Serengeti and Sun Metals Announce Merger to Consolidate Copper District IN North-Central BC and Concurrent $8 Million Financing
SERENGETI AND SUN METALS ANNOUNCE MERGER TO CONSOLIDATE COPPER
DISTRICT IN NORTH-CENTRAL BC AND CONCURRENT $8 MILLION FINANCING
NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Vancouver, BC – November 30, 2020 – Serengeti Resources Inc. (TSX-V: SIR) (“Serengeti”) and Sun Metals
Corp. (TSX-V: SUNM) (“Sun Metals”) are pleased to announce that they have entered into a definitive
arrangement agreement dated November 29, 2020 (the “Agreement”) pursuant to which Serengeti will
acquire all of the issued and outstanding shares of Sun Metals (the “ Transaction”) on the basis of 0.43
common shares of Serengeti (on a pre-Consolidation (as defined below) basis) for each share of Sun
Metals held, by way of a plan of arrangement under the Business Corporations Act (British Columbia) (the
“Arrangement”). T he Transaction will consolidate the contiguous copper-gold exploration and
development assets of Kwanika and Stardust, both of which will benefit from operational synergies as the
projects advance with a combined development strategy, along with a robust portfolio of British Columbia
copper-gold assets, well positioned to take advantage of a strengthening copper market. Upon completion
of the Transaction, it is expected that the shareholders of Sun Metals will hold approximately 40% of
Serengeti’s issued and outstanding shares (prior to the concurrent financing), and Mark O’Dea will assume
the role of Executive Chairman of Serengeti .
Transaction Highlights
• Consolidation of the contiguous Kwanika (67% Serengeti owned) and Stardust (100% Sun Metals
owned) copper-gold resource projects in north-central British Columbia, creating synergistic c o-
development opportunities.
• Additional regional consolidation of the advanced exploration Lorraine (100% Sun Metals owned)
and neighbouring Top Cat (Serengeti option to earn 100%) copper-gold projects.
• Further grassroots exploration opportunities, particularly the 3.5 km district -scale copper-gold
target on Serengeti’s 100% owned 20,750 ha East Niv property.
• Strong leadership team, with the combined company to be led by Mark O’Dea as Executive
Chairman and David Moore as Interim CEO, upon closing of the Transaction.
• Increased corporate and asset scale in a strengthening copper price environment to broaden
investor appeal.
• Well-capitalized with concurrent $8.0 million bough t deal of subscription receipts.
David W. Moore, President, CEO and Director of Serengeti, commented: “ Against the backdrop of a
resurgent copper market, this Transaction consolidates the ownership of a robust copper-gold portfolio,
with near-term development synergy at Kwanika-Stardust and several high priority exploration targets.”
Mark O’Dea, current Director of Sun Metals and proposed Executive Chairman of the combined company,
concluded: “This unique corporate combination creates an exciting, diversifi ed copper-gold developer
with a large pipeline of projects, in one of Canada’s most prolific porphyry mining camps. We are bringing
together exploration, development and operational synergies at multiple projects along with ongoing
resource expansion opportunities and new discovery potential. I am delighted to be part of this exciting
new opportunity both as an executive and meaningful shareholder. I believe the proposed board and
management team has the expertise and experience to deliver value into a rising copper market that is
hungry for new investment opportunities .”
Transaction Details
Pursuant to the terms of the Agreement, Serengeti will acquire all of the issued and outstanding common
shares of Sun Metals on the basis of 0.43 common shares of Serengeti (on a pre-Consolidation basis) for
each share of Sun Metals held (the “ Exchange Ratio”). Warrants and options of Sun Metals will be
adjusted or exchanged to become warrants and options, respectively, of Serengeti based on the Exchange
Ratio. It is anticipated that these securities will be adjusted or exchanged on a post-Consolidation basis.
The Transaction was negotiated at arm’s length.
Sun Metals shall be entitled to nominate three directors, including Mark O’Dea as Executive Chairman, to
join a newly constituted six-member board of directors of Serengeti, which shall include three nominees
of Serengeti. David Moore will remain as Interim CEO of Serengeti, until such time as a full time CE O is
appointed.
Immediately prior to the closing of the Transaction, it is anticipated that Serengeti will consolidate its
common shares on a two for one basis (the “Consolidation”), subject to the receipt of all necessa r y
approvals.
The Arrangement will be carried out by way of a court-approved plan of arrangement under the Business
Corporations Act (British Columbia) and is subject to a number of conditions being satisfied or waived by
one or both of Serengeti and Sun Metals at or prior to closing of the Arrangement, including approval of
Sun Metals securityholders, together with any requisite minority approvals, approval of Serengeti
shareholders, completion of the Consolidation, amendment of the Serengeti stock option plan, and
receipt of all necessary regulatory and court approvals and the satisfaction of certain other closing
conditions customary for a transaction of this nature, including completion of the Offering (as hereina fter
defined). The Transaction is also subject to a simple majority of the votes cast by Serengeti shareholders.
It is expected that the special meeting of Sun Metals securityholders and the special meeting of Serengeti
shareholders to approve the proposed Arrangement will be held in mid-February 2021 and, if approved
at those meetings and all other conditions have been met , it is expected that the Arrangement would
close shortly thereafter.
The Agreement includes customary provisions, including non-solicitation, right-to-match and fiduciary out
provisions, as well as certain representations, covenants and conditions that are customary for a
transaction of this nature. A termination fee of $750,000 may be payable by either party i n the case of
certain terminating events.
Further information regarding the Transaction will be contained in management information circulars to
be prepared by Sun Metals and Serengeti and mailed to securityholders of Sun Metals and shareholders
of Serengeti, in connection with special meetings of securityholders and shareholders to be held by each
company, respectively, to consider the Arrangement and related matters . All securityholders of Sun
Metals and shareholders of Serengeti are urged to read the information circular once available, as it will
contain important additional information concerning the Transaction.
Sun Metals is subject to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Specia l
Transactions (“MI 61-101”). MI 61-101 provides that, in certain circumstances, where a “related party”
(as defined in MI 61-101) of an issuer is entitled to receive a “collateral benefit” (as defined in MI 61-101)
in connection with an arrangement t ransaction such as the Arrangement, such transaction may be
considered a “business combination” for the purposes of MI 61-101 and subject to minority shareholder
approval requirements.
Sun Metals has determined that certain directors or executive officers of Sun Metals are receiving a
“collateral benefit” in connection with the Arrangement as each beneficially owns or exercises control or
direction over more than 1% of Sun Metals common shares (calculated in accordance with MI 61-101).
Consequently, the Sun Metals common shares beneficially owned, directly or indirectly, these certain
directors or executive officers will be excluded for the purposes of determining if minority approval of the
Arrangement is obtained.
This announcement is for informational purposes only and does not constitute an offer to purchase, a
solicitation of an offer to sell any shares or a solicitation of a proxy.
Concurrent Financing
Concurrent with announcement of the Transaction, Sun Metals has entered into an agreement with a
syndicate of underwriters co-led by PI Financial Corp. and Haywood Securities Inc. (collectively, the
“Underwriters”) in connection with a bought deal private placement financing (the “ Offering”) of a n
aggregate of 64,000,000 subscription receipts (the “ Subscription Receipts”) at a price of $ 0.125 pe r
Subscription Receipt (the “ Issue Price”) for gross proceeds of $8,000,000.
In addition, Sun Metals has granted the Underwriters an option to purchase up to an additional 9,600,000
Subscription Receipts at the Issue Price, for additional gross proceeds of up to $1,200,000, exercisa ble in
whole or in part at any time up to 48 hours prior to the closing date of the Offering .
The Subscription Receipts will be issued pursuant to a subscription receipt agreement (the “Subscription
Receipt Agreement”) to be entered into by Sun Metals, the Underwriters, and a licensed Canadian trust
company as subscription receipt agent to be agreed upon. Pursuant to the Subscription Receipt
Agreement, the gross proceeds of the Offering (less 50% of the Underwriters’ cash commission and all of
the Underwriters’ expenses) (the “Escrowed Funds”) will be held in escrow pending satisfaction of certain
conditions, including, amongst others, (a) the satisfaction or waiver of each of the conditions precedent
to the Transaction; and (b) the receipt of all required shareholder and regulatory approvals in connection
with the Transaction and the Offering, including the condition approval of the TSX Venture Exchange (the
“Escrow Release Conditions”). If the Escrow Release Conditions have not been satisfied on or prior to
March 31, 2020, the holders of Subscription Receipts will be returned a cash amount equal to the Issue
Price of the Subscription Receipts and any interest that has been earned o n the Escrowed Funds.
Upon the satisfaction of the Escrow Release Conditions, each Subscription Receipt will automatically
convert into one unit of Sun Metals (each a “Unit”) which shall be exchanged or adjusted into securities
of Serengeti at the Exchange Ratio upon completion of the Transaction, on a post -Consolidation basis.
Each Unit will consist of one common share of Sun Metals (each a “Common Share”) and one-half of one
common share purchase warrant (each a "Warrant"). Each Warrant will be exercisabl e to acquire one
common share of Sun Metals (each a “Warrant Share”) for a period of 24 months from the closing of the
Offering, at an exercise price of $0.18, as adjusted by the Exchange Ratio, subject to acceleration in the
event that the volume weighted average trading price of the common shares of Sun Metals on the TSX
Venture Exchange is equal to or greater than $0.30 (on an exchanged or adjusted basis pursuant to the
Arrangement) for 20 consecutive trading days.
Proceeds from the issue and sale of the Subscription Receipts will be used by Sun Metals and Serengeti to
advance their collective portfolio of copper-gold exploration and development assets in British Columbia,
and for general working capital purposes.
The Subscription Receipts to be issued under the Offering will be offered by way of a private placement
in all the provinces of Canada and in the United States on a private placement basis pursuant to
exemptions from the registration requirements of the United States Securities Act of 1933, as amended.
The Subscription Receipts and the Common Shares , Warrants and Warrant Shares underlying the
Subscription Receipts, will be subject to a statutory four-month hold period in accordance with Canadian
securities legislation, or until such securities are exchange or adjusted pursuant to the Arrangement .
Board Recommendations and Voting Support
The Arrangement has been unanimously approved by the board of directors of both Serengeti and Sun
Metals. Both boards of directors recommend that their respective shareholders and securityholders vote
in favour of the Transaction.
All of the directors and officers of Sun Metals, holding in aggregate 14.03% of the issued and outstanding
common shares of Sun Metals and 15.24% of the outstanding common shares, options and warrants of
Sun Metals, have entered into customary voting support agreements agreeing to vote in favour of the
Transaction. All of the directors and officers and several large shareholders of Serengeti, holding in
aggregate 27.45% of the issued and outstanding common shares of Serengeti, have similarly entered into
customary voting support agreements agreeing to vote in favour of the Transaction.
Haywood Securities Inc. has provided a fairness opinion to the board of directors of Serengeti that, as of
the date hereof, and based upon and subject to the assumptions, limitations and qualifications stated
therein, the consideration to be paid by the Serengeti to the s hareholders of Sun Metals under the
Arrangement is fair, from a financial point of view, to Serengeti.
PI Financial Corp. has provided a fairness opinion to the board of directors of Sun Metals that, as of the
date hereof, and based upon and subject to the assumption, limitations and qualifications stated therein,
the consideration to be received by the shareholders of Sun Metals under the Arrangement is fair, from a
financial point of view, to the shareholders of Sun Metals.
Advisors and Counsel
Haywood Securities Inc. is acting as financial advisor and Fasken Martineau DuMoulin LLP is acting as leg a l
counsel to Serengeti.
PI Financial Corp. is acting as financial advisor and Cassels Brock & Blackwell LLP is acting as legal counsel
to Sun Metals.
Qualified Persons
Technical aspects of this news release have been reviewed, verified and approved on behalf of Serengeti
by Quinn Harper, P.Geo., Chief Geologist of Serengeti, and on behalf of Sun Metals by Ian Neill , P.Geo.,
Vice President Exploration of Sun Metals, both of whom are qualified persons as defined by National
Instrument 43-101 – Standards of Disclosure for Minerals Projects.
About Serengeti
Serengeti is a mineral exploration company managed by an experienced team of professionals with a solid
track record of exploration success. The Company is currently advancing its majority -owned, advanced
Kwanika copper-gold project and exploring its extensive portfolio of properties in north- central British
Columbia. Additional information can be found on the Company’s website at
www.serengetiresources.com .
About Sun Metals
Sun Metals is advancing its 100% owned flagship, high- grade Stardust Project located in north-ce ntral
British Columbia, Canada. Stardust is a high- grade polymetallic Carbonate Replacement Deposit with a
rich history. Sun Metals also owns the Lorraine copper -gold project, and the OK copper -molybdenum
project.
On Behalf of the Board of Directors of Serengeti Resources Inc.
“David W. Moore”
President, CEO & Director
On Behalf of the Board of Directors of Sun Metals Corp.
“Steve Robertson”
President, CEO & Director
For further information, please contact:
Serengeti Resources Inc.
Tel: 604-605-1300
Email: [email protected]
Sun Metals Corp.
Tel: 604-683-7790
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.
Cautionary Statement Regarding Forward Looking Information
All statements, trend analysis and other information contained in this press release about anticipated future events or results constitute forw ard-
looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “believ e”,
“plan”, “estimate”, “expect” and “intend” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be a chieved
and other similar expressions. All statements, other than statements of historical fact, included herein, including, without limitation, s tatements
regarding anticipated benefits of the Transaction, the closing of the Transaction, the Offeri ng, the Kwanika and Stardust (the “Projects ”), including
anticipated operational synergies between the properties, are forward-looking statements. Although Serengeti and Sun Metals (the "Companies" )
believe that the expectations reflected in such forward- looking statements and/or information are reasonable, undue reliance should not be
placed on forward- looking statements since the Companies can give no assurance that such expectations will prove to be correct. T hese
statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially f rom
those anticipated in such forward-looking statements, including the risk s, uncertainties and other factors identified in the Companies' periodic
filings with Canadian securities regulators, and assumptions made with regard to: the Companies' ability to complete the proposed Transaction;
the Companies' ability to secure the necessary shareholder, securityholder, legal and regulatory approvals required to compl ete the Tra nsaction;
the ability to complete the Offering; the estimated costs associated with the advancement of the Projects; and the Companie s' a bi li ty to achieve
the synergies ex pect ed as a resu lt of the Tran sac tion . Forwar d-looking statements are subject to business and economic risks and uncertainties
and other factors that could cause actual results of operations to differ materially from those contained in the forward -l ooking s ta tements.
Important factors that could cause actual results to differ materially from the Companie s’ expectations include risks associated with the business
of Serengeti and Sun Metals; risks related to the satisfaction or waiver of certain conditions to the closing of the Transaction; non-completion of
the Transaction; risks related to reliance on technical information provided by Serengeti and Sun Metals; risks related to exploration and potential
developm en t of the Projects; business and economic conditions in the mining industry generally; fluctuations in commodity prices and currency
exchange rates; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; the need f or
cooperation of government agencies and native groups in the exploration and development of properties and the issuance of requi red permits;
the need to obtain additional financing to develop properties and uncertainty as to the availability and terms of future financing; the possibility
of delay in exploration or development programs and uncertainty of meeting anticipated program milestones; uncertainty as to timely availability
of permits and other governmental approvals; and other risk factors as detailed from time to time and additional risks identified in Ser en g et i and
Sun Metals’s filings with Canadian securities regulators on SEDAR in Canada (available at www.sedar.com). Forward-looki ng s tatements are based
on estimat es and opi ni ons of ma nage me nt at the date the stateme nts a re made . Ne ither Serengeti nor Sun Me tals undertakes any obligation to
update forward-looking statements except as required by applicable securities laws. Investors should not place undue reliance on forward-l ooking
statements.