Jinhua Capital options Pluto property from Musk Metals
stockwatch.com!JHC-3198833/C/JHC
2022-01-25 11:12 ET - News Release
Jinhua Capital Corp., further to its news release dated Oct. 27, 2021, has entered into a property option agreement dated Jan. 19, 2022, with Musk Metals Corp., a reporting issuer incorporated under the Business Corporations Act (British Columbia) and listed on the Canadian Stock Exchange under the symbol MUSK, pursuant to which Musk has agreed to grant an option for Jinhua to earn up to a 100-per-cent interest in and to the 58 mineral claims that constitute the Pluto gold and base metals property, located in the Dolomieu and Daubree townships of Quebec, in accordance with the terms and conditions as described in the option agreement.
The option is subject to the approval of the exchange, and is intended to constitute the company's qualifying transaction (as defined in Policy 2.4). Upon closing, the company will be listed as a Tier 2 mineral exploration company.
Summary of the transaction
First option
The option may be exercised by the company acquiring an initial 80-per-cent interest in and to the Pluto property by:
- Paying $118,324 in cash, common shares of Jinhua, or combination thereof, at the sole election of company on the closing date of the transaction;
- Paying an additional $118,324 in cash, Jinhua shares, or combination thereof, at the sole election of the company on or before the date that is 18 months from the closing date.
Upon satisfaction of the payments set out above, the first stage of the option will be deemed to be exercised and Jinhua will earn an 80-per-cent interest in and to the Pluto property. Any Jinhua shares issued in connection with the option will be issued at the price of the private placement financing (as defined below), or as otherwise required by the exchange. All Jinhua shares issued will be subject to a restricted period of four months and one day.
Upon exercise of the first option, Jinhua and Musk will be deemed to have formed a joint venture on an 80-per-cent/20-per-cent basis, respectively, and will promptly execute a joint venture agreement based upon the material terms attached to the option agreement. Jinhua will initially have a participating interest in the joint venture and Musk will have a carried interest in the joint venture until the earlier of: (a) exercise of the second option as defined below; and (b) termination of the second option. In the event the second option is terminated for failing to satisfy the conditions thereof, Musk's interest in the Pluto property will automatically change to a participating interest.
Second option
The company may exercise the option to acquire the remaining 20-per-cent interest in and to the Pluto property by:
- Incurring at least $250,000 in qualified exploration and development expenditures on the Pluto property on or before the fourth anniversary of the execution of the definitive agreement;
- incurring at least an additional $500,000 ($750,000 in the aggregate) in expenditures on or before the fifth anniversary of the execution of the definitive agreement.
Upon satisfaction of incurring the expenditures set out above, the second option will be deemed to be exercised and the company will acquire an additional 20-per-cent (100 per cent in the aggregate) interest in and to the Pluto property. Upon the exercise of the second option, the joint venture will terminate. In the event that Jinhua fails to satisfy the conditions to exercise the second option, the second option will terminate, Musk's interest will automatically change from a carried interest to a participating interest, and the parties will proceed to advance the Pluto property in accordance with the joint venture terms.
Optionor expenditures
Pursuant to the terms of the option agreement, from Jan. 19, 2022, to Dec. 31, 2022, Musk has the sole and exclusive right to conduct expenditures on the Pluto property of up to $200,000. Upon complying with certain notice and accounting requirements as set out in the option agreement, Jinhua has agreed to reimburse the optionor expenditures to Musk in cash, Jinhua shares, or combination thereof, at the sole election of Jinhua.
Any Jinhua shares issuable will be subject to the approval of the exchange and issued at the discount market price as of the date that the expenditure certificate is received by Jinhua, or as otherwise required by the exchange. All such Jinhua shares issued will be subject to a restricted period of four months and one day.
Joint venture terms
Upon the formation of the joint venture, Jinhua will have an initial participating interest of 80 per cent and Musk will have an initial carried interest of 20 per cent until the earlier of the exercise of the second option and the termination of the second option. In the event the second option is exercised, the joint venture will terminate. In the event the second option is terminated, Musk's interest in the Pluto property will automatically change to a participating interest. The parties will bear their respective proportionate costs in connection with advancing the Pluto property. The Pluto property will be held in the names of the parties jointly as tenants in common in proportion to their interests. Legal title will be transferred and held in the name of the operator in trust for the benefit of the joint venture. A management committee will be created to supervise and co-ordinate the development of the Pluto property and to consider and approve operations plans and operating programs. Each party will have the right to appoint one representative to the management committee for each 20-per-cent interest in the joint venture held.
Jinhua, being the party with the larger initial interest, will be the initial operator under the joint venture. The operator is entitled to include in costs a charge for management supervision and corporate administration of the joint venture equal to: (a) 5 per cent of costs for exploration work until a feasibility report is commissioned; (b) 3 per cent of costs following feasibility to production; and (c) 5 per cent during the period in which a mine closure plan is effective. In the event a party has its interests reduced to below 10 per cent through dilution by not participating in development and costs, the party's interests will be reduced to a 1-per-cent royalty of the net smelter returns from the Pluto property as and when produced.
General terms and National Instrument 43-101 report
The parties anticipate they will close the qualifying transaction and grant the option on or before March 31, 2022. The grant of the option and closing of the qualifying transaction is subject to the satisfaction of standard closing conditions, including but not limited to: (i) exchange approval; and (ii) the company raising gross proceeds of not less than $400,000 in a private placement equity financing, or such other amount as required by the exchange.
Exchange approval will require the company to prepare and file a compliant technical report on the Pluto property which the company anticipates will be filed on SEDAR in connection with the approval process. For more information on the Pluto property, see the "Amended Technical Report on the Pluto Property, Dolomieu and Daubree Townships, Quebec, Canada" technical report dated July 3, 2018, which is available on Musk's SEDAR profile. Musk has advised the company that it has incurred $165,306 in qualified expenditures on the Pluto property in the past 36 months, which amount is being verified by the company and incorporated in the updated report. Exchange approval will also require Jinhua to file a comprehensive filing statement regarding the transaction on SEDAR.
The transaction will be negotiated and carried out by parties dealing at arm's length to one another and therefore will not be a non-arm's-length qualifying transaction. There is no finder's fee associated with the transaction.
Directors and officers
The company anticipates appointing an additional officer and an additional director. The company is proposing upon closing to appoint Timothy Henneberry. Mr. Henneberry, a Dalhousie University graduate, is a professional geoscientist registered in British Columbia with over 41 years of experience in domestic and international exploration and production for base and precious metals and industrial minerals. His appointment is subject to exchange approval. At this time, the company has not identified an additional officer but will announce such appointment as part of the transaction in accordance with the policies of the exchange.
Sponsorship
The company will seek an exemption from the sponsorship requirements of the exchange on the basis that: (i) the company is not a foreign issuer (as defined by the exchange); (ii) the transaction will involve a Canadian property with a current technical report to be prepared in accordance with the terms of National Instrument 43-101; and (iii) following the completion of the proposed transaction, the management of the company will comprise experienced and well-qualified individuals.
About Jinhua Capital Corp.
Jinhua Capital is a capital pool company as defined by the policies of the exchange. The company's principal business activity is to identify and evaluate opportunities for acquisition of assets or business. The company is headquartered in Vancouver, B.C. |
