Waterton Precious Metals is investor; unit also to buy mineral rights
By Susanna Moon
Chicago, May 16 – Terraco Gold Corp. arranged a $12.03 million 0.05% five-year senior convertible debenture with Waterton Precious Metals Fund II Cayman, LP.
The debenture may be converted into either common shares of Terraco at a price of C$0.18 per share, representing a 57% premium to the company’s 20-day volume-weighted average price of C$0.1149 as of May 13, or into shares of TGC Holdings, according to a company announcement.
The notes are putable upon a change of control.
For four years, Waterton will be prohibited from owning more than 19.99% of the Terraco shares. During the life of the notes, Terraco shareholder approval will be required for Waterton to exercise the parent conversion option to acquire 20% or more of the outstanding Terraco shares.
For the first three years, Waterton will be prohibited from making any purchases or any unsolicited offers to acquire Terraco shares, except with respect to the parent conversion option and the equity participation right.
Waterton may not exercise the parent conversion option or the subsidiary conversion option until the second anniversary of closing unless the Terraco shares trade at or above C$0.40 for 20 consecutive days before the second anniversary.
Beginning on the third anniversary, provided the Terraco shares trade at or above C$0.40 for 20 consecutive days, TGC may redeem all or any of the debentures in exchange for Terraco shares.
TGC may prepay the debenture at any time after the second anniversary of closing.
The company also has entered into definitive agreements with Solidus Resources, LLC, a wholly owned subsidiary of Waterton, in which Waterton will acquire 100% of the company’s claims, leases, title and mineral rights to Waterton’s Spring Valley gold project in Pershing County, Nev., including the company’s moonlight project adjacent to the north of Spring Valley but excluding royalties held by the company in exchange for $7 million in cash and a 2% NSR on the SV proximal assets.
TGC will use placement proceeds, along with $4,053,211 of the sale proceeds, to exercise options to acquire royalties over Spring Valley, including a 3% net smelter returns royalty covering a majority of the Spring Valley resource area and a 0.5% NSR covering the balance of the Spring Valley resource area.
Haywood Securities Inc. is the financial adviser. Gowling WLG (Canada) LLP is the Canadian legal counsel, and Erwin & Thompson LLP and Dorsey & Whitney LLP are the U.S. legal counsel.
Terraco is a Vancouver, B.C.-based gold exploration company.
| Issuer: | Terraco Gold Corp.
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| Issue: | Senior convertible debenture
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| Amount: | $12.03 million
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| Maturity: | Five years
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| Coupon: | 0.05%
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| Conversion price: | C$0.18
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| Conversion premium: | 57% to 20-day VWAP as of May 13
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| Put option: | Upon change of control
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| Call: | Company may force conversion beginning on third anniversary, provided the Terraco shares trade at or above C$0.40 for 20 consecutive days; TGC may prepay the debenture at any time after the second anniversary
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| Warrants: | No
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| Settlement date: | May 30
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| Investor: | Waterton Precious Metals Fund II Cayman, LP
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| Stock symbol: | Canada: TEN
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| Stock price: | C$0.12 at close May 13
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| Market capitalization: | C$18.67 million
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