of Talon must be at least $12 million.
The HOA may be terminated by Talon upon notice to Saber. The HOA may also be terminated, among other circumstances, by either party if certain conditions precedent for its benefit are not satisfied in accordance with the terms of the HOA, in the event that Saber enters into an agreement in respect of any of certain alternative transactions (as specified in the HOA, an "Alternative Transaction") or by execution of the Pre-Merger Agreement by both Talon and Saber.
In the event that Saber intends to enter into an Alternative Transaction, Talon has the right to subscribe for common shares of Saber at a subscription price per share equal to the price or value per share offered in the Alternative Transaction, and pursuant to the terms and conditions specified in the HOA. Talon may also elect to apply any principal or interest owing by Saber to Talon in respect of the loan against the aggregate subscription price payable by Talon in respect of such subscription.
Some of the directors of each Company beneficially own or have control or direction over common shares of the other Company, including Warren Newfield (who is a director of both Companies). Mr. Newfield and his associates beneficially own, or have control or direction over, approximately 3% of the outstanding common shares of Talon and approximately 12% of the outstanding common shares of Saber. In light of the foregoing, an independent committee of the board of directors of Talon comprised of Sandra Cowan, Stuart Comline and Luis Mauricio de Azevedo, was formed to review each of the loan to Saber and the HOA. Talon's independent committee and board of directors have approved each of the loan to Saber and the HOA.
Interim Loan
Talon has agreed to loan Saber up to $6 million. An initial $3 million loan has been advanced and Talon will receive 1.5 million common share purchase warrants of Saber (each a "Value Warrant") as part of this transaction. The Value Warrants will be issuable on the earlier of the first closing date of the Saber Private Placement or the termination of the HOA, and each Value Warrant will entitle Talon to purchase one common share of Saber at an exercise price determined in accordance with a specified formula, expiring three years after the date of issuance (subject to extension in certain circumstances). Talon will be eligible for an additional 1.5 million Value Warrants on similar terms if the remaining $3 million of the loan is advanced to Saber.
The loan bears interest at 12% per annum until January 22, 2009 and 18% per annum thereafter. The loan is secured by a pledge of the shares of certain wholly owned subsidiaries of Saber, with additional security to be placed on additional assets prior to the advance of the second $3 million. The loan matures on March 24, 2009 unless extended pursuant to the terms of the HOA.
Should the Companies proceed with the Merger, the Value Warrants will be distributed to Talon shareholders on a pro rata basis and subsequently exchanged for a specified number (based on the Talon Ratio) of common share purchase warrants of MergeCo.
About Saber Energy Corp.
Saber is a private energy company which was incorporated in the British Virgin Islands. Saber is focused on developing a coal bed methane ("CBM") and shale gas field in the Karoo Coal Basin in Botswana, Africa. Saber's current prospecting licences cover almost 3.7 million acres in this area.
Saber intends to use any production from its potential gas field for power generation and conversion to liquid products such as fuels and petrochemicals. Saber anticipates commercial operations for a planned 1,000 megawatt ("MW") power plant (the "Power Project") to begin in 2013, and commercial gas production in 2010. Approximately 0.7 trillion cubic feet of proven gas resource is required to supply a 1,000 MW power plant.
Saber has currently evaluated 92 boreholes, and preliminary results indicate attractive coal and organic shale thickness and gas contents. The current test data from the core drilling and chip samples taken so far exceeds management's expectations and compares favourably in resource, structure, age and permeability to many CBM and shale gas basins currently in production.
Saber is currently operating five production five well patterns ("5 Spots") and once dewatering is complete and full test results are obtained, management plans to commence production drilling to establish proven, probable and possible gas reserves.
In 2007, Saber completed an initial power plant and pipeline technical study, which was conducted by SNC Lavalin. Environmental studies regarding the planned gas pipeline are currently underway.
Led by Mr. Colin Kinley, Saber's well seasoned management team has over 120 years of combined experience in developing large scale unconventional gas resources in remote regions, as well as extensive engineering and geological expertise in unlocking gas in shales and coal beds.
Saber has spent over $30 million on exploration activities since December 2007. For the year ended February 29, 2008, Saber had total assets of approximately $50 million and net losses of $4 million. Saber has outstanding 150,610,690 common shares and 2,530,534 common share purchase warrants.
For additional information on Saber please visit www.saberenergy.com
About Talon Metals Corp.
Talon is a TSX-listed company focused on the acquisition, exploration and advancement of high quality resource projects. Talon has a well-qualified exploration and management team with extensive experience in exploration and project management.
Talon has a treasury of approximately $12 million and holds 4,935,500 common shares of Brazauro Resources Corporation (TSX-V: BZO.V), and 2,450,000 common shares in Beadell Resources Limited (ASX: BDR.AX). Talon has 27,054,222 common shares outstanding.
Forward-Looking Statements
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This press release contains certain "forward-looking statements". All statements, other than statements of historical fact, that address activities, events or developments that Talon believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding Talon's plans and objectives, the interim loan, the proposed Merger, the proposed use by Saber and/or MergeCo of CBM gas for power generation and conversion to fuels and petrochemicals and the anticipated commencement by Saber and/or MergeCo of production drilling, commercial gas production and commercial operation of the Power Project) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of Talon based on information currently available to Talon. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of Talon to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on Talon. Factors that could cause actual results or events to differ materially from current expectations include, among other things: the failure of the Companies to reach agreement and to execute the Pre-Merger Agreement; the failure of the Companies to complete the Merger; Saber failing to repay the interim loan from Talon; volatility of and sensitivity to market prices for gas and prices (market or otherwise) for electricity; changes in the anticipated demand for electricity in southern Africa; changes in equity and debt markets; inflation; changes in exchange rates; uncertainties relating to the availability and costs of financing needed to complete exploration activities, demonstrate the feasibility of the gas reserve and to develop the Power Project; the ability of Saber and/or MergeCo to conclude power purchase agreements with the intended offtakers of the Power Project; exploration costs varying significantly from estimates; delays in the exploration and development of, and/or commercial production from, the Power Project and the properties in which Saber has an interest; inability to commercially exploit the resources of the Power Project or the areas covered by Saber's prospecting licences, including the production of downstream products such as petrochemicals; inability to secure and produce sufficient water to support gas production; actual gas usage varying from assumptions; inability to, or delays in, procuring the engineering, procurement and construction contract, labour, capital equipment and/or operating parts and supplies required for the Power Project; equipment failure; unexpected geological or hydrological conditions; political risks arising from operating in Africa; imprecision in preliminary resource estimates, including estimates of the life and recovery thereof; success of future exploration and development initiatives; inability to establish the minimum amount and quality of reserves required to support the proposed Power Project; competition; operating performance of facilities; environmental and safety risks, including increased regulatory burdens, seismic activity, weather and other natural phenomena; inability to, or delays in, obtaining necessary permits and approvals from government authorities, including approval of environmental impact assessment applications; the existence of undetected or unregistered interests or claims, whether in contract or in tort, over the property of Saber and/or MergeCo, respectively; failure to acquire interests in prospecting licences that Saber currently has an interest in; changes in government regulations and policies, including tax and trade laws and policies; risks relating to labour; and other exploration, development and operating risks.
Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable laws, Talon disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although Talon believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. Information pertaining to Saber has been furnished by Saber. Although Talon does not have any knowledge that would indicate that any such information is untrue or incomplete, Talon assumes no responsibility for the accuracy or completeness of such information.
Contacts
on Talon please visit www.talonmetals.com or contact: Erica Belling
VP Investor Relations
Tau Capital Corp.
Tel: (416) 361-9636 x 243
Email: ebelling@taucapital.com |
