Klondex Mines Ltd. Announces $20 Million Equity
Financing and US$7 Million Debt Financing
Klondex
Mines Ltd. (TSX:
KDX) ("Klondex", or the "Company") is pleased to
announce that it has engaged a syndicate of agents lead by GMP Securities L.P.
and including MGI Securities Inc., RBC Dominion Securities Inc., Fraser
Mackenzie Limited and Mackie Research Capital Corporation (collectively, the
"Agents") to complete a private placement financing on a
fully-marketed best efforts basis (the "Equity Offering") by issuing
up to approximately 14,815,000 non-transferable subscription receipts
("Subscription Receipts") at a price of C$1.35 per Subscription
Receipt (the "Issue Price") for aggregate gross proceeds of up to
C$20,000,250. The Agents have been granted an option (the "Agents'
Option") exercisable up to 48 hours before closing to increase the size of
the Offering by up to 15% (C$3,000,037) to C$23,000,287. Each Subscription Receipt
will be deemed to be exchanged upon satisfaction of the Escrow Release
Condition (as defined below), without payment of any additional consideration,
for one unit (a "Unit") of the Company. The Subscription Receipts
will provide for appropriate adjustments to be made in the event of share
dividends, consolidations, distributions and other forms of capital
reorganizations.
Each Unit will consist
of one common share in the capital of the Company (a "Unit Share")
and one-half of one common share purchase warrant (each whole common share
purchase warrant, a "Unit Warrant"). Each Unit Warrant will entitle
the holder thereof to purchase one common share at a price of C$1.75 for a
period of 2 years following the closing of the Offering. In the event that
following 4 months and one day after the closing date, the volume weighted
average trading price of the Company's common shares on the Toronto Stock
Exchange (the "TSX") for a period of 20 consecutive trading days
exceeds C$2.50, the Company may, within five days after such an event, provide
notice to the warrant holders of the accelerated expiry of the Unit Warrants,
and thereafter the Unit Warrants will expire on the date which is 30 days after
the date of the notice to the Unit Warrant holders.
The Equity Offering is
expected to close on or about November 20, 2012 (the "Closing Date").
The gross proceeds of the Offering, less the Agency Fee and the Agents'
expenses and out-pocket-costs (the "Escrowed Funds"), shall be
deposited in escrow on the Closing Date. The Escrowed Funds will be released
from escrow to the Company upon receipt by the Company of the requisite
approval of the Company's shareholders to the Equity Offering pursuant to the
requirements of the TSX (the "Escrow Release Condition"). In the
event that the Escrow Release Condition is not satisfied on or before December
31, 2012, the gross proceeds will be returned to the holders of the
Subscription Receipts and the Subscription Receipts will be automatically
cancelled. In the event that the Escrow Release Condition is satisfied on or
before the Closing Date, the Company will issue Units under the Offering at a
price of C$1.35 per Unit on the Closing Date in lieu of Subscription
Receipts.
Concurrent with the
closing of the Equity Offering, the Company expects to issue senior unsecured
notes (the "Notes") to certain accredited investors in the principal
amount of US$7,000,000 (the "Commitment") by way of private placement
(the "Debt Offering"). In consideration for providing the Commitment
the Company shall issue to the noteholders up to
525,000 common share purchase warrants of the Company (the "Note
Warrants"). The Note Warrants will be issued on the date upon which the
Company draws down the Commitment which is expected to be on the date of
closing of the Debt Offering. Each Note Warrant will allow its owner to
purchase one common share of the Company at a price equal to C$1.55 (the
"Note Warrant Exercise Price"), subject to adjustment. The Note
Warrants will expire on the date that is 18 months following their date of
issue. If for a period of 20 consecutive trading days following the issuance of
the Note Warrants and prior to the expiry of the respective Note Warrants, the
closing price of the Company's common shares on the TSX exceeds C$2.79, the
Company may, within 30 days of such an occurrence, give written notice to the
holders of the Note Warrants that the Note Warrants will expire on the date
which is 30 days after the date of the notice to the Note Warrant
holders.
The net proceeds from
the Equity Offering are expected to be used for the development of the Fire
Creek gold project in Nevada, USA, and ongoing operating and working capital
requirements. The net proceeds from the Debt Offering are expected to be used
to repay existing indebtedness and for general operating and working capital
requirements.
The Equity Offering
and the Debt Offering remains subject to the receipt of all required regulatory
approvals, including, without limitation, the approval of the TSX. The
Subscription Receipts, the Units, the Unit Shares, the Unit Warrants and the
Note Warrants will be subject to a four month plus one day hold period in
Canada.
The maximum number of
common shares being issued and made issuable pursuant to the above described
private placements is 26,080,875, representing approximately 55.05% of the
47,377,415 common shares of the Company currently issued and outstanding. If a
company listed on TSX proposes to issue more than 25% of their outstanding
listed securities, TSX requires that such company obtain the approval of the
shareholders of the company prior to issuing the listed securities.
Further, it is
expected that certain insiders of the Company, including one significant
shareholder, K2 & Associates Investment Management Inc. ("K2"),
will subscribe for up to an aggregate of 3,066,705 Subscription Receipts
(assuming the exercise of the Agents' Option in full). K2 is expected to
subscribe for up to 2,555,587 Subscription Receipts, and for up to US$4,000,000
in the Debt Offering, in connection with which, K2 will receive up to 300,000
Note Warrants. Therefore a total of up to 4,979,150 common shares may be issued
or made issuable to insiders of the Company (representing approximately 10.5%
of the issued and outstanding common shares of the Company) within a six month
period. As the total number of common shares issued and made issuable to
insiders of the Company represent more than 10% of the issued and outstanding
common shares of the Company, TSX requires that shareholders of the Company
approve the issuance of the shares, excluding the votes attached to the shares
owned by all insiders of the Company. Pursuant to section 604(d) of the TSX
Company Manual, the Company will be obtaining such shareholder approval by way
of written consent from shareholders who hold more than 50% of issued and
outstanding the common shares of the Company (excluding insiders of the
Company). Regardless of whether the Company obtains shareholder approval, up to
525,000 Note Warrants (representing 1.1% of the issued and outstanding common
shares of the Company) will be issued pursuant to the Debt Offering. The Equity
Offering and the Debt Offering will not materially affect control of the
Company and the Company does not expect that any new insiders will be created
as a result of the private placements.
About
Klondex Mines Ltd. (www.klondexmines.com):
Klondex Mines is
focused on the exploration and development of its Fire Creek gold deposit in
North Central Nevada. Fire Creek is a compelling gold mining prospect located
in a region of prolific gold production that is near power, transportation,
mining infrastructure and several milling facilities. As of October 30, 2012,
Klondex had 47.4 million shares issued and outstanding and 59.7 million shares
on a fully-diluted basis.
Sample results cited
in this news release were obtained from crosscut drifting by SMD, an
independent contractor working under the direction of Klondex staff. Assays
were determined by Pinnacle Analytical Laboratories, Lovelock, Nevada and
Inspectorate America Corporation, Sparks, Nevada, both independent analytical
laboratories.
The content of this
press release has been reviewed by Steven L. McMillin, CPG-11031 (American
Inst. of Prof. Geol.), Project Manager and Chief Geologist for Klondex Mines
Ltd., as a non-independent Qualified Person.