Paragon
Minerals announces merger and private placement
with Canadian Zinc Corporation
Paragon Minerals
Corporation (TSX-V: PGR) (�Paragon�)
is pleased to announce that it has entered into a definitive agreement (the
�Arrangement Agreement�) with Canadian
Zinc Corporation (TSX: CZN) (�Canadian Zinc�) whereby Canadian Zinc will
acquire all of the outstanding common shares of Paragon in exchange for common
shares of Canadian Zinc by way of a statutory plan of arrangement (the
�Arrangement�). The Arrangement is subject to approval by the Paragon
shareholders, regulatory and court approvals, and other customary closing
conditions.
Pursuant to the
Arrangement Agreement:
- Paragon
shareholders will receive, in exchange for each Paragon share held, 0.136
shares of Canadian Zinc (the �Exchange Ratio�). The consideration
represents a total of CDN$0.061 per Paragon share, based on the volume
weighted average price of Canadian Zinc shares on the TSX for the 30
trading days ended July 20, 2012 and a premium of 52% to the volume
weighted average price of Paragon shares on the TSX-Venture for the same
period.
- In
addition, all outstanding options and warrants to purchase Paragon common
shares will be exchanged for replacement options and warrants to purchase
Canadian Zinc common shares and will be exercisable to purchase that
number of Canadian Zinc common shares at an exercise price each determined
by reference to the Exchange Ratio.
On signing of the
Arrangement Agreement, Canadian Zinc has also agreed to immediately purchase,
in a non-brokered private placement financing, 7,000,000 Paragon common shares
at a price of $0.07 per share for a total consideration of $490,000 (the
�Private Placement�). The closing of the Private Placement will be as soon as
practicable after acceptance by the TSX Venture Exchange and receipt of other
required regulatory approvals for the Private Placement.
John Kearney,
Canadian Zinc�s Chairman and CEO commented, �The merger is consistent with
Canadian Zinc�s strategy of building a growth focused base metal producer in
North America and represents an excellent value opportunity for shareholders of
both companies. We believe that the addition of Paragon�s advanced
exploration assets like the South Tally Pond VMS project in central
Newfoundland is a major step towards achieving our strategy of creating a
strong intermediate base metal company with an attractive growth profile
focused on enhancing shareholder value�.
Michael Vande Guchte,
President and CEO of Paragon, commented, �Canadian Zinc is a well-funded
Canadian exploration and development company that is in the process of putting
its high grade Prairie Creek silver-lead-zinc deposit into production.
Given the prevailing market conditions, it is the Board and management�s
view that Paragon shareholders will benefit from Canadian Zinc�s financial
strength and development expertise in unlocking shareholder value in Paragon�s
base metal assets. The transaction provides Paragon shareholders with the
opportunity to participate in the future potential of a near-term producer with
a portfolio of production, development and exploration assets�.
Canadian Zinc�s
100%-owned Prairie Creek Mine is a silver-lead-zinc development project located
in the Northwest Territories, 500 km west of Yellowknife. The Prairie
Creek deposit has the potential to be a significant zinc-lead-silver producer,
based on NI 43-101Mineral Resource estimates which include:
- Measured
& Indicated Resource:
5.43 million tonnes grading 10.8% zinc, 10.2% lead, 160 g/t silver, and
0.31% copper.
- Inferred
Resource: 6.24
million tonnes grading 14.5% zinc, 11.5% lead, 229 g/t silver and 0.57%
copper using a 8% zinc equivalent cut-off.
A portion of the
Mineral Resources was converted to a Mineral
Reserve Estimate of 5.2 million tonnes grading 9.4% zinc, 9.5% lead and 151 g/t
silver. A prefeasibility study completed by SNC Lavalin
for Canadian Zinc in June, 2012 indicates a pre-tax net present value (�NPV�)
of $253 million using an 8% discount, with an internal rate of return (�IRR�)
of 40.4% and payback period of 3 years based on long-term metal price
projections of $1.00/lb zinc, $1.00/lb lead, $26.00/oz silver (see Canadian
Zinc press release dated June 27, 2012). The Prairie Creek deposit
remains open for expansion. Please note that mineral resources that are
not mineral reserves do not have demonstrated economic viability.
Paragon�s key asset,
the 100%-owned South Tally Pond VMS project is located in a proven mining
district in central Newfoundland, immediately southwest of Teck Resources
Limited�s Duck Pond Cu-Zn mine and mill complex. In January 2012, Paragon
announced an initial NI43-101 Mineral Resource Estimate on the South Tally Pond
Lemarchant VMS deposit (see Paragon press release dated January 23, 2012
and related technical report entitled �NI 43-101 Technical Report and Mineral
Resource Estimate on the Lemarchant Deposit, South Tally Pond VMS Project,
Central Newfoundland, Canada� and dated effective March 2, 2012). The resource estimate
includes:
- Indicated
Resource: 1.24
million tonnes grading 5.38% zinc, 1.19% lead, 0.58% copper, 1.01 g/t gold
and 59.17 g/t silver using a 7.5% zinc equivalent grade
cut-off
- Inferred
Resource: 1.34
million tonnes at 3.70% zinc, 0.86% lead, 0.41% copper, 1.00 g/t gold and
50.41 g/t silver using a 7.5% zinc equivalent grade
cut-off
The Lemarchant
Deposit remains open along strike and to depth, and there are numerous, other
untested priority VMS targets on the property.
Transaction Benefits
- Implements
Canadian Zinc�s strategy of building a base metal producer with a combined
portfolio of operating mines and pipeline of high-potential growth
projects in mining friendly jurisdictions.
- Further
asset diversification in a proven mining area.
- Financial
strength to review potential for consolidating resources in central
Newfoundland.
- Establish
a pipeline of zinc deposits for the time when it is believed the zinc
price will see significant upside improvement.
Highlights for Paragon Shareholders
- Opportunity
to participate in the future potential of a growth-oriented base metal
company.
- Exposure
to an exceptional portfolio of near producing, development, and
exploration base metal assets.
- A
platform through which to participate in future sector consolidation.
- Increased
trading liquidity through ownership of Canadian Zinc shares.
Transaction Overview
The proposed
transaction will be carried out by way of a court-approved plan of arrangement
whereby Canadian Zinc will acquire all of the issued and outstanding common
shares of Paragon. Paragon will become a wholly owned subsidiary of Canadian
Zinc.
Paragon shareholders
will be entitled to receive, in exchange for each Paragon share held, 0.136
shares of Canadian Zinc. The proposed transaction is subject to certain
customary conditions including the approval of not less than 66-2/3% of the
votes cast at a special meeting of Paragon security holders that is expected to
be held in September 2012. Approval will also be required from the
majority of votes cast by �disinterested� shareholders pursuant to Multilateral
Instrument 61-101 Protection
of Minority Security Holders in Special Transactions.
Pursuant to the terms
of the Arrangement Agreement, the proposed transaction is also subject to
applicable regulatory approvals and the satisfaction of certain closing
conditions customary for transactions of this nature. The Arrangement Agreement
also provides for, among other things, customary board support and
non-solicitation covenants from Paragon (subject to customary �fiduciary out�
provisions that entitle Paragon to consider and accept a superior
proposal). The Arrangement Agreement also provides for the payment of a
break fee of C$150,000 to Canadian Zinc on the occurrence of certain
termination events.
After giving effect
to the Arrangement, Canadian Zinc and Paragon shareholders will own approximately
95.5% and 4.5%, respectively, of the Canadian Zinc issued and outstanding
common shares.
The Paragon Board of
Directors have determined that the proposed transaction is in the best interest
of Paragon, is fair to the Paragon shareholders, and intend to recommend in the
Information Circular that Paragon shareholders vote in favour of the proposed
transaction. The Paragon Board of Directors� determinations are based on the
recommendations of a special committee of independent Paragon directors; Roman
Friedrich & Company Ltd., Paragon�s financial advisor; and Evans &
Evans Inc, the fairness opinion provider to the special committee.
Evans & Evans have provided an opinion to the effect that the
consideration to be received by Paragon shareholders is fair from a financial
point of view. Paragon�s directors and senior management representing, in
aggregate, approximately 2.7% of Paragon�s issued and outstanding shares, have
entered into customary voting support agreements pursuant to which, among other
things, they have agreed to vote their Paragon shares in favour of the proposed
transaction.
If it is approved by
shareholders of Paragon, the proposed transaction is expected to be completed
in September 2012 and is subject to certain customary conditions, including
receipt of all necessary court, TSX, TSX-Venture and shareholder approvals. The
terms and conditions for the proposed transaction will be summarized in the
Paragon Management Information Circular to be mailed to Paragon shareholders in
August 2012. Copies of the Arrangement Agreement, the Management Information
Circular, and certain related documents and agreements will be filed with
Canadian securities regulators and will be available at the SEDAR website at
www.sedar.com under Canadian Zinc and Paragon profiles, as applicable.
Advisors
Roman Friedrich &
Company is acting as financial advisor to Paragon and its board of directors
and a success fee is payable upon closing of the transaction to Roman Friedrich
& Company in respect to the Arrangement Agreement. Evans & Evans
Inc is acting as fairness opinion provider to the special committee of the
board of directors of Paragon. Paragon�s legal counsel is Davis LLP.
Canadian Zinc�s legal counsel is DuMoulin Black LLP.
About Canadian Zinc
Corporation
Canadian Zinc
Corporation is a Toronto-listed junior exploration and development company
trading under the symbol CZN on the Toronto Stock Exchange, under
"CZICF" on the Over the Counter OTCOB in the US, and under the symbol
"SAS" on the Frankfurt Exchange. The company�s main project is
the Prairie Creek Zinc, Silver, Lead Mine in the Northwest Territories, Canada
with Measured and Indicated Resources of 5.43 million tonnes grading 10.8%
zinc, 10.2% lead, 0.31% copper and 160 g/t silver and Inferred resources of
6.24 million tonnes grading 14.5% zinc, 11.5% lead, 0.57% copper and 229 g/t
silver. A portion of the Mineral Resources was converted to a Mineral Reserve
Estimate of 5.2 million tonnes grading 9.4% zinc, 9.5% lead and 151 g/t silver.
For further information on Canadian Zinc visit the website at
www.canadianzinc.com
About Paragon
Minerals Corporation
Paragon Minerals
Corporation is a Canadian-based mineral exploration company focused on gold and
base-metal exploration in Newfoundland and northwest Ontario. Paragon�s
flagship project is the 100%-owned South Tally Pond VMS project where it is
advancing a significant precious metal rich massive sulphide deposit located in
producing base metal mining district in central Newfoundland. Paragon is also
exploring a portfolio of gold properties through partner and company-funded
exploration programs. For more information, please visit the company website or
contact Michael Vande Guchte at (604) 629-2353.
PARAGON MINERALS CORPORATION