Lupaka Gold Corporation and Andean American Gold Corp., announced the signing of a Binding Letter of Intent that provides for a combination of the two companies to create a new Peru-focused gold exploration and development company.
Under the terms of the Business Combination, Andean American shareholders will receive 0.245 shares of Lupaka for each share of Andean American owned, resulting in the shareholders of Andean American owning 45.27% of Lupaka upon the completion of the Business Combination.
The boards of directors of both Lupaka and Andean American have determined that the proposed Business Combination is in the best interests of their respective companies, based on a number of factors, including a fairness opinion received from Andean American's financial advisor, the details of which will be provided in the management information circular to be provided to shareholders. Each company's board of directors unanimously approved the terms of the proposed business combination and intends to recommend that their respective shareholders vote in favour of the transaction.
Lupaka and Andean American believe that the Business Combination will result in significant benefits to the shareholders of each company, including:
- Creating a Peru-focused gold explorer and developer with a combined Measured and Indicated resource estimate of approximately 2.1 million ounces of gold equivalent and an additional combined Inferred resource estimate of approximately 0.9 million ounces of gold equivalent(1,2);
- Geographic diversification and balance through an asset base spread across three regions of Peru, while taking advantage of country-wide synergies, relationships and expertise;
- Exploration focus on the potential of the Crucero gold project, with a view to drive shareholder value through the addition of new estimated resources and discoveries on 10 additional targets within the project area;
- Near-term underground gold and poly-metallic development potential at Invicta;
- Exposure to the substantial and prospective AntaKori copper-gold deposit through a strategic 17% stake in Southern Legacy Minerals Inc.;
- A platform to pursue further accretive acquisitions with a pro forma cash balance of approximately $18 million as at June 30, 2012;
- Complementary on-site management teams and in-country experience offering relative strengths in exploration, permitting, community relations and development;
- Proven management track record of creating shareholder value through growth and acquisitions; and,
- A merging of two complementary shareholder bases.
"We believe Andean American complements and significantly advances Lupaka's goal of creating a pan-Peruvian precious metals focused company to create shareholder value through exploration, community and government relations, strong industry associations, environmental sensitivity and attracting and retaining the most qualified workforce possible," said Eric Edwards, President, CEO & Director of Lupaka. "Invicta will add additional estimated gold resources as described above and the strategic stake in Southern Legacy will provide additional exposure to another highly prospective deposit, in partnership with an emerging Latin American metals company."
"Andean American has conducted a strategic review over the past eight months and reviewed many potential transactions and partnerships. We believe this proposed transaction provides our shareholders with the most value for our current assets, along with the continued exposure to positive developments at Invicta and AntaKori in addition to the exciting potential of Crucero," commented David Rae, President, CEO & Director of Andean American. "Lupaka has proven highly effective in advancing the Crucero project since acquiring its initial ownership position in 2009, and we believe the new management team and board of directors will continue its success at Crucero, and unlock additional value at Invicta."
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