TORONTO,
In recommending that Shareholders vote "FOR" the Arrangement, ISS stated, among other things:
- "The special committee appears to have conducted a robust process, considering a number of potential transaction structures, counterparties, and financing alternatives."
- "In light of the significant premium, the favourable market reaction, the reasonable strategic rationale and the absence of significant governance concerns, shareholder approval of this resolution is warranted."
The Meeting and Voting at the Meeting
The special meeting of Shareholders called for the purposes of considering the Arrangement (the "Meeting") will be held on
At the Meeting, Shareholders will be asked to vote for or against the Arrangement. If the Arrangement becomes effective, Shareholders will be entitled to receive
Detailed information regarding the Arrangement, the Meeting, and voting procedures is included in the Company's management information circular dated
THE DEADLINE TO VOTE YOUR SHARES IS
Non-registered Shareholders (i.e., those who hold Shares through an intermediary, such as a broker) will need to submit their voting instructions prior to the deadline in accordance with the instructions received from their brokers or other intermediaries.
Shareholders who have questions or require assistance voting their Shares should contact TMX Investor Solutions, the Company's proxy solicitation agent, by telephone toll-free in
Supplemental Transaction Disclosure to Assist Shareholders in Assessing the Strategic Rationale for, and the Benefits of, the Arrangement
The Circular contains detailed information with respect to the events and circumstances leading up to the execution of the Arrangement Agreement and the Special Committee's and the Board's unanimous decision to recommend that Shareholders vote for the Arrangement. The Company wishes to provide supplemental disclosure to assist Shareholders in understanding the strategic rationale for and benefits of the Arrangement.
In particular, as described extensively in the Company's public disclosure, the Company wishes to highlight for Shareholders that management and the Board collectively own 12,239,300 Shares, representing approximately 8.7% of the outstanding Shares and have the same interest in maximizing the value of the Shares as all Shareholders. All of the directors and officers that own Shares or options to purchase Shares ("Options") have entered into voting and support agreements agreeing to vote in favour of the Arrangement, and have voted their Shares.
Additional Background and Strategic Rationale for the Arrangement
The Circular describes an exhaustive process by which the Company sought to identify and execute a strategic financing transaction to develop the 3Q Project beginning in 2018, and which culminated in a more structured process beginning in
Three of these interested parties submitted proposals to negotiate a joint venture transaction that would provide the Company with development financing, which included an offtake component. One party submitted an equity financing proposal. One of the parties that proposed the joint venture financing transaction subsequently indicated its interest in an all-cash acquisition of the Company as an entirety as an alternative to the joint venture. After the parties in the process were advised by the Company's financial advisor of an alternative acquisition proposal, another party in the process subsequently also indicated its interest in an acquisition of all of the Shares for cash consideration. Zijin entered the process later than other parties and only proposed an all-cash acquisition of all of the Shares. The price per Share proposed in each of these all-cash indicative offers was below the price ultimately offered by Zijin in connection with the Arrangement.
The Company explored and was open to a wide variety of potential transaction structures in its process, such as combinations of joint venture, debt financing, equity financing, and offtake arrangements, in addition to an outright sale of the Company. Through the feedback and experience received in the process, the Company came to believe that most credible potential counterparties capable of executing a transaction were interested in the Company for the purpose of securing a long-term supply of lithium carbonate (offtake) from the 3Q Project at preferential pricing, however, any indicative terms for such transactions would have required the Company to deliver the partner an amount of offtake that was disproportionate to the proposed investment in the Company and none of these proposals were ultimately seen as maximizing value for Shareholders. Although the Company was willing to explore preferential offtake arrangements as a component of project financing alternatives, the Company did not believe it was in the best interests of the Company to enter into significant offtake arrangements as part of a strategic transaction without a significant preferential financing package and give up control of product supply, as the Company believed it would be preferable to preserve potential long-term upside in lithium carbonate pricing for the Company and Shareholders.
However, any upside from lithium carbonate pricing to the Company depended on eventual production from the 3Q Project.
Given the difference in negotiating incentives between the Company, that is incentivized to sell lithium carbonate at the highest price, and counterparties, that desired a secure supply of lithium carbonate, the Company believes that certain counterparties in the process ultimately came to realize it was in their interests to, and began to express a preference for, acquiring all of the Shares at a premium to the trading price in order to achieve the objective of securing a supply of lithium carbonate. Taking into account the above considerations, the likely available strategic alternatives and the likelihood of execution of a financing transaction that would advance the 3Q Project, and the significant risk of diminishing equity value from continuing as a stand-alone entity, the Special Committee, empowered to consider a range of alternatives, including the status quo, determined an acquisition of the Shares at a significant premium to the trading price would also be the best way to maximize and crystallize value for the Shareholders while at the same time minimizing significant future financing, development, country and operational risks. Given these risks, the "status quo" for the Company included the need to consummate a strategic transaction with a third-party, and the "status quo" absent the completion of such a transaction was not a long-term viable alternative.
The Arrangement was the superior alternative that emerged from a range of carefully considered alternatives, including continuing as a stand-alone entity, and the purchase price of
The Timing of Release of the Feasibility Study Results did not have any Impact on the Negotiations that Resulted in the Arrangement
The Circular describes the circumstances in which the Company determined to re-engage with potential strategic partners more actively in
As the preliminary results of the various work streams making up the Feasibility Study became available, indications were that the study would generally confirm the publicly disclosed economic parameters in the Company's pre-feasibility study, the results of which were announced in the spring of 2019, without material differences, either positive or negative. In particular, the preliminary capital and operating expenditures estimates, key outcomes of the Feasibility Study, were available to interested parties and their advisors for review in connection with any potential offer, subject to the caveat that indicative results were subject to possible change prior to the final offer submission date once external engineers finished their work and vetting procedures to complete the study. The Company carefully considered the impact that the results of the study, and not waiting for their public release, might have on the process, and determined the public release of the final study results would not affect the strategic process that resulted in the Arrangement. Taking into account the results of the Feasibility Study and of the process, the Company does not believe the results of the Feasibility Study had or would have had any impact on negotiations with any participant.
Addendum to Previously Filed Circular
The Company will file an addendum to the Circular under the Company's profile on www.sedar.com. The addendum will include the additional background information above and further supplemental disclosure regarding collateral benefits to be received by certain related parties of the Company, as initially disclosed in the Circular.
Shareholder Questions and Assistance
If you have any questions on the Arrangement or require assistance voting your Shares, please contact our proxy solicitation agent, TMX Investor Solutions at 1-800-294-5107 toll-free in
About
The 3Q Project is located in the Province of Catamarca, the largest lithium producing area in
Additional information regarding
Neither
Cautionary Note Regarding Forward Looking Statements - Certain information set forth in this news release may contain forward-looking statements. Such statements include but are not limited to, statements with respect to the anticipated date of the Meeting, the date for the public audience of the Environmental Impact Assessment and the approval of the Catamarca mining authority thereafter, completion of the arrangement with Zijin and the benefits to Shareholders from the Arrangement. Generally, forward-looking statements can be identified by the use of words such as "plans", "expects" or "is expected", "scheduled", "estimates" "intends", "anticipates", "believes", or variations of such words and phrases, or statements that certain actions, events or results "can", "may", "could", "would", "should", "might" or "will", occur or be achieved, or the negative connotations thereof. Forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of the Company, which could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such statements. These risks include, without limitation, the possibility that the Arrangement will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all, due to a failure to obtain or satisfy, in a timely manner or otherwise, required Shareholder, court and regulatory approvals and other conditions of closing necessary to complete the Arrangement or for other reasons, the possibility of adverse reactions or changes in business relationships resulting from the announcement or completion of the Arrangement, political and regulatory risks associated with mining and exploration activities and operations in
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