Azarga Metals Secures US$3.0-3.5M Investment from Client Funds of Baker Steel Capital Managers
AZARGA METALS CORP.
UNIT 1 – 15782 MARINE DRIVE, WHITE ROCK, B.C. V4B 1E6, CANADA
www.azargametals.com
FOR IMMEDIATE RELEASE
14 February 2019 TSX-V: AZR
AZARGA METALS SECURES US$3.0-3.5M INVESTMENT FROM CLIENT FUNDS OF
BAKER STEEL CAPITAL MANAGERS
HIGHLIGHTS:
• Internationally renowned specialist natural resource s investment management
firm, Baker Steel Capital Managers LLP (BSCM) has agreed to invest US$3.0-3.5M
of client funds into Azarga Metals via a convertible loan, convertible at
C$0.14/share
• US$3.0M of the overall investment to come from BSCM managed fund, Baker
Steel Resources Trust Ltd (BSRT)
• Azarga Metals to mainly use convertible loan proceeds to more than double
drilling at its Unkur Copper-Silver Project and complete a pre-feasibility study
• Investment into Azarga Metals follows BSRT’s highly successful monetization of
its investment in Prog noz Silver Project , Far East Russia , at a multipl e of its
investment cost
• Additional US$ 1.7-2.0M of warrants to be issued to BSCM client funds with a
strike price of C$0.17/share
AZARGA METALS CORP. ("Azarga Metals" or the “ Company”) (TSX-V:AZR) is pleased to
announce that it has executed a Binding Terms Sheet with Baker Steel Capital Managers LLP
(“BSCM”) acting on behalf of its discretionary client funds, principally Baker Steel Resources
Trust Ltd. (“BSRT”) (LSE:BSRT) setting out the proposed terms for an investment of a minimum
of US$3.0 million, up to US$3.5 million in three tranches via a convertible loan with an 8.0% per
annum interest rate and conversion price of C$0.14/share (“ Convertible Loan”). As part of the
transaction, Azarga Metals will issu e between US$1.7 million and US$2.0 million of common
stock warrants (depending on the final convertible loan size) with an exercise price of
C$0.17/share (“Warrants”), which if fully exercised would increase BSCM clients’ interest, to an
overall investment into the Company of up to US$5.5 million. Azarga Metals intends to use the
proceeds of the Convertible Loan to re-invigorate physical exploration at its Unkur Copper-Silver
Project, with a view to more than doubling the cumulative linear meters of drilling.
Chairman, Alex Molyneux commented, “I’m excited our strategic process has resulted in a
partnership with such a high-quality resources-experienced investor. Baker Steel Capital
Managers, the manager of BSRT . BSCM has been around for 18 -years, with a great
reputation for picking early stage winners in the minerals space.”
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The transaction remains subject to certain conditions as set out later in this annou ncement.
Based on timelines for con firmatory due diligence works and third -party regulatory approv als,
Azarga Metals currently anticipates the transaction to complete within two months.
KEY TERMS OF THE TRANSACTION
Key material terms of the transaction are:
• Investor – clients of BSCM , principally BSRT or a wholly -owned subsidiary (directly or
indirectly).
• Convertible Loan – Principal amount of between US$3.0M and US$3.5M, carrying 8.0%
per annum interest (payable in cash or Azarga Metals shares at the Compa ny’s
election). Repayable 31 December 2022. Convertible at the Investor’s election at C$0.14
per share. The Convertible Loan will be secured via a negative pledge against the
Company’s shareholding in its wholly-owned subsidiary Azarga Metals Limited (BVI), the
ultimate owner of the Unkur Copper-Silver Project. Investor will be provided typical anti -
dilution rights, including a mechanism to adjust the conversion price of the Convertible
Loan for: payouts of share dividends ; share splits; share reclassifications; shar e
issuances; capital returns; or any combination of such events.
• Tranched drawdown – The Convertible Loan will be available in tranches: US$1.0M on
completion; and US$2.0M between four and six months following the f irst tranche . A
third tr anche of up to US$0.5M will be drawable between four and tw elve months
following the second tranche if the overall final investment size exceeds US$3.0M.
• Warrants – US$1.7-2.0M of common stock warrants to be issued to Investor on draw of
the first Convertible Loan tranche. War rants to have a strike price of C$0.17 per share.
The actual amount of the final warrant issue will be determined by the final amount of the
Convertible Loan size.
• Board representation – Investor to appoint one director to the board of the Com pany on
completion, with a right to two director appointments at any time Investor owns more
than 20% of the Company’s common stock.
• Drop Dead Date – The parties intend to satisfy the conditions to completion by 31 March
2019 or such other date mutually agreed.
• Break fee – In the event Azarga Metals agrees a change of control transaction with a
third party for either the Company or Unkur Copper-Silver Project prior to the Drop Dead
Date, then Azarga Metals will pay a break fee to Investor of US$250,000, or if Azarga
Metals fails to achieve any of the conditions of the transaction , other than Investor not
being satisfied with confirmatory due diligence on or before the Drop Dead Date, Azarga
Metals will pay a break fee of US$100,000.
CONDITIONS OF THE TRANSACTION
Conditions that need to be satisfied for any part of the proposed transaction to proceed include:
• Confirmatory due diligence – Investor completing, to its satisfaction, legal and
confirmatory due diligence.
• Any TSX Venture Exchange or regulatory approvals.
• Investor entering into an agreement, to its sa tisfaction, to acquire an option f rom the
Unkur net smelter royalty (“ Unkur NSR”) holders to acquire a 40% interest in the Unkur
NSR for US$5.0M.
• Preparation and execution of definitive documentation.
• Approval of Azarga Metals’ board of directors.
• Shareholder approval (if required).
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The Company may be a finder’s fee in connection with this transaction with in the guidelines of
the TSX Venture Exchange.
STATUS OF UNKUR COPPER-SILVER PROJECT
Azarga Metals acquired the Unkur Copper -Silver Project in the Zabaikalsky administrative
region of eastern Russia (relatively near the China -Russia border) in mid -2016 and then
embarked on a successful initial exploration program. In 2016 -2017, the Company completed
16 diamond core drill-holes at Unkur for 4,580 cumulative linear meters. An outstanding maiden
NI43-101 Resource was published in Apr il 2017 and then in March 2018 the Resource w as
enlarged and a preliminary economic assessment (“PEA”) was undertaken.
The Unkur PEA was filed at the end of August 2018 (see: “Technical Report and Preliminary
Economic Assessment for the Unkur Copper-Silver Project, Kodar-Udokan, Russian Federation”
dated effective 30 August 2018 for its Unkur Copper-Silver Project in Russia filed on SEDAR or
the Company’s website). The PEA is based on the current Inferred Mineral Resou rce estimate
of 62 million tonnes at 0.53% copper and 38.6g/t silver, containing 3 28,600 tonnes (724 million
pounds) of copper and 76.8 million troy ounces of silver, as announced by the Company on 27
March 2018. The PEA was positive, envisaging an 8 -year mine life producing 13.2kt of copper
and 3.7M oz of silver per year and resulting in an estimated pre -tax net prese nt value of
US$206.3M (post -tax US$147.5M) and internal rate of return of 28.9% (see: Company’s
announcements of 30 and 31 August 2018).
Mineralization at the Unkur Copper-Silver Project remains open in both directions along strike
and at depth. The Company believes there is potential to at least double the size of the existing
Resource with a second phase drilling program. Azarga Metals plans to finalize the next
exploration program in conjunctio n with working to complete the BSCM-led Convertible Loan
transaction such that physical exploration can re -commence at Unkur in the summer of 2019. If
the Company’s Resource development objectives are met or exceeded, the subsequent phase
would be to complete a pre-feasibility study for Unkur.
Qualified Person
The results of the 2018 Mineral Re sources and Unkur PEA prepared by Tetra Tech have been
reviewed by the Company’s technical staff, includi ng Dorian (Dusty) Nicol B.Sc. Geo, MA Geo
the Company’s President and Chief Executive Officer and, a Qualified Person as defined by NI
43-101. Mr. Nicol is also the person responsible for preparation of the technical information
contained in this news release.
About Azarga Metals Corp.
Azarga Metals is a mineral exploration and development company that owns 100% of the Unkur
Copper-Silver Project in the Zabaikalsky administrative region in eastern Russia.
AZARGA METALS CORP.
"Dusty Nicol"
Dorian L. (Dusty) Nicol, President and CEO
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For further information please contact: Doris Meyer, at +1 604 536-2711 ext 6, visit
www.azargametals.com, or follow us on Twitter @AzargaMetals.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined
in the policies of the TSX Venture Exchange) accepts responsibility for the adequac y or
accuracy of this release.
Cautionary Statement:
This news release contains forward -looking statements that are based on the Corporation's current
expectations and estimates. Forward -looking statements are frequently c haracterized by words such as
"plan", "expect", "project", "intend", "belie ve", "anticipate", "estimate", "suggest", "indicate" and other
similar words or statements that certain events or conditions "may" or "will" occur. Such forward -looking
statements i nvolve known and unknown risks, uncertainties and other factors that could cause actual
events or results to differ materially from estimated or anticipated events or results implied or expressed
in such forward -looking statements. Such factors include, am ong others: the actual results of current
planned exploration activities; c onclusions of economic evaluations; changes in project parameters as
plans to continue to be refined; possible variations in ore grade or recovery rates; accidents, labor
disputes and other risks of the mining in dustry; delays in obtaining governmental app rovals or financing;
and fluctuations in metal prices. There may be other factors that cause actions, events or results not to be
as anticipated, estimated or intended. Any forward -looking statement speaks only a s of the date on which
it is made and, excep t as may be required by applicable securities laws, the Corporatio n disclaims any
intent or obligation to update any forward -looking statement, whether as a result of new informatio n,
future events or results or otherwise. Forward -looking statements are no t guarantees of future
performance and accordingly undue reliance should not be put on such statements due to the inherent
uncertainty therein.