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Prophecy Resource Corp. and
Pacific Coast Nickel Corp. are pleased to announce that they have entered
into a binding letter of agreement dated January 17, 2011 (the
"Agreement") whereby PCNC will acquire Prophecy's Nickel PGM
projects by issuing common shares to Prophecy. (the
"Transaction").
Terms of the Transaction
Pursuant to the Agreement, PCNC
will acquire the Wellgreen PGM Ni-Cu and Lynn Lake
nickel projects located in the Yukon Territory and Manitoba respectively (the
"Properties") by issuing up to 550 million common shares of PCNC to
Prophecy. PCNC currently has 55.7 million shares outstanding.
Following the Transaction,
-- Prophecy will own approximately 90% of PCNC.
-- PCNC will consolidate its share capital on a 10 old for 1 new basis.
-- Prophecy will change its name to "Prophecy Coal Corp." and PCNC will be
renamed as "Prophecy Platinum Corp."
-- Prophecy intends to distribute half of its PCNC share to shareholders
pro rata in accordance with their holdings (the "PCNC Distribution").
Based on the closing price of the
common shares of PCNC on January 17, 2010, being $0.195 per share, the gross
value of the Transaction is $107,250,000.
John Lee, the current Chairman of
PCNC, is appointed Interim CEO of PCNC effective immediately. PCNC thanks Mr.
James Walchuk, departing PCNC CEO for his
invaluable experience and service to PCNC.
Highlights of the Transaction
-- Prophecy shareholders realize the value of Prophecy's Canadian projects
through PCNC distribution.
-- PCNC becomes a mid-tier resource firm with substantial Nickel PGM
assets, including Wellgreen (Yukon), Lynn Lake (Manitoba), and Las
Aguilas (Argentina) projects.
-- Prophecy sets pure focus on its Mongolian coal operation, while holding
equity positions in PCNC and Victory Nickel Inc.
-- PCNC will have Prophecy as a major shareholder, and leverage the
marketing and technical expertise of Prophecy.
John Lee, Chairman and CEO of
Prophecy states: "This transaction unlocks the intrinsic value of
Prophecy's assets. Investors will have a choice to own Prophecy Coal for
1.4-billion-tonne coal exposure, or own Prophecy Platinum for unique and
significant Nickel PGM exposure."
Further Detail Regarding the
Transaction
It is contemplated that the
Transaction will be completed by way of a Plan of Arrangement, structured in
such a way that will result in the financial terms of the Transaction being
met. The parties have agreed to complete the Transaction by May 31, 2011.
Holders of share purchase warrants
of Prophecy will be entitled to participation in the PCNC Distribution in
accordance with the terms of their respective warrants. Holders of stock
options of Prophecy will not be entitled to participation in the PCNC
Distribution.
In addition to the terms as set
forth above, Prophecy has agreed to fund up to $2,000,000 of qualified flow
through expenditures on the Properties over the period commencing as of the
date of the Agreement until December 31, 2011 and has agreed to make a
payment of $600,000 to Victory Nickel Inc. necessary to keep the Lynn Lake
property in good standing until April 2012.
The boards of PCNC and Prophecy
have each appointed a special committee to review the Transaction. John Lee
and Greg Hall, as members of the boards, and in respect of John Lee, as
Chairman and CEO, of both Companies, have abstained from voting in respect of
the Agreement and will abstain from voting in respect of matters involving
the Transaction. The board of PCNC will remain unchanged.
The final structure and ratios of
the Transaction will be subject to the receipt of final tax, corporate and
securities law advice and receipt of a positive fairness opinion from an
independent advisor by each of Prophecy and PCNC.
Completion of the Transaction is
conditional upon:
-- PCNC and Prophecy, if required, shareholders having approved the
Transaction;
-- receipt of all necessary regulatory approvals, including the approval of
the TSX Venture Exchange (the "Exchange");
-- receipt of approval of the British Columbia Supreme Court, if
applicable;
-- receipt by both Companies of a positive fairness opinion concerning the
Transaction as prepared by an independent advisor;
-- Prophecy shareholders or PCNC shareholders not having exercised rights
to dissent over more than 5% of the shares of Prophecy or 5% of the PCNC
shares;
-- certain other customary conditions.
Projects being Acquired by PCNC
The Wellgreen
PGM Ni-Cu Project
The Wellgreen
PGM Ni-Cu property covers an area of approximately 22 square miles in the
Yukon Territory, Canada. The property has easy road access, located
approximately 35 kilometres northwest of Burwash Landing, Yukon, 15 km from the paved 2 lane
Alaska Highway and 402 km from Alaska's Haines deep sea port. Wellgreen is part of Kluane Ultramafic Nickel belt, which is second largest behind
the Thompson Belt in Canada and remains vastly unexplored. In 1972, Hudbay milled 171,652 tons grading 2.23% Copper and 1.39%
Nickel. A total of 701 holes (182 surface, 519
underground) totalling 53,222 meters (28,303 meter
surface, 24,919 meters underground) by previous operators. A historic, non
43-101 compliant geological resource (1989) estimated 55 million tonnes of 0.36% Ni, 0.35% Cu, 0.78 g/t PGM at Wellgreen. A qualified person has not done sufficient
work to classify the historical estimate as current mineral resources and the
Company is not treating the historical estimate as current mineral resources
but as a historical estimate that should not be relied upon.
The current approach at Wellgreen has been to define the project's full potential
as a large, bulk tonnage, open pit operation. An independent NI 43-101 report
prepared for Prophecy by Wardrop Engineering ("Wardrop") dated July 2010 indicates that the
potential of the Wellgreen property ranges between
77 to 254 million tonnes at 0.26 to 0.38% Nickel,
0.26% to 0.36% Copper, 0.55 to 0.85 g/t Platinum and Palladium, based on a
strike length range of 4,000 to 7,000m and a width of 30 to 35m. The
potential quantity and grade is conceptual in nature, there has been
insufficient exploration to define a mineral resource, and it is uncertain if
further exploration will result in any discovery of a mineral resource. Subsequent
to Wardrop's Wellgreen
Report Prophecy intercepted encouraging mineralization at Wellgreen
including 496.06 meters of 0.596 g/t PGM+Au, 0.27%
Ni, 0.18% Cu, 0.02% Co from Surface. (Please refer to Prophecy September 27th
news). Prophecy currently is assaying past drill cores for Iridium, Osmium,
Ruthenium, and Rhodium to obtain the full PGM grades at Wellgreen,
and Prophecy intends to start drilling in April when weather permit.
The Lynn Lake Nickel Project
In October 2009, Prophecy entered
into an agreement to acquire a 100% interest in The Lynn Lake Nickel Project
from Victory Nickel Inc. (TSX:NI - News). The deposit is in
Manitoba, Canada, which is mining friendly and also adjacent to a power line,
rail line, and airport. Lynn Lake contains Measured and indicated mineral
resources of 22.9 million tons of grading, of 0.57% nickel and 0.30% copper
and and 8.1 million tonnes
of Inferred Resource at 0.51% Nickel & 0.28% Copper (Wardrop
Technical Report May, 2010). Approximately 50% of the host rock remains
unexplored. An exciting 2008 discovery, the Disco Zone, includes intercepts
of 47 meters of 0.7% nickel located 1.5km away from the outlined resource. A
3,000m 2010 drill program intercepted an additional discovery zone, the Tango
Zone, details of which are outlined in Prophecy news release, December 6,
2010. The aforementioned Wardrop resource estimate
does not include either the Disco Zone or Tango Zone discoveries. Prophecy
recently completed extensive induced polarization (geophysics) programs and
has initiated bulk tonnage metallurgical testing at Lynn Lake in preparation
for a combination of infill and exploratory drill programs and a forthcoming
feasibility study at Lynn Lake.
The information concerning the
current mineral properties controlled by Prophecy, as described in this news
release, has been reviewed and approved by Danniel Oosterman, P.Geo., a Prophecy Geologist and a Qualified Person under
National Instrument 43-101.
In accordance with Exchange
policies, the shares of PCNC are currently halted from trading and will
remain so until the documentation required by the Exchange for the
Transaction can be provided to the Exchange.
Further information pertaining to
the Properties and Prophecy is available at Prophecy's SEDAR profile at www.sedar.com,
where investors may review technical reports prepared in respect of the
Properties and Prophecy's annual and interim financial statements.
About Prophecy Resource
Prophecy Resource Corporation is
an internationally diversified company engaged in developing energy, nickel
and platinum group metals projects. The company controls over 1.4 billion
tons of open-pittable thermal coal in Mongolia (839
Mt Measured, 579 Mt Indicated). Prophecy's Ulaan Ovoo coal mine is fully commissioned and in production.
In Canada Prophecy owns Wellgreen PGM Ni-Cu Project
in Yukon, Lynn Lake Nickel Sulphide Project in
Manitoba, and a 10% equity stake in Victory Nickel. Mineral resources that
are not mineral reserves do not have demonstrated economic viability.
About PCNC
Pacific Coast Nickel Corp. is a
Canadian based nickel and copper base metal exploration company actively
exploring properties in Canada and Uruguay. Included in the Company's
property portfolio is the Burwash property located
adjacent to the Wellgreen Mine (a former nickel and
copper producer) near Burwash, Yukon Territory,
Canada. PCNC in December optioned the Las Aguilas
Nickel-PGM project in Argentina, which contains an historic , non 43-101
compliant resource of 2.2mt of 0.52% Ni, 0.50% Cu, 1.16 g/t PGM. A qualified
person has not done sufficient work to classify the historical estimate as
current mineral resources and the Company is not treating the historical
estimate as current mineral resources but as a historical estimate that
should not be relied upon.The Company has also
established a wholly owned subsidiary in Uruguay which has identified and
acquired a number of prospective nickel-copper exploration targets.
For more information about
Prophecy, please contact Paul McKenzie at +1.604.642.2625 ext. 107, or Scott
Parsons at +1.604.642.2625 ext. 106.
ON BEHALF OF THE BOARD OF
DIRECTORS of
Prophecy Resource Corp.
John Lee Chairman and CEO
Pacific Coast Nickel Corp.
John Lee Chairman and Interim CEO
Cautionary Statements: Completion
of the transaction is subject to a number of conditions, including regulatory
approval, shareholder approvals, completion of satisfactory due diligence, a
definitive agreement and approval of the British Columbia Supreme Court if
applicable. There can be no assurance that the transaction will be completed
as proposed or at all. Investors are cautioned that, except as disclosed in
the Management Information Circular 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 exploration and development stage resource
companies should be considered highly speculative.
Forward Looking Statements: This
news release includes certain statements that may be deemed
"forward-looking statements". All statements in this release, other
than statements of historical facts, including, without limitation,
statements regarding potential mineralization, the estimation of mineral
resources, the realization of mineral resource estimates, interpretation of
prior exploration and potential exploration results, the timing and success
of exploration activities generally, the timing and results of future
resource estimates, permitting time lines, metal prices and currency exchange
rates, availability of capital, government regulation of exploration
operations, environmental risks, reclamation, title, and future plans and
objectives of the companies are forward-looking statements that involve
various risks and uncertainties. Although PCNC and Prophecy believe the
expectations expressed in such forward-looking statements are based on
reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from
those in the forward-looking statements. Forward-looking statements are based
on a number of material factors and assumptions. Factors that could cause
actual results to differ materially from those in forward-looking statements
include unsuccessful exploration results, changes in project parameters as
plans continue to be refined, results of future resource estimates, future
metal prices, availability of capital and financing on acceptable terms,
general economic, market or business conditions, risks associated with
operating in foreign jurisdictions, uninsured risks, regulatory changes,
defects in title, availability of personnel, materials and equipment on a
timely basis, accidents or equipment breakdowns, delays in receiving
government approvals, unanticipated environmental impacts on operations and
costs to remedy same, and other exploration or other risks detailed herein
and from time to time in the filings made by the companies with securities
regulators. Readers are cautioned that mineral resources that are not mineral
reserves do not have demonstrated economic viability. Mineral exploration and
development of mines is an inherently risky business. Accordingly the actual
events may differ materially from those projected in the forward-looking
statements. For more information on PCNC and Prophecy and the risks and
challenges of their businesses, investors should review their annual filings
that are available at www.sedar.com.
This press release does not
constitute an offer to sell or a solicitation to buy any of the securities in
the United States. The securities have not been and will not be registered
under the United States Securities Act of 1933, as amended ("the U.S.
Securities Act") or any state securities law and may not be offered or
sold in the United States or to U.S. Persons unless registered under the U.S.
Securities Act and applicable state securities laws or an exemption from such
registration is available.
Completion of the Transaction is
subject to a number of conditions, including Exchange acceptance and
disinterested PCNC shareholder approval. 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 the Management Information Circular and/or 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 PCNC
should be considered highly speculative.
The TSX Venture Exchange has in no
way passed upon the merits of the proposed Transaction and has neither
approved nor disapproved the contents of this press release.
"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."
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