Defiance Silver and Valoro Resources Announce Merger to Create a Leading Diversified Mexican Explorer
DEFIANCE SILVER AND VALORO RESOURCES
ANNOUNCE MERGER TO CREATE A
LEADING DIVERSIFIED MEXICAN EXPLORER
FOR RELEASE: September 17, 2018 TSXV: DEF & VRO
OTC: DNCVF & GIXEF
Defiance Silver Corp . (“Defiance”) (TSX -V: DEF) and ValOro Resources Inc. (“ValOro”)
(TSX-V: VRO) are pleased to announce that they entered in to a Letter of Intent on September 5,
2018 (“LOI”) to complete a friendly merger that will create a significant Mexico focused
explorer with an advanced portfolio of silver and gold projects (the “Transaction”) . The
combined company will continue under the name of Defiance Silver Corp. and will be led by a
highly experienced management team from both companies , including Mr. Peter J. Hawley
(Americas Silver Corp), Mr. Randy Smallwood (Wheaton Precious Metals Corp.), Mr. George
Brack (Capstone Mining Corp.), Mr. Darrell Rader (Minaurum Gold Inc.), Mr. Paul Smith
(Ocean Partners Holdings Ltd.), Mr. Dunham Craig (ValOro Resources Inc.) and Mr. Ron
Sowerby.
Highlights of the Transaction
Robust resource base with significant exploration potential: High grade San Acacio
Silver project containing an initial deposit with an inferred mineral resource estimate of
16.9 M oz in 2.9 MT grading 18 1.94 grams per tonne silver 1 and the Tepal Gold Copper
Project having a 2017 Preliminary Economic Assessment (“PEA”) estimating a pre-tax
NPV5% of $299 million and a 36% IRR with a 1.6 -year payback period 2 and a post -tax
NPV5% of $169 million and a 24% IRR with a 2.4 -year payback period. The PEA is
based on a n estimated Measured and Indicated Resource containing 4 M oz. gold
equivalent3. For further details please re fer to the footnotes at the end of this news
release.
Proven management team : Extensive experience in all critical mining and exploration
disciplines with demonstrated capabilities in financing, acquiring, developing and
operating mines and a proven track record of exploration successes.
Enhanced market presence : The larger merged company is expected to appeal to a
broader institutional shareholder base and improve share trading liquidity.
Compelling value proposition: Significant leverage among junior Mexico explorer’s
equities and attractive relative valuation based on net asset value.
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Peter J. Hawley, President and CEO of Defiance, s tated “We are extremely pleased with this
transformational transaction that represents excellent value for our shareholders. Post-merger,
Defiance will boast both the significant exploration potential and initial deposit at the high-grade
and wide -vein San Acacio silver project as well as the foundational 4 M oz. gold-equivalent
resource3 Tepal gold-copper project. With a best-in-class Board of Directors, we look forward to
aggressively exploring San Acacio as well as seeking other accretive acquisition opportunities.”
Dunham Craig, President and CEO of ValOro, said “ Combining ValOro with Defiance presents
an op portunity to build a premier exploration company focused on Mexico, driven by an
experienced management team and the opportunity to significantly enhance the long term growth
potential of the Tepal gold -copper project. With a 2017 Preliminary Economic Asse ssment that
produced positive economic results coupled with our 2017 and 2018 exploration work in
preparation for a drill program to potentially expand the resource and test new targets, this
transaction provides further value accretion by coupling our ass et with the exploration potential
at the San Acacio Silver deposit, further providing value accretion for ValOro and our
shareholders.”
Terms
Under the terms of the Transaction, which will be effected by a plan of arrangement,
shareholders of ValOro will receive 0.71 common shares of Defiance for each share of ValOro
held. This represents a 54.3% premium to the closing price of ValOro’s shares based on the
closing price of Defiance’s shares on the TSX Venture Exchange on the date the LOI was signed
and a 98.2% premium to the 60 day VWAP of ValOro’s shares based on the 60 day VWAP of
Defiance’s shares on the Exchange preceding the date the LOI was signed. Shareholders of
Defiance will not have to exchange their shares of Defiance in the Transaction. Upon completion
of the Transaction, the combined company will have approximately 119 million common shares
outstanding, of which former shareholders of Defiance will own approximately 87% and the
former shareholders of ValOro will own approximately 13%.
Management Team and Board of Directors
Upon completion of the Transaction, the combined management team will be led by Peter J
Hawley, who will assume the title of President and Chief Executive Officer. The new Board will
be comprised of Mr. Hawley togethe r with three directors from each D efiance and ValOro .
Biographies of all proposed directors are included later in this press release.
Lock Up Agreements
Each of the officers and directors of Defiance and ValOro have stated they will enter into an
agreement supporting the Transaction and will vote any common shares of the companies held
by them in favour of the Transaction. In addition , Defiance and ValOro will endeavour to have
additional lock-up agreements signed by significant shareholders who agree to vote in favour of
the Transaction.
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Details of the Transaction
The Transaction will be carried out by the way of court -approved plan of arrangement under the
Business Corporations Act (British Columbia) which requires the approval of at least two-thirds
of the votes cast by the shareholders of ValOro at a special meet ing of its shareholders. In
addition, the Transaction will be subject to the approval of the TSX Venture Stock Exchange and
the Supreme Court of British Columbia.
The Transaction will include customary provisions, including fiduciary -out provisions,
covenants not to solicit other acquisition proposals and the right to match any superior proposal .
In addition, ValOro may be required to pay a termination fee of $217,204 if the Transaction is
terminated as a result of ValOro accepting a superior proposal or c ompleting an alternative
proposal within 12 months of termination of the Transaction.
There are no common directors, officers or significant shareholders between Defiance and
ValOro and the Transaction is an Arm’s Length Transaction under the Exchange’s policy.
Loan Financings
In support of this transaction, Defiance ’s principal lender has agreed to increase its loan facility
from $700,000 to approximately $1.13 million, on similar terms.
Timing
The Transaction is subject to Defiance and ValOro executing a definitive agreement.
Once the definitive agreement is signed, ValOro will mail its shareholder information circular in
respect of its shareholder special meeting.
Defiance and ValOro want to complete the Transaction by December 31, 2018.
Proposed Board of Directories and Management Biographies
Peter J. Hawley, BSc, BEng, PGeo.
President & CEO
Mr. Hawley adds significant depth to the board with his 36 years of geological and mining
experience spanning grassroots exploration through to dev elopment and production. Having
worked extensively with a large number of intermediate and senior mining companies including
Teck, Noranda, Placer Dome and Barrick Gold, Mr. Hawley was also the founder, and Chairman
of Scorpio Mining Corporation from 1998 to December 2014 when Scorpio combined with U.S.
Gold and Silver Inc to form Americas Silver Corporation, of which he still remains a Director.
Mr. Hawley has a track record of raising significant funds for private and public companies
along with structuring mergers and acquisitions.
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Randy V. J. Smallwood, P. Eng.
Director
Mr. Smallwood holds a geological engineering degree from the University of British Columbia
and a mine engineering diploma from British Columbia Institute of Technology . He was
involved in the founding of Wheaton Precious Metals where, in 2010 , he was appointed
President and , in April 2011 , he was appointed Wheaton's Chief Executive Officer. Mr.
Smallwood originally started as an exploration geologist with Wheaton River Minerals Ltd., and
in 2001 was promoted to Director of Project Development, his role through its 2005 merger with
Goldcorp. Before joining the original Wheaton River group in 1993, Mr. Smallwood also worked
with Homestake Mining Company, Teck Corp. and Westmin Resources Limited. Mr. Smallwood
was an instrumental part of the team that built Wheaton River / Goldcorp into one of the largest,
and most profitable gold companies in the world . He is now focused on continuing to add to the
impressive growth profile of Wheat on Precious Metals. Mr. Smallwood has served on the board
of ValOro since 2005. In 2015, Mr. Smallwood received the British Columbia Institute of
Technology Distinguished Alumni Award.
George Brack, B.A.Sc, MBA, CFA.
Director
Mr. Brack’s 30-year career in the mining industry has focused on investment banking and
corporate development, specifically identifying, evaluating, and executing strategic mergers and
acquisitions, and the provision of equity financing. Most recently , he acted as the Managing
Director and Industry Head, Mining Group, of Scotia Capital. Prior to joining Scotia Capital in
2006, Mr. Brack spent seven years as President of Macquarie North America Ltd., an investment
banking firm specializing in merger and acquisition advice. Previous to t hat, he was Vice -
President, Corporate Development at Placer Dome Inc., Vice -President of the investment
banking group at CIBC Wood Gundy, and worked in Rio Algom's Corporate Development
department. Mr. Brack currently serves as Chairman of Capstone Mining Corp and a Director of
Alio Gold Inc. and Wheaton Precious Metals. Mr. Brack holds a B.A.Sc. in Geological
Engineering from the University of Toronto, an MBA from York University, and the CFA
designation.
Darrell Rader, BBA
Director
Mr. Rader is the founder of Defiance Silver. Having directly raised over $100 million for mineral
exploration and development, Mr. Rader has significant contacts with institutional investors. He
is currently the President and CEO of Mexican -focused Minauru m Gold Inc. and p reviously
oversaw Corporate Development for Energold Drilling Corp and IMPACT Silver Corp. Over his
eight year tenure, Energold grew from three drill rigs to over eighty in its fleet and IMPACT was
transformed from a grass roots silver exp lorer into a profitable silver miner . Mr. Rader holds a
BBA (Finance) from Simon Fraser University.
Dunham L. Craig, P. Geo.
Director
Mr. Craig graduated from the University of British Columbia with a Degree in Geology in 1988.
Upon graduation, he served as a project geologist for Cominco Exploration Ltd. and later
consulted for Cominco and Kennecott Canada Inc . Subsequently, as the vice president of
exploration and corporate development for Wheaton River Minerals in 1993, he was responsible
for the disco very of three mineral deposits at Wheaton River's highly profitable Golden Bear
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mine and for participating in the project through bankable feasibility and bank financing. He
later directed the acquisition of the Bellavista Gold Project in Costa Rica and ov ersaw its design
through bankable feasibility. From 2002 to 2005, he was a member of the management team of
Glencairn Gold Inc. that acquired and developed two operating mines in Central America. Mr.
Craig joined ValOro in 2005 as its President and was lat er appointed CEO and President by the
Board in 2006.
Paul Smith
Director
Mr. Smith, MA in Metallurgy and the Science of Materials graduated from Oxford University.
He spent most of his 36 year career in the non -ferrous mining and smelting industry working
with Rio Tinto Zinc, Pasminco, Mount Isa Mines and Pechiney World Trade i n the UK and
internationally. Most recently he was a founding shareholder and Finance Director of Ocean
Partners Holdings Limited, a global trader of copper, zinc and lead concentrates. He left Ocean
Partners in May 2012 to pursue investment opportunities and charitable activities.
Ron Sowerby
Director
Mr. Sowerby CA is a member of the Chartered Professional Accountants of British Columbia
and holds a Bachelor of Commerce degree from the University of British Columbia . Mr.
Sowerby was Comptroller and Chief Financial Officer of TCG International Inc. (formerly Trans
Canada Glass Ltd.) of Burnaby, B.C. from January 1970 until June, 2007. Mr. Sowerby was a
director of Glentel Inc. (since August, 1989) which subsequently was purchased by Bell Inc. for
$594 million in May 2015.
About Defiance Silver Corp.
Defiance Silver Corp. (DEF | TSX Venture Exchange; DNCVF | OTC; D4E | Frankfurt) is
a silver explorer and developer advancing the San Acacio Deposit, located in the historic
Zacatecas Silver District of central Mexico. Defiance is managed by a team of proven mine
developers with a track record of exploring and developing 7 operating mines to date. Defiance’s
corporate mandate is to expand San Acacio to become one of Mexico’s premier high grade wide
vein silver deposits. A Panoramic Video on the San Acacio Deposit is available on our website.
About ValOro Resources Inc.
ValOro Resources Inc. (VRO | TSX Venture Exchange) is a mineral exploration and
development company focused on acquiring, exploring, and developing mineral resource
opportunities with the potential to host profitable mining operations. The Company's primary
focus is the 100% owned Tepal Gold/Copper Project in Michoacán state, Mexico.
Qualified Persons
Mr. Peter J. Hawley, P.Geo. , Interim President & CEO, Chairman of the Board of Defiance
Silver Corp, is a Qualified Person within the meaning of National Instrumen t 43-101 Standards
of Disclosure for Mineral Projects of the Canadian Securities Administrators , and has approved
the disclosure of , and verified the data comprising, the technical information concerning
Defiance’s material mineral properties contained in this press release.
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Mr. Dunham L. Craig Interim CEO, President of ValOro is a Qualified Person within the
meaning of National Instrument 43-101, and has approved the disclosure of, and verified the data
comprising, the technical information concerning ValOro’s material mineral properties contained
in this press release.
On behalf of Defiance Silver Corp.
“Peter J. Hawley”
Interim President & CEO
Chairman of the Board, Director
On behalf of ValOro Resources Inc.
“Dunham L. Craig”
President, CEO & Director
For more information, please contact:
Sunny Pannu – Corporate Development
604-669 7315
or via email at [email protected]
For more information, please contact:
Dunham Craig, President & CEO
604- 694-1742
or via email at [email protected]
2300 - 1177 West Hastings Street
Vancouver, BC V6E 2K3
www.defiancesilver.com
Tel: 604-669-7315
Email: [email protected]
570 Granville Street, Suite 501
Vancouver, BC V6C 3P1
www.valoro.ca
Tel: 604- 694-1742
Email: [email protected]
Neither 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 adequacy or accuracy of this release.
1 Please see Defiance news release dated January 15, 2015 and the following table:
2 Please see ValOro news release dated January 19, 2017
Assumptions used to estimate the 2017 PEA economics:
98% of the mine plan material is Measured and Indicated, 2% of the mine plan material is Inferred.
The base case used metals prices of $1,250/oz. for gold, $2.50/lb for copper, $18.00/oz. for silver.
Recoveries are based on the following tables 1-2:
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Table 1: Flotation Concentrate & Tails Cyanidation Recovery Estimates
Tepal Recovery Flotation Tails
Cyanidation
Combined
Recovery
Copper % 88.2 88.2
Gold % 62.4 16.5 78.9
Silver % 27.4 15.5 40.2
Tizate Recovery
Copper % 85.9 85.9
Gold % 58.0 16.0 74.0
Silver % 59.6 18.5 78.1
Table 2: Oxide Leach Recovery Estimates
Tepal
Gold % 83.2
Silver % 63.3
Tizate
Gold % 75.2
Silver % 55.9
Operating Costs used are displayed in Table 3:
Table 3: Operating Cost Estimates
Parameter Unit Sulphide
Flotation
Sulphide
Cyanidation
Oxide
Cyanidation
Mining Cost - waste US$/t mined
1.80
Mining Cost – mineralized material US$/t mined
Processing Cost US$/t milled 5.79 1.06 8.70
G&A US$/t milled 0.90 - 0.90
Tailings Cost US$/t milled 0.05 - 0.05
3 Please see ValOro news release dated March 27, 2012 and the following tables:
Assumptions used to calculate 2012 Resource soft pit constraint:
Metallurgical Recoveries
North and South Zones Oxide: 78.4% Au, Cu 14.3% - Sulphide 60.7% Au, 87.4% Cu
Tizate Oxide: 68.8% Au, Cu 6.8% - Sulphide 66.2% Au, 85.3% Cu
Metals Used and Metal Prices ($USD)
Gold, Copper $1300 Au, $3.30 Cu
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Operational Constraints
Pit Slope Angle 45 degrees
Operating Cost (Oxide and Sulphide) Mining: $1.35/t, Processing: $4.30/t, G&A: $0.68/t