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TSX: JAG
TORONTO, June 18, 2019 /CNW/ - Jaguar Mining Inc.
("Jaguar" or the "Company") (TSX: JAG) today announced that it is
proposing to complete a non-brokered private placement (the
"Offering") pursuant to which it will seek to raise up to
USD$25 million in gross proceeds
through the sale of the Company's common shares ("Common Shares").
The Common Shares will be offered at a price of CAD$0.085 per share. The closing price of the
Common Shares on the Toronto Stock Exchange on June 17, 2019 was CAD$0.12.
The Company's two largest shareholders both intend to
participate in the Offering.
- Eric Steven Sprott (21.7%
shareholder): Mr. Sprott intends to subscribe for a minimum amount
of USD$15 million; and
- Tocqueville Asset Management LP (19.6% shareholder):
Tocqueville intends to purchase 19.6% of the Offering (representing
a minimum investment of USD$4.896
million).
The minimum amount from these lead orders (the "Lead
Orders") therefore represents USD$19.896
million, representing 79.58% of the Offering.
Mr. Sprott currently holds 59,755,141 Common Shares directly and
holds an additional 11,545,455 Common shares through 2176423
Ontario Ltd. (a personal investment holding corporation) for total
holdings of 71,300,596 Common Shares.
"I am pleased to participate in the Offering", said Mr. Sprott,
who also added: "The Offering represents an opportunity for Jaguar
Mining to remedy its operating issues at its Turmalina Mine and as
a result, improve its overall production profile, operating
efficiency and cost structure."
Jaguar's Interim-CEO, Benjamin
Guenther (P.Eng.), stated "The proceeds from the Offering
will be utilized to make overdue changes to the Company and its
otherwise rich and robust yet historically underperforming mineral
properties. Completion of the Offering will result in an
opportunity to increase developed reserves, improve and
update the capital equipment and infrastructure, increase gold
production, expand reserves, reduce expenses per ounce of gold
produced, improve efficiencies and cash flow, and reduce the
financial distress caused by debt."
Tocqueville Asset Management LP is a New York-based, SEC registered, investment
adviser firm and investment fund manager that manages a number of
investment funds, including the Tocqueville Gold Fund, which is a
mutual fund. Tocqueville Asset Management LP does not itself
own any securities of Jaguar, but has authority to exercise control
and direction over the assets of the Tocqueville Gold Fund.
The Tocqueville Gold Fund currently holds 64,330,707 Common
Shares.
Jaguar currently has 328,505,674 Common Shares that are issued
and outstanding. Pursuant to the terms of the Offering, Jaguar will
issue up to 394,117,647 additional Common Shares (which assumes a
CAD/USD foreign exchange rate of 1.34), representing 119.97% of its
currently issued and outstanding Common Shares. If the entire
Offering amount of USD$25 million is
raised and Mr. Sprott purchases 236,470,588 Common Shares
(representing USD$15 million and 60%
of the Offering) he would then have total holdings of 307,771,184
Common Shares, which will represent 42.6% of the Company's
outstanding Common Shares on a post-closing basis. If the entire
Offering amount of USD$25 million is
raised, then the Tocqueville Gold Fund will purchase 77,179,388
Common Shares (19.6% of the Offering) for total holdings of
141,510,095 Common Shares, which will represent 19.6% of the
Company's outstanding Common Shares on a post-closing basis. Mr.
Sprott's and the Tocqueville Gold Fund's participation in the
Offering will not result in any collateral benefits for Mr. Sprott
or the Tocqueville Gold Fund. Their subscriptions for Common Shares
will be made upon the same terms as any other party that
participates in the Offering.
"The completion of this Offering is expected to result in a
significant change to Jaguar and its operations in Brazil. If the full amount of equity capital
is raised, then this will allow the Company to invest in long
overdue upgrades that are required and will result in the
installation of new infrastructure, improved facilities and modern
equipment at its mines and processing facilities. The Company would
also be free from debt covenants and interest expenses at a time
when ore processing and gold production are expected to be
increasing. In addition, additional drilling efforts are expected
to further improve mine planning and optimization while also
expanding reserves and mine life" said Thomas S. Weng, Chairman of Jaguar.
The Offering will be conducted by way of prospectus exemptions
in the provinces of Canada and
other jurisdictions within and outside of Canada as determined by the Company in its
sole discretion, where permitted by applicable law. No prospectus
will be filed to qualify or register the Offering in any
jurisdiction. The Offering will be made to "accredited investors"
within the meaning of National Instrument 45-106 – Prospectus
and Registration Exemptions, or to other qualified persons in
jurisdictions outside of Canada as
determined by the Company.
Due to the size of the Offering, there is a sufficient number of
Common Shares being offered by the Company that if the portion not
allocated to Mr. Sprott and Tocqueville is subscribed for by one
person, then a new insider (>10% holder) could be created.
If such a situation occurs, then prior to the closing of any
transaction that will create a new insider (>10% holder), the
TSX requires that a Personal Information Form (PIF) or Declaration
be filed by the subscriber and be reviewed by the TSX. Accordingly,
the Company may limit any subscriber's subscription amount to an
amount whereby the subscriber will only hold 9.9% or less of the
Company's outstanding common shares on a post-closing basis if the
acceptance of that subscriber's full subscription would be
reasonably expected to result in a delay in the closing of the
Offering caused by the requirement to submit a PIF or Declaration
and have it be reviewed by the TSX. In the alternative, the
Company may elect to close the Offering in two tranches whereby any
subscription (or portion thereof) that is delayed by the submission
and review of a PIF or Declaration will form part of the closing of
a second tranche, if the TSX's approval is obtained.
Any qualifying shareholders or new investors who are interested
in participating in the Offering are encouraged to contact the
Company's Chief Financial Officer at
hashim.ahmed@jaguarmining.com.
The Offering is expected to close on or about July 8, 2019, or such other date(s) as may be
determined by the Company.
A finder's fee or commission will be paid to any finder or
independent intermediary that: (i) identifies and solicits
qualified investors that subscribe for the Offering; and (ii) is a
registered dealer or advisor in accordance with applicable
securities laws. For clarity, there will be no commission, referral
or finder's fee payable in respect of subscribers that are
identified and solicited by the Company or any of its affiliated
entities. There will also be no commission, referral or finder's
fee payable to a subscriber (or an affiliate thereof) in regard to
the subscriber's own purchase of any Common Shares.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the
securities in any State in which such offer, solicitation or sale
would be unlawful. The securities being offered have not been, nor
will they be, registered under the United
States Securities Act of 1933, as amended, and may
not be offered or sold in the United
States absent registration or an applicable exemption from
the registration requirements of the
United States Securities Act of 1933, as amended, and
applicable state securities laws.
Financial Hardship Exemption:
Since the Offering is a private placement where insiders of the
Company will be acquiring greater than 10% of the number of the
Common Shares which are outstanding prior to the Offering and
completion of the Offering may materially affect control of the
Company, the TSX ordinarily requires that shareholder approval must
be obtained (as per section 604(a) and 607(g)(ii) of the TSX
Company Manual). In addition, since the Offering is a private
placement for an aggregate number of listed securities issuable
greater than 25% of the number of securities of the Company which
are outstanding, on a non-diluted basis, prior to the date of the
closing of the transaction and the price per security is less than
the market price, then the TSX ordinarily requires that shareholder
approval must be obtained (as per section 607(g)(i) of the TSX
Company Manual).
However, the Company applied to the TSX, pursuant to the
provisions of Section 604(e) of the TSX Company Manual, to utilize
the "financial hardship" exemption from the requirements to obtain
shareholder approval, on the basis that the Company is in serious
financial difficulty and the Offering is designed to improve the
Company's financial situation. The application was made upon the
recommendations of both the Finance & Corporate Development
Committee and the Audit & Risk Committee of the Company's Board
of Directors, whose members are free from any interest in the
transactions and are unrelated to the parties involved in the
transactions, and was based on their determination that the
Offering is reasonable for the Company in the circumstances.
Following the TSX's review of the Company's application and the
considerations described in TSX Staff Notice 2009-0003, the TSX
provided its approval for the Company to issue this press release
announcing the Offering. The Offering and the Company's use
of the exemption remains subject to the outcome of the TSX's
review. The completion of the Offering is subject to the
TSX's conditional approval and its final acceptance.
In regard to the subscription agreements from the Lead Orders
(and from any other related parties), the Offering is a "related
party transaction" pursuant to Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special
Transactions ("MI 61-101"). The Offering will be
exempt from the formal valuation requirement and minority
shareholder approval requirement of MI 61-101 since the Company
will rely upon the financial hardship exemptions that are found in
section 5.5(g) and 5.7(e) of MI 61-101. As described in OSC
Staff Notice 51-706, the TSX's financial hardship exemption and the
considerations made by the Company and the TSX pursuant to the
Company's application to utilize that exemption are similar to, and
based on, the financial hardship exemption in MI 61-101.
Approval by the TSX regarding the Company's use of the financial
hardship exemption found in Section 604(e) of the TSX Company
Manual is consistent with the Company's use of the financial
hardship exemptions in MI 61-101.
The terms of the Offering were principally negotiated by the
Company's Finance & Corporate Development Committee. All
of the members of the Finance & Corporate Development Committee
are independent within the meaning described in section 7.1 of MI
61-101. All of the members of the Finance & Corporate
Development Committee are independent from the Lead Orders, will
not be parties to the Offering and will not receive a collateral
benefit or any payment or bonus compensation as a result of the
completion of the Offering.
During the past year, the Finance & Corporate Development
Committee reviewed and considered the Offering amongst a mix of
other alternatives, including: debt financing; convertible debt
financing; royalty financing; merger and acquisition possibilities;
a rights offering; and maintaining the status quo. No
alternatives, other than the Offering, were able to be developed to
the point where they were both feasible and the terms would be
acceptable to the Company (based upon the best interests of the
Company and considerations made regarding the Company's
stakeholders and a desire to maximize shareholder value). The
Finance & Corporate Development Committee also worked with the
Company's external financial and legal advisors regarding the
alternatives that were pursued and reviewed. No fairness
opinion was obtained in regard to the Offering. Since the
Offering is expected to raise gross proceeds of at least
USD$19.896 million from the Lead
Orders, the Company will be able to avoid a liquidity crisis and
improve its operating and financial circumstances by: (i) repaying
its USD$7.85 million bridge-loan
owing to Auramet International LLC (see the Company's press release
dated March 15, 2019), which is due
to be repaid on July 15, 2019; and
(ii) making overdue investments in capital equipment and
infrastructure at its Turmalina mine that are expected to allow the
Company to increase ore processing and gold production, improve
recovery rates, improve operating efficiencies and reduce costs per
ounce produced, which will result in improved positive cash
flows. If the Offering is able to raise gross proceeds of
USD$25 million, then these initial
objectives are expected to be achieved and the additional funds
will be used to achieve a stronger working capital position and to
fund near-term investments in infill drilling (to increase gold
reserves and improve detailed mine planning) and exploration
drilling (to increase mineral resources and confirm the expected
extensions to mine life). If the Offering is not successfully
completed, then the Company is expected to have challenges
continuing as a going concern (the amount of time will depend upon
whether management can negotiate an extension to the term of the
bridge-loan owing to Auramet International LLC and management's
ability to generate sufficient cash flow from the current
infrastructure and equipment). If no funds are raised
pursuant to the Offering or any alternative transaction and if the
term of the bridge-loan owing to Auramet International LLC is not
extended, then the liquidity crisis will occur on July 15, 2019 when the bridge loan is due to be
repaid. However, with the support of the Lead Orders, the
Company is currently quite confident that the Offering will be
successfully completed by early July
2019.
In regard to deciding to proceed with the Offering, no member of
the Finance & Corporate Development Committee or the Company's
Board of Directors had a materially contrary view or any material
disagreement regarding the decision to proceed with the
Offering. If the Offering was the subject of a shareholder
vote, then the Company's Board of Directors would unanimously
recommend that the shareholders vote to approve the Offering.
About Jaguar Mining Inc.
Jaguar Mining Inc. is a Canadian-listed junior gold mining,
development, and exploration company operating in Brazil with three gold mining complexes and a
large land package with significant upside exploration potential
from mineral claims covering an area of approximately 64,000
hectares. The Company's principal operating assets are located in
the Iron Quadrangle, a prolific greenstone belt in the state of
Minas Gerais and include the Turmalina Gold Mine Complex and Caeté
Mining Complex (Pilar and Roça Grande
Mines, and Caeté Plant). The Company also owns the Paciência
Gold Mine Complex, which has been on care and maintenance since
2012 and the Roça Grande Mine which has been on care and
maintenance since April 2018.
Additional information is available on the Company's website at
www.jaguarmining.com.
Forward-Looking Statements
Certain statements in this news release constitute
"forward-looking information" within the meaning of applicable
Canadian securities legislation. Forward-looking statements and
information are provided for the purpose of providing information
about management's expectations and plans relating to the future.
All of the forward-looking information made in this news release is
qualified by the cautionary statements below and those made in the
Company's other filings with the securities regulators in
Canada. Forward-looking
information contained in forward-looking statements can be
identified by the use of words such as "are expected," "is
forecast," "is targeted," "approximately," "plans," "anticipates,"
"projects," "anticipates," "continue," "estimate," "believe" or
variations of such words and phrases or statements that certain
actions, events or results "may," "could," "would," "might," or
"will" be taken, occur or be achieved. All statements, other than
statements of historical fact, may be considered to be or include
forward-looking information. This news release contains
forward-looking information regarding, among other things,
fundraising, capital markets, expected sales, production
statistics, ore grades, tonnes milled, recovery rates, cash
operating costs, definition/delineation drilling, the timing and
amount of estimated future production, costs of production, capital
expenditures, costs and timing of the development of projects and
new deposits, success of exploration, development and mining
activities, currency fluctuations, capital requirements, project
studies, mine life extensions, restarting suspended or disrupted
operations, continuous improvement initiatives, capital
improvements, operating efficiencies, and resolution of pending
litigation. The Company has made numerous assumptions with respect
to forward-looking information contained herein, including, among
other things, assumptions about the estimated timeline for: the
raising of sufficient additional capital; the continued development
of its mineral properties; the supply and demand for, and the level
and volatility of the price of, gold; the accuracy of reserve and
resource estimates and the assumptions on which the reserve and
resource estimates are based; the receipt of necessary permits;
market competition; ongoing relations with employees and impacted
communities; political and legal developments in any jurisdiction
in which the Company operates being consistent with its current
expectations including, without limitation, the impact of any
potential power rationing, tailings facility regulation,
exploration and mine operating licenses and permits being obtained
an renewed and/or there being adverse amendments to mining or other
laws in Brazil and any changes to
general business and economic conditions. Forward-looking
information involves a number of known and unknown risks and
uncertainties, including among others: the risk of Jaguar not
meeting the forecast plans regarding its operations and financial
performance; uncertainties with respect to the price of gold,
labour disruptions, mechanical failures, increase in costs,
environmental compliance and change in environmental legislation
and regulation, weather delays and increased costs or production
delays due to natural disasters, power disruptions, procurement and
delivery of parts and supplies to the operations; uncertainties
inherent to capital markets in general (including the sometimes
volatile valuation of securities and an uncertain ability to raise
new capital) and other risks inherent to the gold exploration,
development and production industry, which, if incorrect, may cause
actual results to differ materially from those anticipated by the
Company and described herein. In addition, there are risks and
hazards associated with the business of gold exploration,
development, mining and production, including environmental
hazards, tailings dam failures, industrial accidents and workplace
safety problems, unusual or unexpected geological formations,
pressures, cave-ins, flooding, chemical spills, procurement fraud
and gold bullion thefts and losses (and the risk of inadequate
insurance, or the inability to obtain insurance, to cover these
risks). Accordingly, readers should not place undue reliance on
forward-looking information.
For additional information with respect to these and other
factors and assumptions underlying the forward-looking information
made in this news release, see the Company's most recent Annual
Information Form and Management's Discussion and Analysis, as well
as other public disclosure documents that can be accessed under the
issuer profile of "Jaguar Mining Inc." on SEDAR at www.sedar.com.
The forward-looking information set forth herein reflects the
Company's reasonable expectations as at the date of this news
release and is subject to change after such date. The Company
disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, other than as required by
law. The forward-looking information contained in this news release
is expressly qualified by this cautionary statement.
SOURCE Jaguar Mining Inc.
