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Cream Minerals Limited Mails Notice of Change
Vancouver, BC -
November 23, 2010 - Cream Minerals Ltd. (TSX-V - CMA) ("Cream" or the "Company")
announces that a notice of change (the "Notice of Change")
in relation to the amended offer (the "Amended Offer")
made by Endeavour Silver Corporation ("Endeavour Silver")
will be mailed to Shareholders today. The terms of the Amended Offer are
described in full in Endeavour Silver's notice of change, variation and
extension dated November 18, 2010 (the "Notice of Variation").
The Notice of Change amends and supplements the supplementary directors'
circular dated October 29, 2010 (the "Circular") issued by
the Cream board of directors (the "Board") in relation to
the initial unsolicited offer made by Endeavour Silver to Shareholders (the
"Initial Offer").
The information in this news release is a summary only of information in
the Notice of Change and the Circular, both of which are available on
Cream's website at www.creamminerals.com and on SEDAR at www.sedar.com under Cream's profile. Shareholders are urged to
read the Notice of Change and the Circular in their entirety.
Recommendation of the Board
Having carefully considered the Amended Offer, various factors which it
considered relevant and the unanimous recommendation of the independent
committee of the Board (the "Independent Committee"), and
having consulted with its legal and financial advisors, the Board, by a
majority vote, has concluded that the Amended Offer is fair, from a
financial point of view, to Shareholders, and accordingly recommends that
Shareholders who wish to realize upon their investment in Shares at this
time accept the Amended Offer.
Reasons for Recommendation
The following is a summary of the principal reasons why the Independent
Committee and the Board make the recommendation:
- Capital
West Partners ("Capital West") has delivered to the
Independent Committee its opinion, based on and subject to the scope
of review, assumptions and limitations set forth therein, that the
consideration offered to Shareholders under the Amended Offer is fair,
from a financial point of view, to the Shareholders.
- The
increased consideration of $0.14 per Share under the Amended Offer
represents a 17% increase in the cash consideration of $0.12 per Share
under the Initial Offer.
- The
consideration of $0.14 per Share represents a premium of 105% over the
average closing price of the Shares of $0.068 for the 10 trading days
ended September 24, 2010 (the last trading day prior to the
announcement of the Initial Offer), a premium of 86% over the closing
trading price of $0.075 on September 24, 2010, and a premium of 27%
over the closing price of the Shares of $0.11 on November 8, 2010.
- The
consideration of 0.02575 of an Endeavour Silver Share has an implied
value of $0.1566 per Share, based on the 10-day volume-weighted
average price of the Endeavour Silver Shares on the Toronto Stock
Exchange as at close of trading on the last trading day prior to the
date of the Notice of Variation, which average price was $6.0815 per
Endeavour Silver Share.
- The
Amended Offer permits Shareholders who elect to receive Endeavour
Silver Shares in consideration for their Shares to continue to
participate in silver exploration.
- The
Amended Offer is the only offer for 100% of the Shares that is
available for acceptance by the Shareholders, and offers Shareholders
an opportunity for immediate liquidity and certainty of value.
- Minco
Silver Corporation ("Minco") has advised Cream that
it has waived the due diligence condition in the Minco Offer (as
described in the Circular), and is willing to extend the date for
acceptance of the Minco Offer until one day past the expiry date of
the Amended Offer.
- The
Company's ability to continue as a going concern is dependent on its
ability to obtain additional financing. If the Amended Offer is not
successful, and for any reason Cream cannot or does not complete the
transaction contemplated by the Minco Offer, the Company will have an
immediate need for additional financing. There can be no assurance
that the required funding will be available to the Company on
acceptable terms, or at all.
Risks
Related to the Amended Offer
The following is a summary of some of the risks and uncertainties related
to the Amended Offer:
- The
Amended Offer remains subject to conditions to the benefit of
Endeavour Silver, including that the 50.1% minimum tender condition
stipulated by it (the "Minimum Tender Condition") be
met or waived.
- Contrary
to what Endeavour Silver stated in its press release of November 9,
2010 (the "Press Release") and the notice of change
and extension in which it extended the expiry date of the Initial
Offer to November 19, 2010 (the "Notice of Extension"),
it did not include in the Amended Offer a commitment that, if the
Minimum Tender Condition is met, it will announce that fact by news
release and extend the Amended Offer by at least 10 days. Accordingly,
it may be that Shareholders who do not tender their Shares in the
first instance may have no further opportunity to tender if it becomes
clear that Endeavour Silver will acquire a majority shareholding in
Cream.
- It
is possible that Endeavour Silver can waive its Minimum Tender
Condition and acquire less than a majority of the Shares without any
obligation to extend its offer to Shareholders who did not tender in
the first instance.
- Frank
Lang, a director and the Chairman of the Company, beneficially owns or
controls approximately 21.4% of the issued and outstanding Shares and
approximately 24.1% of the Shares on a fully-diluted basis. Mr. Lang
has advised the Board that he will not tender any of his Shares to the
Amended Offer. The value of the Shares may decline, perhaps
significantly, if a majority of the outstanding Shares are controlled
by two significant Shareholders, each wanting to direct the affairs of
the Company.
- Cream
is an exploration company that holds what the Board believes is a
highly prospective silver-gold property, the Nuevo Milenio
project, as well as several other exploration prospects. Shareholders
who accept the Amended Offer will forego an opportunity to participate
to any meaningful degree in the upside potential associated with Nuevo
Milenio, which could be significant, as well
as Cream's other properties.
- Endeavour
Silver stated in the Press Release and the Notice of Extension that,
if the Minimum Tender Condition is not met at the expiry time of the
Amended Offer (as may be extended), it would agree, at any time within
30 days after the expiry date of the Amended Offer, at Cream's
election, to enter into an agreement with Cream on the same terms as
the Minco Offer. No such commitment was included, however, in the
Notice of Variation.
- The
purchase of Shares by Endeavour Silver pursuant to the Amended Offer
will reduce the number of Shares that might otherwise trade publicly
and the number of Shareholders and could, therefore, adversely affect
the liquidity and market value of the remaining Shares held by the
public.
- If
Endeavour Silver takes up Shares under the Amended Offer, but does not
acquire 100% of the Shares, there may thereafter be insufficient
public distribution of the Shares to meet the TSX Venture Exchange's
continued listing requirements. If the Shares are delisted from the
TSX Venture Exchange, there may be no other market for the Shares.
- Given
that Mr. Lang has advised that he will not tender to the Amended
Offer, it is not expected that Endeavour Silver will be in a position
to complete a compulsory acquisition of the remaining Shares, and
there is no certainty that it will be able to acquire a sufficient
number of Shares to effect a subsequent acquisition transaction.
- Endeavour
Silver has advised that if it cannot complete a subsequent acquisition
transaction, it will evaluate its alternatives, which may include
purchasing Shares in the market, in privately negotiated transactions,
in another take-over bid for Cream, or otherwise, or taking no further
action to acquire additional Shares. Any additional purchases would be
at the discretion of Endeavour Silver, and could be at a price greater
than, equal to or less than the Amended Offer price.
Background
to the Amended Offer
The Independent Committee engaged Capital West as its independent financial
advisor to, among other things, conduct a process intended to develop
value-maximizing alternatives to the Initial Offer.
On several occasions, Capital West met with Endeavour Silver to discuss the
possibility of Endeavour Silver improving the terms of the Initial Offer.
On November 4, 2010, Endeavour Silver advised Capital West that it was
considering increasing the offer price to $0.14, payable in cash or
Endeavour Silver Shares, at the option of the tendering Shareholder,
conditional on the support of the Board. On the morning of November 5,
2010, Capital West reported on these discussions to the Independent
Committee, and received instructions regarding certain terms that the
Independent Committee considered to be essential to Board support. Capital
West then conveyed to Mr. Bradford Cooke, Endeavour Silver's CEO, the
requirements stipulated by the Independent Committee.
In the late afternoon of November 5, 2010, the Board met and received
Capital West's report on the status of negotiations with Endeavour Silver. The
Board authorized Capital West to convey to Endeavour Silver that a majority
of the Board would be prepared to recommend that Shareholders accept an
amended offer of $0.14 per Share, payable at the Shareholder's election in
cash or in Endeavour Silver Shares, provided that:
- if
Endeavour decided to take up Shares, it would announce that fact by
news release and extend its bid by at least 10 days to allow
Shareholders who did not tender in the first instance to do so;
- none
of the Cream directors would enter into lock-up agreements or
otherwise be obliged to indicate an intention to tender their Shares
to such amended offer;
- no
break fee would be payable in the event that the Board rescinded its
support of the amended bid because a superior proposal had been made;
and
- if
the Minimum Tender Condition was not met, Cream could, at its
election, enter into a property acquisition and joint venture
agreement on Nuevo Milenio with Endeavour
Silver having the same terms (but without any due diligence condition)
as the Minco Offer.
The last
condition had been suggested by Endeavour as a means to protect Cream in
the event that Endeavour did not acquire at least a majority of the Shares,
and at that time the Minco Offer was for any reason no longer available to
Cream.
On the evening of November 5, 2010, Capital West conveyed the foregoing
information to Mr. Cooke, who replied that he would consult with others and
advise Capital West of Endeavour Silver's position the next day. On
Saturday, November 6, 2010, Mr. Cooke advised Capital West by telephone
that Endeavour Silver was prepared to amend its offer on the basis conveyed
by Capital West on the evening of November 5, 2010, but that it wanted to
document the terms clearly, which it would do in an agreement to be delivered
on Monday, November 8, 2010.
In the late afternoon of Sunday, November 7, 2010, Capital West received a
draft support agreement from Endeavour Silver and forwarded it to legal
counsel for the Independent Committee and Cream. On the morning of Monday,
November 8, 2010, Capital West advised Mr. Cooke that the draft support
agreement did not reflect certain material terms that had been stipulated
by Capital West to Endeavour Silver on November 5, 2010, and that it
contained a number of additional terms that had not been considered or
approved by the Board. On the afternoon of November 8, 2010, Endeavour
Silver sent to Capital West a shorter letter agreement which purported to,
but still did not, reflect the terms that had been
conveyed by Capital West to Endeavour Silver on November 5, 2010. In a
further discussion between Capital West and Mr. Cooke immediately before
Cream's 4:00 p.m. Board meeting, Mr. Cooke agreed to amend a provision of
the letter agreement to make it consistent with the message delivered by
Capital West on November 5. Even with that change, however, the terms of
the letter agreement presented to the Board on November 8 did not reflect
those approved by it on November 5 and it was apparent to the Board that a
meeting of the minds with respect to the terms of the proposed agreement
had not been achieved.
Also on November 8, 2010, Cream received a letter from Minco stating that
Minco had agreed to waive the due diligence condition in the Minco Offer
and, if there was an amended or extended offer from Endeavour Silver, to
extend the date for acceptance of the Minco Offer until one day past the
expiry date of such amended or extended offer from Endeavour Silver.
At the Board meeting on November 8, 2010, following extensive discussion, a
vote was held to determine whether the Board would be prepared to recommend
the amended offer to Shareholders, provided that an agreement could be
concluded with Endeavour Silver that reflected the terms that had been
approved by a majority of the Board and conveyed to Endeavour Silver by
Capital West on November 5, 2010. Before the voting concluded, Mr. Art
Troup resigned from the Board. With an equality of votes, the resolution
was not approved. Immediately after the Board meeting on November 8, 2010,
Capital West advised Mr. Cooke that Cream was not in a position to say that
a majority of the directors would recommend that Shareholders accept the
proposed amended offer.
The
Minco Offer
The Minco Offer was initially open for acceptance by Cream until November
10, 2010, the day after the scheduled expiry time of the Initial Offer. On
November 8, 2010, Minco amended the Minco Offer by waiving its due
diligence condition and stating that the Minco Offer would remain open for
acceptance by Cream until one day following the expiry date (as it may be
extended) of any amended offer made by Endeavour Silver. Details of the
Minco Offer are disclosed in the Circular.
The Board is of the view that, given the limited financial resources of the
Company and in accordance with the Company's business plan, if the Amended
Offer is not accepted by a majority of the Shareholders and no superior
alternative proposal is received, the acceptance of the Minco Offer would
be in the best interests of the Company. If on December 6, 2010, the expiry
date of the Amended Offer, Shares representing less than
50.1% of the outstanding Shares, calculated on a fully-diluted basis, have
been tendered to the Amended Offer, the Board intends to accept the Minco
Offer. If an agreement is entered into with Minco on substantially the
terms set forth in the Minco Offer, Cream would retain a 30% interest in
the upside potential of Nuevo Milenio.
Although the Board recommends that Shareholders who wish to sell their
Shares at this time accept the Amended Offer and tender the Shares,
Shareholders who wish Cream to remain in the business of mineral
exploration and to participate in the development of the Nuevo Milenio project, with the possibility but no assurance
that they may over the longer term achieve a better return by retaining
their Shares, may prefer not to accept the Amended Offer.
Risks
Related to the Minco Offer
While the Minco Offer creates potential opportunities for Cream and the
Shareholders, it is also subject to a number of risks and uncertainties,
including but not limited to the following:
- The
Minco Offer is not irrevocable, and there can be no assurance that it
will not be withdrawn by Minco prior to acceptance by Cream.
- The
obligations of Minco and Cream to complete the transactions related to
the Minco Offer are subject to a variety of conditions, including the
receipt of all necessary governmental, regulatory and stock exchange
approvals and, if required, the approval of the Shareholders. There
can be no assurance that all such approvals will be obtained.
- The
option for Minco to acquire an additional 20% interest in Nuevo Milenio is an option only. There would be no
requirement for Minco to incur the necessary work expenditures to earn
an additional 20% interest in the Nuevo Milenio
project. Minco would be the operator of the Nuevo Milenio
project so long as it maintained a minimum 50% interest in the
project.
- If
Cream and Minco form a joint venture on the Nuevo Milenio
project, Cream would need to contribute its pro-rata share of
expenditures related to the Nuevo Milenio
project, failing which it would suffer the dilution of its interest in
the project. There can be no assurance that Cream will have or be able
to raise sufficient funds, when required, to maintain its interest. If
Cream's interest in the Nuevo Milenio
project is diluted to less than a 10% interest, it would convert to a
1.0% net smelter returns royalty interest.
- If
the Minimum Tender Condition is not met, an agreement reflecting the
Minco Offer, together with the debt forbearance by Frank Lang that is
described in the Circular, appears to be a viable means for Cream to
achieve financial stability and maintain a significant interest in the
upside potential of the Nuevo Milenio
project and its other properties; however, that potential may never be
realized.
- Mineral
exploration is speculative. It is possible that, for a variety of
reasons (including but not limited to inherent uncertainties involved
in mineral resource estimates, fluctuations in the price of silver,
failure to obtain or maintain all required permits and approvals, and
country risk), further exploration on the Nuevo Milenio
project will not prove to be a success, and the market value of the
Shares after the completion of the work contemplated by the Minco
Offer may be lower than the Amended Offer price.
The foregoing is only a summary
of the information and factors considered by the Independent Committee and
the Board. This summary is not intended to be exhaustive. Shareholders
should read the entire Notice of Change, together with the Circular.
The current directors and officers of Cream, as a group, beneficially own
or control 25,620,388 Shares, representing approximately 25.5% of the
issued and outstanding Shares, as well as options and warrants entitling
them to acquire additional Shares, for a total of approximately 29.6% of
the Shares calculated on a fully-diluted basis. Each of the directors
and officers of Cream who owns Shares has indicated that he or she has not
accepted, and does not intend to accept, the Amended Offer. To the
knowledge of the directors and officers of Cream, after reasonable enquiry,
no associate or affiliate of Cream, no associate or affiliate of a director
or officer of Cream, no person holding more than 10% of the issued and
outstanding Shares, and no person acting jointly or in concert with Cream,
has accepted or indicated an intention to accept the Amended Offer.
However, if the Minimum Tender Condition is met and Endeavour Silver then
chooses to extend the expiry date of the Amended Offer, certain of the
directors and officers of the Company may choose to tender to the Amended
Offer at that time.
Inferred Mineral Resource Estimate
Cream's disclosure of an inferred mineral resource estimate for the Nuevo Milenio property is based on a report entitled
"Geological Report on the Dos Hornos and
Once Bocas Gold-Silver Structure, Nuevo Milenio
Project, Municipality of Xalisco, Tepic Area,
Nayarit State, Mexico" dated February 16, 2006 prepared by F. Holcapek, P. Eng. Geology (the "Report").
Mr. Holcapek, who prepared the Report and
subsequent reports dated January 30, 2008 and December 24, 2008 on the
Nuevo Milenio project, is a "qualified
person", but is not independent of Cream within the meaning of
National Instrument 43-101, Standards of Disclosure for Mineral Projects.
It is possible that an independently prepared mineral resource estimate
could be materially different from the inferred mineral resource estimates
contained in the Report and subsequent reports.
For further information, please contact:
Michael E. O'Connor
President & CEO
Robert Paul
Investor Relations
Tel: (604) 687-4622 Fax: (604) 687-4212 Toll Free: 1-888-267-1400
Email: info@creamminerals.com
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 adequacy or accuracy of this release.
This news release
contains forward-looking statements and information within the meaning of
applicable Canadian securities laws and the "safe harbor'' provisions
of the U.S. Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and beliefs and
are subject to a number of risks and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. Examples of such forward-looking information include, but are
not limited to: whether the Amended Offer will be successful; whether the
Minimum Tender Condition will be met or waived; whether the Minco Offer
will be accepted by Cream; whether the transactions contemplated by the
Minco Offer will be completed; and whether greater value may be realized in
the future on the Shares than the value available under the Amended Offer.
Forward-looking information is based on a number of assumptions which may
prove to be incorrect, including, but not limited to: the ability of
Endeavour Silver to complete the Amended Offer; the existence of third
parties interested in purchasing some or all of the Shares; the continued
availability of the Minco Offer; receipt of all necessary approvals to the
Minco Offer; and the exploration potential of the Nuevo Milenio
project. Although Cream believes that the expectations expressed in such
forward-looking statements are reasonable, there is no assurance that
developments beyond its control will not result in Cream's expectations
regarding such matters proving to be incorrect. Factors which could cause
actual results to differ materially from current expectations include, but
are not limited to: risks and uncertainties relating to the Amended Offer;
Endeavour Silver's ability to develop the Nuevo Milenio
project; fluctuations in the price of silver; fluctuations in the fair
value of the assets of Cream; a failure to receive all necessary
governmental, regulatory and stock exchange approvals required by the Minco
Offer; inherent uncertainties involved in mineral resource estimates;
fluctuations in interest rates and exchange rates; the strength of the
economic fundamentals of silver; general economic conditions; competitive
conditions in the businesses in which Endeavour Silver and Cream operate;
and changes in laws, rules and regulations applicable to Cream and
Endeavour Silver. Cream specifically disclaims any obligation to update
these forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. These
forward-looking statements should not be relied upon as representing
Cream's views as of any date subsequent to the date of this news release.
You can also
view this News Release on our website at:
http://www.creamminerals.com/s/NewsReleases.asp?ReportID=430373
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