Fengro Provides Update ON Proposed Business Combination with Elemental Royalties
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NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES
FENGRO PROVIDES UPDATE ON PROPOSED BUSINESS
COMBINATION WITH ELEMENTAL ROYALTIES
May 21, 2020 - VANCOUVER, BRITISH COLUMBIA: Fengro Industries Corp. (TSX -V: FGR.H)
(“Fengro” or “the Company”), further to its new releases of November 5, 2019 and April 30, 2020, the
Company is pleased to provide an update to its proposed t ransaction with Elemental Royalties Limited
(“Elemental”) to be completed pursuant to a business combination agreement dated April 27, 2020 (the
“Agreement”) resulting in the reverse takeover of Fengro by Elemental (the “Transaction”). Following the
completion of the Transaction, Fengro (the “Resulting Issuer”) will carry on the business of Elemental,
being the acquisition of royalties over mining projects, under the name “Elemental Royalties”.
Business of Elemental
Elemental’s core business is the acquisition of royalties over mining projects. Elemental was formed in 2016
as a British Virgin Islands company and, since Elemental’s first acquisition in 2017, it has built a diversified
portfolio of royalties providing exposure primarily to gold and silver producing assets .
Elemental’s objective is to become a leading, precious metals royalty company and to maximize returns for
its shareholders by growing its portfolio of royalty and other similar rights, both through organic growth and
through acquisitions of royalties and other rights that its management expects to be accretive.
Elemental currently has six royalty interests, five on producing mines, and one development asset at the
pre-feasibility study stage.
Elemental’s principal royalty interests include:
• 1% NSR over Teranga Gold Corporation’s Wahgnion gold project in Burkina Faso;
• 2.25% NSR over Austral Gold Limited’s Amancaya gold project in Chile; and
• 1% NSR over Premier Gold Mines Limited’s Mercedes gold-silver mine in Mexico.
Elemental also holds royalty interests in:
• 0.25% GRR over Base Resources Ltd.’s Kwale mineral sands project in Kenya;
• AUS$10/oz or 5% NPI over Zijin Mining Group’s Mt Pleasant Gold mine in Western Australia; and
• 0.5% NSR over Panoramic Resources Ltd.’s Panton Sill project (development stage) in Wester n
Australia.
Selected Financial Information
The following table contains selected consolidated unaudited financial information in respect of Elemental
for the years ended December 31, 2019, 2018 and 2017:
Year Ended
December 31, 2019
(unaudited)
Year Ended
December 31, 2018
(unaudited)
Year Ended
December 31, 2017
(unaudited)
Assets US$6,666,315 US$6,057,916 US$1,952,340
Liabilities US$293,424 US$1,965,168 US$41,172
Revenue US$2,415,359 US$1,449,108 US$508,081
Net Income (loss) US$(81,810) US$(247,969) US$45,953
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Business Combination Agreement
Under the terms of the Agreement, the Transaction will be completed by way of a share exchange (the
“Share Exchange” ) between Fengro and each of the shareholders of Elemental ( “Elemental
Shareholders”) whereby each outstanding ordinary share of Elemental will be exchanged for 4.8114
common shares (the “Exchange Ratio”) in the capital of Fengro (each, a “Fengro Share”) as constituted
following the completion of the consolidation of the outstanding Fengro Shares on the basis of one (1) post-
consolidation Fengro Share (each, a “Consolidated Fengro Share ”) for each 209 Fengro Shares held.
Following such exchange, former Elemental S hareholders will hold approximately 96% of the issued and
outstanding Consolidated Fengro Shares . All o utstanding convertible securities of Elemental , which
consists solely of a total of 497,798 performance rights, will be exchanged for equivalent rights to receive
Consolidated Fengro Shares as adjusted for the Exchange Ratio. Pursuant to the terms of the Agreement,
on May 1, 2020, Elemental c ompleted a private placement of 257,904 ordinary shares for gross proceeds
of US$902,664 (the “Interim Private Placement”). Immediately prior to the completion of the Transaction
it is anticipated that Elemental will have approximately 4,710,638 ordinary shares issued and outstanding
resulting in approximately 22,664,845 Consolidated Fengro Shares being issued pursuant to the Share
Exchange. Aggregate consideration for the acquisition of the ordinary shares of Elemental is approximately
C$23,684,763.
Prior to the completion of the Transaction, it is anticipated that Elemental, through a newly incorporated
and wholly-owned British Columbia subsidiary ( “ERL Finco”), will complete a brokered private placement
of subscription receipts (described below). Following the satisfaction of the escrow release conditions and
the conversion of the ERL Finco subscription receipts into common shares of ERL Finco ( “ERL Finco
Shares”), ERL Finco will amalgamate (the “Amalgamation”) with a newly incorporated and wholly-owned
British Columbia subsidiary of Fengro (“Acquireco”), with each one (1) ERL Finco Share being exchanged
for one (1) Consolidated Fengro Share. A portion of the subscription receipt f inancing may be completed
through the sale of subscription receipts of Fengro on substantially the same terms and at the same
conversion ratio as the subscription receipts of ERL Finco (described below).
The Agreement includes non- solicitation covenants (subject to the fiduciary obligations of the board of
directors of each party) and contains a number of conditions, including but not limited to, closing conditions
customary to transactions of the nature of the Transaction , approvals of all regulatory bodies having
jurisdiction in connection with the t ransactions contemplated by the Agreement and approval of the TSX
Venture Exchange ( “TSXV”), including the satisfaction of its initial listing requirements , the completion of
the Consolidation and change of name of Fengro, the completion of the Offering (as defined and described
below), the reconstitution of the Fengro board with nominees of Elemental, and the distribution of
Consolidated Fengro Shares pursuant to the Share Exchange in connection with the Amalgamation shall
be exempt from prospectus and registration requirements and shall not be subject to resale restrictions
under applicable Canadian securities laws.
A copy of the Agreement has been posted under the Company’s profile at www.sedar.com.
Board of Directors and Management
Subject to applicable TSXV approval, on completion of the Transaction the executive management team
and the board of directors of the Resulting Issuer will be comprised of the following individuals:
Frederick Bell – Chief Executive Officer and Director
Frederick co-founded Elemental in 2016 following his role as Managing Director of a listed gold exploration
company, Goldcrest Resources plc, where he assembled a portfolio of gold licences in northeast Ghana to
take to the AIM. He has wide experience in the mining industry, including as General Manager of Resource
Star Limited, ASX-listed uranium company. Frederick received the ‘Young Rising Star’ Award at Mines &
Money 2018, obtained an Honours Master of History at the University of Edinburgh and is on the Committee
of Young Mining Professionals in London.
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Peter Williams – Director
Peter is a co-founder of Elemental and was the first Manager of WMC Geoscience Technology before he
became a founding member of Independence Group Limited. He was a founding director of Ampella Mining
Ltd, a vendor of Gryphon Minerals ’ Banfora Gold Project and involved in the project generation for
Papillion’s Mali projects. Peter co-founded the International Resource Sector Intelligence company, Intierra
RMG Ptd Limited, and also co- founded the first hard rock mineral seismic company in the world, HiSeis
Pty. He is a current board member of Boss Resources and Superior Lake Resources, and is the Managing
Director of Alderan Resources. Peter is a member of the Australian Institute of Company Directors and the
Australian Institute of Mining and Metallurgy. He holds a Bachelor of Science in Geology from UNISA and
a Master of Science in Geophysical Engineering from the Colorado School of Mines.
Martin Turenne – Director
Martin is senior executive with over 15 years’ experience in the commodities industry, including 10 years in
the mining industry, Martin is currently CEO of FPX Nickel Corp. He was formerly CFO of First Point
Minerals Corp. from 2012 to 2015 and previously with KPMG LLP and Methanex Corporation. He is a
member of the Chartered Professional Accountants of Canada and serves on the board of directors of the
Association for Mineral Exploration of British Columbia.
John Robins – Director
John is a professional geologist, prospector and entrepreneur with over 35 years of experience in the mining
industry. In 2008 he was awarded the Spud Huestis award for his contributions to mineral exploration in
British Columbia and Yukon. He has been involved in several notable discoveries including the 5 million oz
Coffee Gold deposit in Yukon, Three Bluffs gold deposit in the Committee Bay greenstone belt and the
Aviat/Churchill diamond districts of Nunavut. He has been involved in over a billion dollars in M&A activity
and has generated over 500 million in direct and in direct mineral expenditures throughout Canada, Latin
America and Australia. He has served as Executive Chair of Bluestone Resources since August 2017, and
was previously its President and Chief Executive Officer beginning in December 2013.
Matt Anderson – Chief Financial Officer
Matt is a Chartered Professional Accountant who has served as CFO of public companies in the mining
industry for over 10 years. He earned a Bachelor of Commerce degree from McGill University and earned
his CPA while articling at a large accounting firm. He is currently a managing director at Malaspina
Consultants Inc., a company providing consulting, accounting and administrative services to junior resource
companies.
Greg Owen – Vice President, Operations
Greg has over 10 years’ experience of both public and private companies in the mining and mine finance
industries, most recently as VP Corporate Development with Altus Strategies Plc from 2011 until Q1 2018.
He was part of the management team responsible for the AIM IPO in August 2017 and the acquisition of
TSXV listed Legend Gold Corp in January 2018. Prior to that Greg was Business Development Manager
for Metals Exploration Plc, an AIM-listed company developing the Runruno gold-molybdenum project in the
Philippines. Greg studied Environmental Science at the University of Plymouth, is a member of the
Association of Mining Analysts, and acted as Honorary Secretary of the Oxford Mining Club from 2012 –
2018.
Richard Evans – Senior Vice President, Technical
Richard is a co-founder of Elemental and has over 30 years of technical and commercial resource industry
experience on five continents with a metals focus. He spent 18 years with Western Mining covering
exploration, feasibility, underground mining, business development and audit. He previously served as
Industry advisor for Southern Innovation Pty Ltd. Richard was formerly CEO of an ASX -listed uranium
explorer that relisted in 2010 and was a founding shareholder and consultant to Mantra Resources,
acquired by ARMZ for AUS$1bn. He has been a member of the Australasian Institute of Mining and
Metallurgy since 2001. Richard holds an Honours Bachelor of Science in Geology from the University of
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Melbourne and a Graduate Diploma in Business from Curtin University of Technology in Perth, WA.
In addition to the above, joining the Resulting Issuer’s management team will be David Baker, Vice
President, Business Development . David brings over nine years of experience in the mining and mine
finance industries. David started his career in Equity Research at BMO Capital Markets before joining
Kulczyk Investments, a Polish family investment company. Whilst at KI, David was part of the establishment
of QKR Corporation, a private mining investment company, and was seconded to the business development
team which acquired the Navachab gold mine from Anglogold Ashanti. Prior to joining Elemental, David
was Vice President at Tamesis Partners LLP, specialising in corporate advisory, research, and equity
capital markets.
Brokered Offering
In connection with the Transaction, Elemental intends to complete a best efforts brokered private placement
offering of subscription receipts (the “Offering”) of ERL Finco for gross proceeds of approximately C$15M
at a price of $1.30 per subscription receipt. The final size and price of the Offering will be determined in the
context of the market. Each subscription receipt of ERL Finco will, upon satisfaction or waiver of the
applicable escrow release conditions, automatically convert, without any action or fur ther consideration of
the subscription receipt holder, into one (1) ERL Finco Share and, immediately thereafter, ERL Finco and
Acquireco will complete the Amalgamation and each one (1) ERL Finco Share will be exchanged for one
(1) Consolidated Fengro Share (the Resulting Issuer).
Elemental has engaged Canaccord Genuity Corp. to act as lead agent and sole bookrunner, on behalf of a
syndicate of agents, in respect of the Offering. As compensation for their services, the agents will receive
a cash commission equal to 6% of the gross proceeds from the Offering, which amount shall be reduced in
respect of certain president’s list purch asers. The subscription r eceipts will be offered on a private
placement basis in each of the provinces of Canada, in the United States pursuant to available exemptions
from registration requirements of the United States Securit ies Act of 1933 , and in jurisdictions outside of
Canada and the United States in each case subject to exemption from applicable prospectus and or
registration requirements. It is anticipated that the net proceeds from the Offering will be used for future
royalty acquisitions, repayment of outstanding debts, and general corporate and working capital purposes.
Additional Information
Sponsorship of the Transaction may be required by the TSXV unless an exemption or waiver from this
requirement can be obtained in accordance with the policies of the TSXV. Fengro intends to apply for a
waiver of the sponsorship requirement. There is no assurance that a waiver from this requirement can or
will be obtained.
The Transaction is not a “Non-Arm’s Length Transaction” as defined under TSXV policies. Fenrgo does not
anticipate that shareholder approval will be required for the Transaction under the policies of the TSXV as,
(i) the Transaction is not a Related Party Transaction (as defined in the policies of the TSXV), (ii) Fengro is
without active business operations as it completed the sale of its remaining assets being its historical
Brazilian fertilizer business on January 24, 2020, (iii) the Fengro shares are not subject to a cease trade
order or otherwise suspended from trading, and (iv) shareholder approval of the Transaction is not required
under the Company’s governing corporate statute.
The following Non-Arm’s Length Parties (as defined in the policies of the TSXV) of Fengro, each of whom
are controlling shareholders of Fengro, hold direct benef icial interests in Elemental : (1) Tembo Capital
Mining GP Limited is a lender to Elemental in respect of a US$2,000,000, loan accruing interest at 12% per
annum, entered into January 9, 2020 and maturing August 6, 2020 (the “Loan”). The Loan is convertible
into shares of the Resulting Issuer if the Tr asnaction closes not less than 6 business days prior to August
6, 2020 and the required notice is provided; and (2) each of James Paterson and John Robins are also
shareholders of Elemental having subscribed under the Interim Private Placement (which closed after the
execution and announcement of the Agreement ), each holding less than 2.9% of the outstanding ordinary
shares of Elemental. Neither of the foregoing persons are Insiders (as defined in the policies of the TSXV)
of Elemental.
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Upon completion of the Transaction and the Offering, it is currently anticipated that no shareholder of the
Resuling Issuer will hold 10% or more of the outstanding Resulting Issuer common shares.
The Company will be submitting a filing statement providi ng disclosure with respect to each of Fengro,
Elemental and the Resulting Issuer in the form of Exchange Form 3D2, which will also be filed under the
Company’s profile at www.sedar.com.
Trading in Fengro’s Shares is presently halted, and will remain halted until completion of the Transaction.
Further updates and additional particulars of the Transaction will be provided as the Transaction
progresses.
All information contained in this press release with respect to Elemental and Fengro was supplied by the
parties respectively, for inclusion herein, and each party and its directors and officers have relied on the
other party for any information concerning the other party.
About Elemental
Elemental is a precious metals royalty company based in the British Virigin Islands with a portfolio of
producing and exploration assets spanning Burkina Faso, Chile, Mexico, Kenya and Western Australia.
On behalf of Fengro Industries Corp.
Duane Lo, Director
For more information contact:
Email: [email protected]
+1 (778) 994 6577
Disclaimer
Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and
if applicable, disinterested shareholder approval. Where applicable, the Transaction cannot close until the required
shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at
all.
Investors are cautioned that, except as disclosed in filing statement to be prepared in connection with the Transaction,
any information released or received with respect to the Transaction may not be accurate or complete and should not
be relied upon. Trading in the securities of Fengro should be considered highly speculative.
The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the
contents of this news release.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.
Any securities referred to herein have not been, nor will they be, registered under the United States Securities Act of
1933, as amended, and may not be offered or sold in the United States or to a U.S. Person absent registration or an
applicable exemption from the registration requirements of the United States Securities Act of 1933, as amended, and
applicable state securities laws.
Forward-Looking Statements
Certain information contained in this press release constitutes “forward-looking information”, within the meaning of
applicable Canadian securities legislation. Generally, these forward-looking statements can be identified by the use of
forward-looking ter minology such as “aims”, “plans”, “expects” or “does not expect ”, “is expected”, “budget”,
“scheduled”, “target”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations
of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will
be taken”, “occur”, “be achieved” or “has the potential to”. Forward looking statements contained in this press release
may include statements regarding the future operating or financial performance of Fengro, the anticipated completion
of the Transaction including the Share Exchange and the Amalga mation, the completion the Offering, Consolidation,
and the name change of Fengro. Actual results and outcomes may differ materially from what is expressed or forecasted
in these forward-looking statements. Such statements are qualified in their entirety by the inherent risks and
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uncertainties surrounding future expectations. Among those factors which could cause actual results to differ materially
are the following: market conditions, failure to obtain TSXV approval of the transactions contemplated by the
Agreement, and other risk factors listed from time to time in our reports filed with Canadian securities regulators on
SEDAR at www.sedar.com. The forward-looking statements included in this press release are made as of the date of
this press release and Fengro disclaims any intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as expressly required by applicable securities
legislation.
Neither the TSX Venture Exchange Inc. nor its Regulation Service Provider (as that term is defined in the
policies of the TSX Venture Exchange Inc.) accepts responsibility for the adequacy or accuracy of this press
release.