Business Context and Reporting Period
This Form 8-K, dated March 14, 2016, reports that Paramount Gold Nevada Corp. ("Paramount") entered into a definitive Arrangement Agreement to acquire Calico Resources Corp. ("Calico"). The transaction targets Calico's principal asset, the Grassy Mountain Gold Project in Oregon. The deal is structured as a Plan of Arrangement under British Columbia law and requires approval from the Supreme Court of British Columbia, as well as shareholder approval from both companies.
Key Financial Metrics and Transaction Terms
- Exchange Ratio: Each outstanding Calico common share converts into 0.07 of a Paramount common share.
- Ownership Structure: Post-closing, existing Calico shareholders are projected to own approximately 46% of Paramount's common stock, while existing Paramount shareholders will retain 54%. On a fully-diluted basis, Paramount shareholders are expected to hold 57% and Calico shareholders 43%.
- Interim Financing: Paramount agreed to provide Calico with an interim loan of up to US$800,000. This loan is convertible into Calico shares at CDN$0.10 per share (subject to TSX Venture Exchange approval) and is secured by all of Calico's assets.
- Breakup Fees: A reciprocal cash breakup fee of $300,000 is payable by either party if the agreement is terminated under specified circumstances, such as a change in board recommendation.
- Financial Statements: This filing does not provide revenue, profit, cash flow, margin, or debt metrics for either company.
Material Changes and Conditions
The primary material change is the entry into the acquisition agreement. The transaction is subject to several closing conditions, including:
- Receipt of interim and final orders from the Supreme Court of British Columbia.
- Approval by Calico and Paramount shareholders.
- Listing approval by NYSE MKT LLC for the new shares.
- Absence of a material adverse effect on either party.
Calico has agreed not to solicit alternative transaction proposals. Certain Calico shareholders have entered into voting and support agreements to vote in favor of the transaction.
Outlook, Risks, and Contingencies
The completion of the transaction is contingent upon regulatory and shareholder approvals. Key risks include the failure to obtain court orders, shareholder rejection, or the occurrence of a material adverse effect. The interim loan to Calico is repayable 90 days following the termination of the agreement if the transaction does not close. The filing notes that the description of the agreements is not complete and refers to the full exhibits for detailed rights and obligations.
Investor Verification Checklist
- Verify the status of shareholder approval meetings for both Paramount and Calico.
- Confirm the receipt of the interim order from the Supreme Court of British Columbia.
- Review the full Arrangement Agreement (Exhibit 2.1) for detailed representations and warranties.
- Monitor the status of the NYSE MKT LLC listing approval for the new shares.
- Assess the impact of the 46% ownership dilution for existing Paramount shareholders.