VANCOUVER, B.C. — November 27, 2014 — Desert Star Resources Ltd. (“Desert Star“)(TSX-V: DSR) and Providence Resources Corp. (“Providence“)(TSX-V: PV) announce they have entered into a Letter of Intent to amalgamate the two companies (the “Amalgamation“). The amalgamated entity (“Amalco“) will have a primary focus on the identification, acquisition and development of copper and gold projects in the Southwestern USA.
“The amalgamation of Desert Star and Providence is a good strategic fit as both companies share several individuals who comprise their management and exploration teams. The amalgamation exploits an opportunity to combine the prospective assets of Desert Star with the cash position of Providence. The combined entity will result in a unified strategic focus and will be well-positioned to continue developing prospective assets in the Southwestern US and pursuing innovative generative programs to feed a pipeline of prospective opportunities.” stated Vince Sorace, President and Chief Executive Officer of Desert Star and Providence Resources.
The respective boards of directors of Providence and Desert Star have approved a proposed amalgamation of the two companies pursuant to the provisions of the Business Corporations Act (British Columbia). In reviewing the proposed amalgamation, the independent members of the board of directors of each of the amalgamating companies considered the merits and fairness of the transaction to its shareholders.
The proposed amalgamation is subject to the approval of the shareholders of Providence and Desert Star and the approval of applicable regulatory authorities. The amalgamating companies plan on holding special meetings of their respective shareholders on such a date as agreed to with regulators to consider the proposed amalgamation and matters related thereto. The proposed amalgamation will require the statutory approval of at least two thirds of the shareholders of each company voting on the matters.
A joint information circular in respect of the special meeting of shareholders of each of the amalgamating companies will be mailed to the shareholders when formal notices of the special meetings are given.
In connection with the Amalgamation, Providence will advance Desert Star $250,000 as an unsecured, non-interest bearing loan (the ” Loan“) which Loan will be fully refundable to Providence within 30 business days if the Amalgamation does not complete.
Independent Directors and Amalgamation Ratio
Providence’s directors are Steve Bajic, Vince Sorace and Keith Henderson. Desert Star’s directors are Martin Bajic, Chris Taylor, Vince Sorace and Keith Henderson. As Desert Star have two directors in common with Providence, being Vince Sorace and Keith Henderson, Steve Bajic is the only independent director of Providence and Martin Bajic and Chris Taylor are the independent directors of Desert Star.
The independent directors of the Desert Star and Providence determined the applicable share exchange ratios for which the existing common shares of the respective amalgamating companies will be exchanged for Amalco common shares to former shareholders of the amalgamating companies based on the following share exchange ratio:
- for every one common share of Providence, shareholders will receive approximately 0.3 of an Amalco common share and 0.3 of a common share purchase warrant of Amalco (each whole warrant, an “Amalco Warrant”). Each Amalco Warrant will entitle the holder to acquire an additional share of Amalco (an “Amalco Warrant Share”) for a period of two years at a price of $0.25 per Amalco Warrant Share; and
- for every one common share of Desert Star, shareholders will receive one Amalco common share.
The amalgamating companies intend that Amalco will adopt a new 10% rolling stock option plan concurrent with the completion of the amalgamation. A resolution for the adoption of the new stock option plan will be presented at the special meetings and will be subject to approval by a majority vote.
Desert Star’s outstanding warrants (the “Desert Star Warrants“) will be converted into warrants of Amalco, on a one-for-one basis, on the same terms and conditions of as the Desert Star Warrants.
Desert Star’s has outstanding convertible loans in the aggregate amount of $495,000 (the “Convertible Loans“). The Convertible Loans are convertible into units of Desert Star comprised of one common share and one transferable share purchase warrant. Each warrant is exercisable by the holder to purchase an additional common share of Desert Star for a period of 12 months from the issuance of the warrant at an exercise price of $0.25 per share. On completion of the Amalgamation the Convertible Loans will become liabilities of Amalco and will be convertible to acquire units of Amalco on the same terms and conditions set forth above.
Advance Notice Policy for Nominating Directors
Both of Desert Star and Providence have adopted an advance notice policy (the “Policy“) to provide their shareholders, directors and management with a clear framework for nominating directors. The Policy is meant to: (i) facilitate an orderly and efficient annual general and/or special meeting process; (ii) ensure all shareholders receive adequate notice of director nominations and sufficient information with respect to all nominees; and (iii) allow shareholders to register an informed vote, having been afforded reasonable time for appropriate deliberation. The Articles of Amalco will include advance notice provisions as set forth in the Policy.
Related Party Transaction
If the Amalgamation is deemed to be a “related party transaction” as that term is defined under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (” MI 61-101“), Desert Star and Providence will need to obtain “majority of the minority” approval of the Amalgamation after excluding the votes cast in respect of common shares held by certain directors and officers of Desert Star and Providence.
Desert Star will use its best efforts to complete a private placement (the “Private Placement“) for gross proceeds of up to $1,500,000 through the issuance of units (each a “Unit“) of Desert Star, at a price of $0.15 per Unit. Each Unit is comprised of one common share and one common share purchase warrant (a ” Warrant“). Each Warrant entitles the holder to acquire one additional share of Desert Star for a period of two years from the date of issuance at a price of $0.25 per share.
Desert Star will pay finder’s fees in accordance with TSX Venture Exchange policies. Proceeds of the Private Placement will be used for the continued exploration of Desert Star’s properties and for general working capital purposes.
All securities issued pursuant to the Private Placement will be subject to a four month and a day hold period.
About Desert Star and Providence
Desert Star is a Vancouver-based mineral exploration company focused on the identification, acquisition and development of copper and gold projects located in top-tier mineral belts in the southwestern United States that contain significant historical production, existing mining infrastructure and an established mining culture.
Providence Resources is a precious and base metal junior exploration company focused on creating shareholder value through acquisition and aggressive exploration in established, highly endowed mineral belts.
On behalf of the Board of
DESERT STAR RESOURCES LTD AND PROVIDENCE RESOURCES CORP.
Vince Sorace, President and CEO
For further information please contact:
Desert Star Resources Ltd.: email@example.com or visit our website at www.desertstar.ca.
Providence Resources Corp.:firstname.lastname@example.org or visit our website at www.pvresources.ca.
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.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the “United States”, as such term is defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”). The securities have not been and will not be registered under the U.S. Securities Act or any state securities laws and may not be offered or sold in the United States unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration requirements is available.