NextSource Materials Inc 6-K, filed Apr 20, 2021
NextSource Materials Inc. (NSRCF)
6-K
2021-04-20
For: 2021-04-20
View Original
Added on
April 12, 2026
About this 6-K
NextSource Materials Inc filed this 6-K on April 20, 2021.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the
month of April,
2021
Commission
File Number 000-51151
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NEXTSOURCE MATERIALS INC.
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(Translation
of registrant’s name into English)
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1940-130 King Street West Toronto, Ontario, Canada M5X
2A2
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(Address
of principal executive office)
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Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F
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Form
20-F
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☒
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Form
40-F
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☐
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Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule
101(b)(1):
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Yes
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☐
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No
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☒
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Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule
101(b)(7):
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Yes
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☐
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No
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☒
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Exhibits
Notice of the
Special Meeting of Shareholders and Management Information Circular
as filed on SEDAR on April 16, 2021.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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NEXTSOURCE
MATERIALS INC.
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Date: April 20,
2021
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By:
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/s/ Marc Johnson
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Marc Johnson |
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Chief Financial Officer |
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Exhibit 99.1
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AND
MANAGEMENT INFORMATION CIRCULAR
For the Special Meeting of Shareholders
to be held on
May 17, 2021
10:00 a.m. (Toronto time)
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The Board of Directors unanimously
supports the Transaction Resolution discussed in the enclosed
management information circular and recommends that Shareholders
vote FOR
the Transaction Resolution approving
the Second Private Placement with Vision Blue Resources
Limited.
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NEXTSOURCE MATERIALS INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
I am
pleased to give you notice that a special meeting (the
“Meeting”) of
the holders (the “Shareholders”) of common shares
(the “Shares”)
of NextSource Materials Inc. (the “Company”) will be held in a
virtual-only format, which will be conducted via live audio webcast
available online using https://virtual-meetings.tsxtrust.com/1110 on
May 17, 2021 at 10:00 a.m. (Toronto time) for the following
purposes:
1.
To approve, in
accordance with the policies of the Toronto Stock
Exchange, a
resolution, the full text of which is set forth in Appendix B to
the accompanying Circular, authorizing the Company to issue, on a
private placement basis,
232,142,857 units of the Company (the
“Units”),
consisting of 232,142,857 common shares in the capital of the
Company (the “Shares”) and 232,142,857 common
share purchase warrants of the Company (the “Warrants”), to Vision Blue
Resources Limited (“Vision
Blue”), at a price of C$0.07 per Unit for gross
proceeds of approximately US$12.4 million, pursuant to the
investment agreement dated February 8, 2021 entered into between
the Company and Vision Blue, as the same may be amended,
supplemented or otherwise modified in accordance with the terms
therein (the “Second Private
Placement”).
2.
To transact other
business as may properly come before the Meeting or any
adjournments thereof.
Particulars
of the Second Private Placement are set forth in the accompanying
management information circular of the Company dated April 6, 2021
(the “Circular”). The Board of Directors
has fixed the close of business on April 5, 2021 as the record date
for the Meeting. Only Registered Shareholders at such time are
entitled to notice of, and to vote at, the Meeting.
The Company will be using the notice-and-access model
provided under National Instrument 51-102 – Continuous Disclosure Obligations and
National Instrument 54-101 – Communication with Beneficial Owners of
Securities of a Reporting Issuer (“Notice and Access”) for the
delivery of the Circular and other related materials of the Meeting
(the “Meeting
Materials”) to Shareholders. Under Notice and Access,
instead of receiving printed copies of the Meeting Materials,
Shareholders receive a package in the mail containing: (i)
information on the Meeting date, location and purpose; (ii) a form
of proxy or voting instruction form so Shareholders can vote their
Shares; and (iii) information on how they may electronically access
the Meeting Materials. However, the Company will mail paper copies
of the Meeting Materials to those Registered and Non-Registered
Shareholders who have previously elected to receive paper copies of
the Meeting Materials. The Meeting Materials will be available at
https://docs.tsxtrust.com/2084 on or about April 16, 2021 and will
remain on the website for one full year thereafter. Meeting
Materials are also available upon request, without charge, by
e-mail at TMXEInvestorServices@tmx.com or by calling toll-free
1-866-600-5869, or can be accessed online on SEDAR at www.sedar.com on
or about April 16, 2021.
ALL SHAREHOLDERS ARE ENCOURAGED TO VOTE IN ADVANCE USING THE FORM
OF PROXY/VOTING INSTRUCTION FORM OR USING
VOTEPROXYONLINE.COM.
If you
hold your Shares directly (that is, as a “Registered Shareholder”),
complete, date, sign and return the accompanying form of proxy in
the enclosed envelope to the TSX Trust Company, 100 Adelaide Street
West, Suite 301, Toronto, Ontario, Canada, M5H 4H1, Attention:
Proxy Department, by 10:00 a.m. (Toronto time) on May 13, 2021. If
you hold your Shares in "street name" (that is, as a
“Non-Registered
Shareholder”), complete, date and sign the voting
instruction form that has been provided by your broker, bank or
other nominee and return it in the enclosed envelope in accordance
with the instructions provided by your broker, bank or other
nominee. You can also submit your
proxy votes online through voteproxyonline.com
and using the control number that
will be provided on the form of proxy/voting instruction
form.
Any
Shareholder that would like to attend the Meeting can join
ELECTRONICALLY by logging
into the live audio webcast available online using https://virtual-meetings.tsxtrust.com/1110.
Registered Shareholders that attend electronically and that have
not already voted by proxy will be permitted to vote their Shares
during the Meeting by voting when prompted during the
Meeting.
The
Meeting for which this notice is given may be adjourned without
further notice other than announcement at the Meeting or any
adjournment thereof. Any business for which notice is hereby given
may be transacted at any such adjourned Meeting.
BY
ORDER OF THE BOARD OF DIRECTORS
(signed) “Craig Scherba”
Craig
Scherba, President and Chief Executive Officer
2
NEXTSOURCE MATERIALS INC.
MANAGEMENT INFORMATION CIRCULAR
FOR THE SPECIAL MEETING OF SHAREHOLDERS
INTRODUCTION
Unless
otherwise stated, the information contained in this Circular is as
of April 6, 2021.
No
person is authorized to give any information or to make any
representation other than those contained in this Circular and, if
given or made, such information or representation should not be
relied upon as having been authorized by the Company. The delivery
of this Circular shall not, under any circumstances, create an
implication that there has not been any change in the information
set forth herein since the date hereof.
All
references to Shareholders in this Circular and the accompanying
form of proxy and notice of Meeting are to be Shareholders of
record unless specifically stated otherwise. All dollar amounts
referenced herein, unless otherwise indicated, are expressed in
United States dollars and Canadian dollars are referred to as
“C$”. All capitalized terms used but not otherwise
defined in this Circular shall have the meanings ascribed to such
terms as set forth in Appendix A. For greater certainty, all
references herein to “Shares” are on a pre-Share
Consolidation basis.
The
Company is listed on the TSX in Canada (ticker: NEXT), on the OTCQB
in the United States of America (ticker: NSRC) and on the
Frankfurt, Germany Stock Exchange (ticker: A1CXW3). The Company's
principal business office is located at 130 King Street West,
Exchange Tower, Suite 1940, Toronto, Ontario, Canada M5X
2A2.
SOLICITATION OF PROXIES
This
Circular is being sent to the Shareholders of NextSource Materials
Inc. (the “Company”) in connection with the
solicitation by or on behalf of management of the Company by its
Board of Directors (the “Board”) in connection with a
special meeting of Shareholders (the “Meeting”) to be held in a
virtual-only format, which will be conducted via live audio webcast
available online using https://virtual-meetings.tsxtrust.com/1110
on May 17, 2021 at 10:00 a.m. (Toronto time), or at any adjournment
or postponement thereof.
Proxies
will be solicited primarily by mail but may also be solicited
personally, by telephone or electronically by the regular employees
of the Company at nominal costs. The proxy cut-off date for Shares
to be voted in advance of the Meeting will be on May 13, 2021 at
10:00 a.m. (Toronto time).
Record Date
Registered
Shareholders at the close of business on April 5, 2021, the record
date for the Meeting, are entitled to receive this Circular and to
vote at the Meeting and at any adjournment or postponement thereof.
Shareholders have one vote per Share on each matter to be acted
upon. A list of the Registered Shareholders entitled to vote will
be available at the Meeting and for 10 days prior to the Meeting,
for any purpose germane to the Meeting, between the hours of 9:00
a.m. and 4:30 p.m. (Toronto time) at the Company’s principal
office at 130 King Street West, Exchange Tower, Suite 1940,
Toronto, Ontario, Canada M5X 2A2.
3
Notice and Access
The
Company will be using the notice and access model
(“Notice and
Access”) provided under National Instrument 51-102
– Continuous Disclosure
Obligations and National Instrument 54-101 –
Communication with Beneficial
Owners of Securities of a Reporting Issuer ("NI 54-101") for the delivery of the
Circular and other related materials of the Meeting (the
“Meeting
Materials”) to Shareholders for the Meeting. Under
Notice and Access, instead of receiving printed copies of the
Meeting Materials, Shareholders receive a package (the
“Notice and Access
Package”) in the mail containing: (i) information on
the Meeting date, location and purpose; (ii) a form of proxy or
voting instruction form so Shareholders can vote their Shares; and
(iii) information on how they may electronically access the Meeting
Materials. However, the Company will mail paper copies of the
Meeting Materials to those Shareholders who have previously elected
to receive paper copies of the Meeting Materials.
The
Meeting Materials will be available at
https://docs.tsxtrust.com/2084 on or about April 16, 2021 and
will remain on the website for one full year thereafter. Meeting
Materials are also available upon request, without charge, by
e-mail at TMXEInvestorServices@tmx.com or by calling toll-free
1-866-600-5869, or can be accessed online on SEDAR at www.sedar.com on
or about April 16, 2021.
To
receive the Meeting Materials in advance of the proxy deposit date
and Meeting date, requests for printed copies must be received at
least five business days (i.e. by May 6, 2021) in advance of the
proxy deposit date and time set out in the accompanying form of
proxy or voting instruction form. Shareholders may make this
request by following the instructions on their form of proxy or
voting instruction form.
Virtual Meeting
ALL SHAREHOLDERS ARE ENCOURAGED TO VOTE IN ADVANCE USING THE FORM
OF PROXY/VOTING INSTRUCTION FORM OR USING
VOTEPROXYONLINE.COM.
Any
Shareholder that would like to attend the Meeting can join
ELECTRONICALLY by logging
into the live audio webcast available online using https://virtual-meetings.tsxtrust.com/1110.
Registered Shareholders that attend electronically and that have
not already voted by proxy will be permitted to vote their Shares
during the Meeting by voting when prompted during the
Meeting.
Registered Shareholders
If your
Shares are registered directly in your name with the
Company’s transfer agent, TSX Trust Company, you are
considered, with respect to those Shares, a registered Shareholder
(each, a “Registered
Shareholder”). The Notice and Access Package has been
sent directly to you on the Company’s behalf at the address
on file with TSX Trust Company. The Company has engaged the TSX
Trust Company, to handle the setup, mailing and tabulation of
proxies in relation to the Meeting. See “Manner of Voting and Exercise of
Discretion by Proxies – Voting Instructions for Registered
Shareholders” for more detailed information on how to
vote your Shares.
Non-Registered Shareholders
If your
Shares are held in “street name” through a broker, bank
or other nominee (such as CDS & Co.), you are considered a
non-registered Shareholder (each, a “Non-Registered Shareholder”). In
accordance with NI 54-101, arrangements have been made to
forward proxy solicitation materials to the Non-Registered
Shareholders. The Notice and Access Package has been forwarded, if
requested, to you by your broker, bank or other holder of record
who is considered, with respect to those Shares, the Registered
Shareholder. See “Manner of
Voting and Exercise of Discretion by Proxies – Voting
Instructions for Non-Registered Shareholders” for more
detailed information on how to vote your Shares.
Appointment and Submission of Proxies
The
persons named in the enclosed form of proxy are directors and/or
officers of the Company. A Shareholder has the right to appoint a
person or company (who need not be a Shareholder of the Company),
other than the persons designated in the accompanying form of proxy
or voting instruction form, to represent the Shareholder at the
Meeting. Such right may
be exercised by inserting the name of such person or company in the
blank space provided in the proxy or by completing another proper
form of proxy or voting instruction form. In all cases, the
completed proxy is to be delivered to the TSX Trust Company, 100
Adelaide Street West, Suite 301, Toronto, Ontario, Canada, M5H 4H1,
Attention: Proxy Department, by May 13, 2021 at 10:00 a.m. (Toronto
time). You can also submit your
proxy votes online through voteproxyonline.com
and using the control number that
will be provided on the form of proxy/voting information
form. See “Manner of
Voting and Exercise of Discretion by Proxies – Voting
Instructions for Proxyholders” for more detailed
information on how duly appointed proxyholders can vote such
Shares.
4
Manner of Voting and Exercise of Discretion by Proxies
Your
Shares will be voted at the Meeting in accordance with the
instructions contained in the form of proxy or voting instruction
form. Your Shares will be voted for or against the Transaction
Resolution in accordance with your instructions on any ballot that
may be called for and, if you specify a choice with respect to any
matter to be acted upon, your Shares will be voted
accordingly.
IF YOU RETURN A SIGNED FORM OF PROXY OR VOTING INSTRUCTION FORM
WITHOUT INDICATING YOUR VOTE, YOUR SHARES WILL BE VOTED
“FOR” THE TRANSACTION RESOLUTION PUT FORTH AT THE
MEETING.
Voting Instructions for Registered Shareholders
If you
are a Registered Shareholder, you can vote your Shares using any
one of the following methods:
1.
Via the internet at
www.voteproxyonline.com.;
2.
Signing and
returning the enclosed form of proxy appointing the named persons
or some other person you choose, who need not be a Shareholder, to
represent you as proxyholder and vote your Shares at the Meeting;
OR
3.
Attending the
virtual Meeting on May 17, 2021 and voting during the live webcast
as follows:
a.
Log into
https://virtual-meetings.tsxtrust.com/1110
at least 15 minutes before the start of the Meeting. Registered
Shareholders should allow ample time to check into the Meeting and
to complete the related procedures.
b.
Click on "I have a
control number" and enter your 12-digit control number on your form
of proxy.
c.
Enter the password
(case sensitive): nsm2021
d.
Follow the
instructions to access the Meeting and vote when
prompted.
Voting Instructions for Non-Registered Shareholders
If you
are a Non-Registered Shareholder, you will have received voting
instructions from your broker, bank or other holder of record who
is considered, with respect to those Shares, the Registered
Shareholder. As a Non-Registered Shareholder, you have the right to
direct your broker, bank or other holder of record on how to vote
your Shares by using the voting instruction form included in the
Notice and Access Package or as otherwise provided to you by your
broker, bank, or other nominee. Non-Registered Shareholders should
complete, date and sign the voting instruction form that has been
provided by your broker, bank or other nominee and return it in the
enclosed envelope in accordance with the instructions provided by
your broker, bank or other nominee. Non-Registered Shareholders may
view a live audio webcast of the Meeting by going to
https://virtual-meetings.tsxtrust.com/1110 and clicking on “I
am a guest”.
Voting Instructions for Proxyholders
Duly
appointed proxyholders, including Non-Registered Shareholders who
have been duly appointed by a Registered Shareholder as
proxyholder, can access and vote at the Meeting during the live
audio webcast as follows:
1.
Log into
https://virtual-meetings.tsxtrust.com/1110
at least 15 minutes before the start of the Meeting. Duly appointed
proxyholders should allow ample time to check into the Meeting and
to complete the related procedures.
2.
Enter the control
number (the control number will be provided by TSX Trust Company
provided that you have been duly appointed in accordance with the
procedures outlined in this Circular).
3.
Enter the password
(case sensitive): nsm2021
4.
Follow the
instructions to access the Meeting and vote when
prompted.
5
The
grant of a proxy on the enclosed form of proxy or voting
instruction form does not preclude a Shareholder from voting in
person. Registered Shareholders that attend electronically and that
have not already voted by proxy will be permitted to vote their
Shares during the Meeting by voting when prompted during the
Meeting.
Revocability of Proxies
A
Registered Shareholder may revoke a proxy at any time prior to your
proxy being voted: (i) by delivering to the Company’s
President and Chief Executive Officer, prior to the Meeting, a
written notice of revocation bearing a later date or time than the
proxy; or (ii) by timely delivery of a valid, later dated proxy; or
(iii) by electronically attending the Meeting and voting in person.
Attendance at the Meeting will not by itself constitute revocation
of a proxy. If an adjournment occurs, it will have no effect on the
ability of Registered Shareholders as of the record date to
exercise their voting rights or to revoke any previously delivered
proxies. We do not expect to adjourn the Meeting for a period of
time long enough to require the setting of a new record
date.
Quorum and Approval
The
presence in person or by proxy of two persons holding at least ten
percent (10%) of the outstanding Shares of the Company constitutes
a quorum for the Meeting. There are no cumulative voting rights.
The scrutineer who will be appointed for the Meeting will tabulate
votes cast by proxy or in person and will determine whether or not
a quorum is present.
In
order for the Second Private Placement to proceed, under the rules
of the TSX Company Manual, the Transaction Resolution must be
approved by a majority of the votes cast by the Minority
Shareholders present in person or represented by proxy at the
Meeting or any adjournment or postponement thereof. For greater
certainty, votes in respect of the Shares held by Vision Blue and
its affiliates will be excluded from the vote on the Transaction
Resolution.
Solicitation Costs
The
Company will pay the cost of solicitation of proxies on behalf of
the Board. In addition to mail, proxy solicitation may be made
through other means, including by telephone, electronically, and
personal interview by officers, directors and
employees. The
Company does not intend to pay for an intermediary to deliver to
Objecting Beneficial Owners, or “OBOs” (within the
meaning of such term under NI 54-101, the proxy-related materials and Form 54-101F7),
and therefore OBOs will not receive the materials unless their
intermediary assumes the costs of delivery. The Company is sending
proxy related material to Non-Objecting Beneficial
Owners.
INTEREST OF CERTAIN PERSON IN MATTERS TO BE ACTED UPON
No
director or officer of the Company, nor any person who has held
such a position since the beginning of the last completed financial
year-end of the Company, nor any associate or affiliate of any of
the foregoing persons, has any material interest, direct or
indirect, by way of beneficial ownership of securities or
otherwise, in any matter of business to be acted upon at the
Meeting, other than Sir Mick Davis (Chairman and a director) as the
Chief Executive Officer and founder of Vision Blue, as set forth in
this Circular.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The
Company is authorized to issue an unlimited number of Shares. As of
the date hereof, the Company has 733,806,918 Shares issued and
outstanding, all of which are common shares, each of which carries
the right to one vote on all matters that may come before the
Meeting.
To the
knowledge of the directors and executive officers of the Company,
as of the date hereof, no person or Company beneficially owns, or
controls or directs, directly or indirectly, Shares carrying in
excess of 10% of the voting rights attached to all outstanding
Shares of the Company, other than Vision Blue as set forth in this
Circular.
6
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Circular contains forward-looking statements within the meaning of
U.S. securities laws and forward-looking information within the
meaning of Canadian securities laws (collectively,
“forward-looking
statements”) and are intended to be covered by the
safe harbors provided by such regulations. Any statements that
express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions
or future events or performance (often, but not always, identified
by words or phrases such as “expects”, “is
expected”, “anticipates”, “believes”,
“plans”, “projects”,
“estimates”, “assumes”,
“intends”, “strategy”, “goals”,
“objectives”, “potential”,
“possible” or variations thereof or stating that
certain actions, events, conditions or results “may”,
“could”, “would”, “should”,
“might” or “will” be taken, occur or be
achieved, or the negative of any of these terms and similar
expressions) are not statements of historical fact and may be
forward-looking statements. Forward-looking statements in this
Circular include, but are not limited to, statements with respect
to the timing and completion of the Second Private Placement and
the related transactions (including the Share Consolidation);
Shareholder approval of the Second Private Placement; other
required approvals of the Second Private Placement; the anticipated
use of proceeds from the Financing Package; benefits from the
Financing Package and the strategic partnership with Vision Blue;
the strategies of Vision Blue; future construction and expansion
activities and production estimates in respect of the Molo Graphite
Mine; the impact of the Financing Package on the Company; and the
future success of the Company.
Forward-looking
statements are not guarantees of future performance. They are based
on current expectations that involve a number of risks,
uncertainties and assumptions that could cause our future results
to differ materially from those expressed in any forward-looking
statements. The assumptions upon which such forward-looking
statements are based include, but are not limited to, that the
Company will be successful in its financing activities; the demand
for graphite will develop as anticipated; graphite prices will
remain at or attain levels that would render the Molo Graphite Mine
potentially economic; that any proposed operating and capital plans
will not be disrupted by operational issues, title issues, loss of
permits, environmental concerns, power supply, labour disturbances,
financing requirements or adverse weather conditions; the Company
will continue to have the ability to attract and retain skilled
staff; and there are no material unanticipated variations in the
cost of energy or supplies. The assumptions underlying our
forward-looking statements are based on judgments with respect to a
number of factors that are difficult or impossible to predict
accurately, and many of which are beyond our control. Accordingly,
although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore there can be no
assurance that the results contemplated in forward-looking
statements will be realized.
Important
factors that may cause our actual results to differ from our
forward-looking statements include, but are not limited to, the
risks outlined in the annual information form of the Company dated
September 22, 2020 (the “2020 Annual Information Form”) and in
the interim management’s discussion and analysis of the
Company for the six months ended December 31, 2020 and 2019 (the
“Interim
MD&A”), as well as the risks discussed under the
heading “Risk Factors
Concerning the Financing Package (including the Second Private
Placement) and the Company” in this
Circular.
In
light of the significant uncertainties inherent in our
forward-looking statements, there can be no assurance that the
forward-looking statements contained in this Circular will in fact
occur, and the inclusion of such forward-looking statements in this
Circular should not be construed as a representation by us or any
other person that our predicted or expected outcomes will be
achieved. You should carefully consider the risks disclosed in this
Circular and in the 2020 Annual Information Form and Interim
MD&A before deciding how to vote.
Additionally,
you are cautioned that our Company does not have a policy of
updating or revising forward-looking statements, other than in
compliance with applicable securities laws, and thus, you should
not assume that silence by our management over time means that
actual events are bearing out as estimated in such forward-looking
statements.
PARTICULARS OF THE MATTER TO BE ACTED UPON AT THE
MEETING
APPROVAL OF THE SECOND PRIVATE PLACEMENT
Background to the Financing Package
Management of the Company and the Board has spent considerable time
and effort over the past several years in seeking beneficial and
viable long-term financing and strategic partners in
order to develop the Molo Graphite Mine. Financing discussions were
held with numerous private equity firms, independent financial
service firms, multinational financial service companies/banks,
national development finance institutions, special purpose
acquisition companies, high net-worth individuals, investment
trusts and potential off-takers. These discussions explored
financing alternatives consisting of varying combinations of
equity, debt, royalty/streaming, forward payments for off-take and
project-level ownership stakes. After fulsome analysis of the
financing alternatives available to the Company, the Board
determined there were significant benefits of aligning the Company
with Sir Mick Davis and strategic shareholder Vision Blue. The
following provides background as to how the Financing Package has
evolved to the date hereof.
7
In
mid-August 2020, Robin Borley, the Chief Operating Officer of the
Company, learned that Sir Mick Davis was vetting prospective mining
projects for potential investment and that the Company’s Molo
Graphite Mine was one of the mining projects he was evaluating. On
September 15, 2020, the Company executed a non-disclosure agreement
(the “NDA”) with
Vision Blue. Subsequent to executing the NDA, members of management
and the Board, including Craig Scherba (President and Chief
Executive Officer); Robin Borley (Chief Operating Officer), Brent
Nykoliation (SVP Corporate Development) and Brett Whalen
(then-Chairman) joined Sir Mick Davis and his team at Vision Blue
via teleconference to discuss the Company’s development and
growth plans for its Madagascar-based graphite project, being the
Molo Graphite Mine, and the Company’s vanadium project, being
the Green Giant Vanadium Project. During this teleconference, the
parties also discussed how their respective relationships could be
leveraged for diversification into other battery materials,
including potential merger and acquisition targets identified in
the battery materials space.
On
September 16, 2020, based on a positive teleconference, Vision Blue
initiated a fulsome technical due diligence review and was provided
with access to the Company’s data room. This due diligence
review included direct discussions with the Company’s
off-takers, EPCM, engineering consultants (process, civil, mining,
etc.), equipment suppliers, logistics providers, and
Madagascar-based legal counsel.
On
November 25, 2020, the Company received an indicative proposal and
draft term sheet from Vision Blue. After fulsome negotiation
between the Company and Vision Blue, the terms were presented to
the Board, which unanimously authorized management of the Company
to continue negotiating toward settling outstanding terms and
progressing to execution of a term sheet.
On
December 7, 2020, negotiations between the parties culminated in
the Company and Vision Blue executing a non-binding term sheet.
Thereafter, the Company and Vision Blue engaged counsel to commence
legal due diligence and drafting definitive
documentation.
During
the second week of December 2020, Company counsel provided the TSX
with a high level overview of the contemplated Financing Package
and thereafter submitted a Form 11A in order to seek price
protection as the parties continued detailed negotiations regarding
the financing structure. During the second half of December 2020,
the parties continued their respective due diligence review and
worked toward finalizing the deal terms of the Financing
Package.
In
mid-January, 2021, the Company submitted a further price protection
request to the TSX as discussions and negotiations between the
parties remained ongoing.
In the
first week of February 2021, after further negotiations between the
parties and extensive drafting by the requisite legal counsel in
Canada, England, Madagascar and Mauritius, the draft definitive
Investment Agreement and Royalty Agreement were submitted to the
Board for review.
On
February 7, 2021, the Board held a meeting at which it engaged in a
detailed review of the draft definitive Investment Agreement and
Royalty Agreement. The Company’s counsel was present at the
meeting. After a fulsome discussion, the Board unanimously passed a
resolution authorizing management of the Company to finalize and
execute the Investment Agreement and Royalty Agreement in respect
of the Financing Package.
On
February 8, 2021: (i) the Investment Agreement was entered into
between the Company and Vision Blue; and (ii) the Royalty Agreement
was entered into among the Company, each of the Mauritian and
Madagascan subsidiaries of the Company, and Vision
Blue.
On
February 8, 2021, following execution of the Investment Agreement
and Royalty Agreement, the Company issued a press release
announcing the Financing Package with Vision Blue.
On
March 10, 2021, the Company received conditional approval from the
TSX for the Initial Private Placement and Second Private Placement,
subject to approval by Shareholders of the Second Private Placement
and certain other customary conditions.
On
March 15, 2021, the Company and Vision Blue completed the Initial
Private Placement and Sir Mick Davis was appointed Chairman and a
director of the Company.
Transaction Resolution
The text of the Transaction Resolution to be submitted to Minority
Shareholders at the Meeting is set forth in Appendix
B.
8
Recommendation of the Board
The Board recommends that Shareholders vote FOR the Transaction Resolution
approving the Second Private Placement for the reasons set forth in
“Reasons for Recommendation of the Board”.
Proxies received in favour of management will be voted in favour of
the Transaction Resolution, unless the Shareholder has specified in
the proxy that his, her or its Shares are to be voted against the
Transaction Resolution.
Reasons for Recommendation of the Board
In making its recommendation that Minority Shareholders vote
FOR
the Transaction Resolution approving
the Second Private Placement, the Board carefully considered a
number of factors, including those listed below. The Board based
its recommendation upon the totality of the information presented
to and considered by it in light of its knowledge of the business,
financial condition and prospects of the Company, after having
undertaken a thorough review of, and having carefully considered
the terms of the Second Private Placement and the larger Financing
Package.
The following summary of the information and factors considered by
the Board is not intended to be exhaustive, but includes a summary
of the material information and factors considered in the
consideration of the Second Private Placement. In view of the
variety of factors and the amount of information considered in
connection with the consideration of the Second Private Placement,
the Board did not find it practicable to, and did not, quantify or
otherwise attempt to assign any relative weight to each of the
specific factors considered in reaching its conclusions and
recommendations.
●
Vision Blue
is supportive of the Company’s graphite development strategy,
and will expedite the Company’s development plans.
Vision Blue’s investment of
approximately US$29.5 million is expected to enable the Company to:
(i) complete construction of Phase 1 of the Molo Graphite Mine,
which, upon completion, is expected to enable the Company to
process 240,000 tpa of ore and produce 17,000 tpa of flake graphite
concentrate by mid-2022; (ii) accelerate the Company’s
strategic development plans for a battery anode plant with the
Company’s industry-leading partners; and (iii) fast-track the
Company’s aggressive graphite mine expansion plans.
See “Transaction Documents
– Investment Agreement – Use of Proceeds”
for more detailed information relating
to the intended use of proceeds from the Financing
Package.
●
Significant
benefits of aligning the Company with Sir Mick Davis.
Sir Mick Davis, the Chief Executive
Officer and founder of Vision Blue, has extensive capital markets
and corporate transaction experience, with 40+ years of experience
in the mining, industrial and natural resources sectors and
engagement at governmental and operational levels. Most notably,
Sir Mick Davis was the former CEO and founder of Xstrata Plc (an
Anglo-Swiss multinational mining company until its merger with
Glencore Plc in 2013), the former CFO of Billiton Plc and Chairman
of Billiton Coal, and the founder and a former partner at X2
Resources, a $5.6 billion mining investment fund. During his
career, Sir Mick Davis has been involved in raising almost US$40
billion from global capital markets and completing corporate
transactions with a total market value of over US$120 billion. In
connection with the Financing Package, Sir Mick was named a
director and Chairman of the Company on March 15, 2021.
Approval of the Transaction Resolution
will enable the Company to continue to significantly benefit from
Sir Mick Davis’ extensive business and governance
experience.
●
Significant
benefits of Vision Blue as the Company’s strategic
Shareholder. Vision Blue is a newly created battery
commodity/resource-focused investment company led by Sir Mick Davis
that will target companies in established mining jurisdictions with
advanced and best-in-class battery material assets that are
scalable and can be rapidly brought into production. Vision Blue
intends to work with existing management teams by providing
critical growth capital, technical support, experience in securing
future financing, expertise in building a credible ESG framework,
and assistance with eventual exit strategies. Where possible,
Vision Blue will utilize a phased development approach to
self-finance expansions and acquisitions in order to achieve large
scale revenues and cash flows across the entire battery materials
vertical supply chain. Approval of the Transaction Resolution will
enable the Company to significantly benefit from Vision
Blue’s expertise as the Company advances its battery anode
and graphite mine expansion plans.
●
Vision
Blue’s involvement as the Company’s strategic
Shareholder positions the Company to become a market disruptor in
the burgeoning energy materials market. Reducing the world’s carbon footprint will
require a shift from hydrocarbons to crystalline carbon (i.e.
graphite) for use in electric vehicles and in grid-level energy
production and storage. This shift is expected to increase global
demand for graphite and for other energy materials that are used in
batteries and for energy storage and renewable energy production.
This represents a unique market opportunity for investment in
graphite, vanadium, cobalt, indium, lithium, nickel, silver,
neodymium, molybdenum, aluminum, zinc and copper. Approval of the
Transaction Resolution will enable the Company to advance its Molo
Graphite Mine and Green Giant Vanadium Project, consider other
opportunities in the energy materials space, and evaluate
value-added processing of graphite and the production of battery
materials, with the support of Vision Blue.
●
Likelihood
of closing. The Initial Private
Placement with Vision Blue closed on March 15, 2021 and as a result
Vision Blue presently beneficially owns 16.3% of the current issued
and outstanding Shares. Additionally, Vision Blue has committed to
completing the Royalty Financing, subject to satisfaction of the
conditions set out in the Royalty Agreement. The obligation of
Vision Blue to complete the Second Private Placement is subject to
a limited number of closing conditions and is not subject to a due
diligence or any financing condition. With the Initial Private
Placement having been completed, the only remaining closing
condition to be satisfied in order for Vision Blue and the Company
to complete the Second Private Placement is the approval of the
Second Private Placement by Shareholders at the Meeting. The Board
is confident in Vision Blue’s ability to finance and close
the Second Private Placement and the overall Financing
Package.
●
No other
readily available financing or partnership opportunities.
As discussed above, management of the
Company and the Board has spent considerable time and effort over
the past several years in seeking beneficial and viable long-term financing and strategic partners
in order to develop the Molo Graphite Mine. The completion of the
Second Private Placement, and the overall Financing Package,
provides the Company with an ideal financing and strategic
partnership opportunity that is anticipated to provide many present
and future benefits to the Company and its
Shareholders. If the Second Private Placement is not completed
and management and the Board are required to seek other sources of
capital in order to fully fund the construction of Phase 1 of the
Molo Graphite Mine, there is no assurance that the Company will
receive sufficient financing from another party on similar or more
favorable terms.
9
Transaction Documents
The following summary outlines the material terms of the
Transaction Documents and is not intended to be
exhaustive.
Investment Agreement
On February 8, 2021, the Company and Vision Blue entered into the
Investment Agreement. The Investment Agreement has been filed and
is available on the Company’s profile on SEDAR at
www.sedar.com.
The Investment Agreement contemplates, among other
things:
●
Initial
Private Placement. The private
placement financing completed by the Company on March 15, 2021,
pursuant to which the Company issued 120,000,000 Shares to Vision
Blue at a price of C$0.065 per Share for gross proceeds of
approximately US$6.1 million. As a result of the Initial Private
Placement, Vision Blue presently beneficially owns 16.3% of the
current issued and outstanding Shares.
●
Second
Private Placement. The completion of the Second Private Placement,
subject to approval of Minority Shareholders, pursuant to which the
Company will issue 232,142,857 Units (consisting of 232,142,857
Shares and 232,142,857 Warrants) to Vision Blue at a price of
C$0.07 per Unit for gross proceeds of approximately US$12.4
million. On completion of the Second Private Placement,
Vision Blue will beneficially own approximately 36.5% of the issued
and outstanding Shares, or approximately 48.8% of the issued and
outstanding Shares on a partially diluted basis, based on the
current issued and outstanding Shares.
●
Share
Consolidation. Subject to
approval of the Transaction Resolution by Shareholders at the
Meeting, the completion of the Share
Consolidation in a ratio of one-for-ten concurrently with the
completion of the Second Private Placement. For additional
information related to the Share Consolidation, see the disclosure
contained in the 2020 Circular available under the Company’s
profile on SEDAR at www.sedar.com. For greater certainty, in
addition to the effects the Share Consolidation will have on any
outstanding Shares held by Shareholders, the number of Shares held
by Vision Blue as at the date hereof and the number of Shares and
Warrants issuable to Vision Blue in connection with Second Private
Placement will be adjusted in accordance with the Share
Consolidation.
●
Royalty
Financing. The entering into of
the Royalty Agreement, pursuant to which, among other things, the
Company will receive gross proceeds of approximately US$11.0
million in exchange for a royalty in respect of sales of
SuperFlake® graphite concentrate from the Molo Graphite Mine.
In connection with the Royalty Agreement, Vision Blue shall receive
the Financing Fee in the amount of US$1.5 million. The Financing
Fee will be payable upon the Royalty Financing being provided by
Vision Blue.
●
Right of
First Refusal. Where further
funding for Phase 2 of the Molo Graphite Mine is required by the
Company as determined by the Board, Vision Blue having a right of
first refusal exercisable at its sole discretion to provide all or
part of the funding sought by the Company on terms to be agreed
between the Company and Vision Blue provided that such terms are no
more onerous than those available from any third
party.
●
Issue of
New Debt or Equity Securities. For so long as Vision Blue holds at least 10% of
the issued and outstanding Shares, Vision Blue having the right
(but not the obligation) to participate in any new issuances of
Shares or other equity securities contemplated to be completed by
the Company, subject to certain exceptions, so as to maintain
its pro
rata ownership interest in the
Shares. In the event that the Company seeks to secure any bank debt
or other debt or borrowings (whether secured or unsecured) that
does not involve Shares or other equity securities, Vision Blue
will have a right of first refusal at its discretion to provide
some or part of the funding sought by the Company on substantially
the same terms as those offered to the Company by a third party or
otherwise as agreed between the Company and the Vision Blue. Vision
Blue also been granted certain top-up rights by the Company in
respect of new issuances of Shares or other equity securities, so
as to maintain its pro rata ownership interest in the
Shares.
●
Board
Rights. Sir Mick Davis was
appointed Chairman and a director on March 15, 2021 and will
continue in such capacities in accordance with the Investment
Agreement. In addition, Vision Blue will have the right at all
times to nominate, for so long as Vision Blue owns no less than 10%
of the issued and outstanding Shares, one other person as a
non-executive director of the Company or, where Sir Mick Davis is
not then entitled to be nominated as a director under the
Investment Agreement, two other persons. In certain circumstances,
Vision Blue will also have certain observer rights in respect of
the Board.
●
Use of
Proceeds. The Company has
undertaken to use the proceeds from the Financing Package
approximately as follows:
o
US$24.1
million towards Phase 1 in respect of the Molo Graphite
Mine;
o
US$1.5
million towards Phase 2 and the SG Processing Plant in respect of
the Molo Graphite Mine;
o
US$2.4
million towards general corporate purposes, working capital and
further studies on the Green Giant Vanadium Project;
and
o
US$1.5
million to fund the payment of the Financing Fee.
10
The Investment Agreement also contains certain negative covenants
agreed to by the Company, including, but not limited to that: (i)
the Company will not, prior to certain dates, encumber the
property, permits, and other interests comprising the Molo Graphite
Mine without prior written consent of Vision Blue; (ii) the Company
will not, prior to the earlier of the completion of the Second
Private Placement and May 28, 2021 (or earlier termination in
accordance with the terms of Investment Agreement), complete any
new issuances of Shares or other equity securities without prior
written consent of Vision Blue, subject to certain exceptions; and
(iii) the Company (including its officers, directors, employees,
agents and representatives) will not, prior to the earlier of the
completion of the Second Private Placement and May 28, 2021,
directly or indirectly, make,
initiate, solicit or encourage discussions, proposals, inquiries or
offers from another person relating to any Alternative Transaction
(as such term is defined in the Investment Agreement) or
participate in discussions or negotiations regarding, or furnish to
any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any person to do or seek to
do any of the foregoing, and to the extent it is currently doing
so, shall cease and terminate any ongoing negotiations or
discussions regarding any other transaction that would constitute
an Alternative Transaction.
The Investment Agreement contains standard representations and
warranties included in transactions of this nature, including in
respect of: (i) the Company, those relating to capacity, share
capital, public disclosure documents and securities laws, financial
information, financial position, the business of the Company,
contracts and arrangements, licenses, the Molo Graphite Mine,
taxation, litigation, insolvency and judgments, related parties,
records and filings, compliance with laws and regulations,
scientific and technical information, and environmental laws; and
(ii) Vision Blue, those relating to capacity, securities laws
matters, and compliance with laws and regulations.
The Investment Agreement contains certain termination provisions,
including, but not limited to:
(i)
if
at any time prior to the completion of the Second Private
Placement,
a.
Vision
Blue becomes aware that:
i.
any
of the warranties given on signing of the Investment Agreement or
given as at the date of the Initial Private Placement was, when
given, untrue or inaccurate, or is not, or has ceased to be, true
and accurate (or would not be true and accurate if then repeated)
by reference to the facts subsisting at the time;
ii.
there
has occurred a suspension or cancellation of the listing of the
Shares;
iii.
the
Company has failed to comply in all material respects with any of
its obligations under the Investment Agreement;
iv.
the
Transaction Resolution is not approved by Minority Shareholders
and/or the approval of the TSX in respect of the Second Private
Placement is not obtained;
v.
there
has occurred, in Vision Blue’s opinion, acting in good faith,
a Material Adverse Change (as such term is defined in the
Investment Agreement); or
b.
if
the Second Private Placement has not occurred within 4 business
days following the satisfaction or waiver of the conditions to the
completion of the Second Private Placement,
then
Vision Blue may, in its absolute discretion, terminate its
obligations to complete the Second Private Placement.
(ii)
if at any time prior to the earlier of: (a)
completion of the Second Private Placement, or (b) the Transaction
Resolution is not approved by Minority Shareholders at the Meeting,
Sir Mick Davis voluntarily resigns or is no longer legally able to
hold the role of, either Chairman or director of the Company (other
than by virtue of death or incapacity) or
as a director of Vision Blue, then the Company may, in its absolute
discretion, terminate its obligations to complete the Second
Private Placement.
If the Investment Agreement is terminated in accordance with its
terms prior to the completion of the Second Private Placement,
Vision Blue and the Company shall have no further obligations
thereunder.
11
Royalty Agreement
On February 8, 2021, the Company and Vision Blue entered into the
Royalty Agreement. The Royalty Agreement contemplates, among other
things:
●
Advance
Payment. Vision Blue advancing to the Company, subject to
the satisfaction of certain conditions, a total of US$11
million.
●
Royalty. The
Company paying to Vision Blue, in consecutive six-month periods
commencing on the Effective Date (as such term is defined in the
Royalty Agreement), the greater of: (i) US$1.65 million or (ii) 3%
of the gross revenues from SuperFlake® sales (the
"GSR"). Upon Vision Blue receiving a cumulative
royalty payment of US$16.5 million, the GSR will be calculated as
3% of the gross revenues from the Company's SuperFlake® sales.
The Company will have the option at any time to reduce the GSR to
2.25% upon payment to Vision Blue of US$20 million. In addition,
the Company will pay to Vision Blue 1.0% of the gross revenues from
sales of vanadium pentoxide ("V2O5") for a period of 15 years following commencement
of production of V2O5.
●
Security
Interests. The Company granting
to Vision Blue certain security interests over the assets of the
Company, including the mineral property interests comprising the
Molo Graphite Mine and the Green Giant Vanadium Project, as well as
the shares in the capital of the subsidiaries of the
Company.
Lock-In Agreements
In connection with the Transaction Documents, each of the officers
and directors of the Company, being Craig Scherba (President, Chief
Executive Officer and director), Marc Johnson (Chief Financial
Officer), Brent Nykoliation (SVP Corporate Development), Robin
Borley (Chief Operating Officer and director), Brett Whalen
(director), Christopher Kruba (director), and David McNeely
(director), entered into a Lock-In Agreement, pursuant to which
each such person shall not, subject to certain exceptions, dispose
of any securities of the Company held by such persons: (i) from the
date of the announcement of the Financing Package for a period of
three (3) calendar months following the closing of the Initial
Private Placement (the “First Restricted
Period”); (ii) from the
date that is the end of the First Restricted Period for a period of
three (3) calendar months, exceeding 20% of the securities held by
such person as at the date of the Lock-In Agreement (the
“Second Restricted
Period”); (iii) from the
date that is the end of the Second Restricted Period for a period
of three (3) calendar months, exceeding 40% of the securities held
by such person as at the date of the Lock-In Agreement (the
“Third
Restricted Period”); (iv)
from the date that is the end of the Third Restricted Period for a
period of three (3) calendar months, exceeding 60% of the
securities held by such person as at the date of the Lock-In
Agreement (the “Fourth Restricted
Period”), without the
prior written consent of Vision Blue.
In connection with the Initial Private Placement, Vision Blue
entered into a Lock-In Agreement, pursuant to which Vision Blue
shall not, subject to certain exceptions, dispose of any securities
of the Company held by Vision Blue: (i) during the First Restricted
Period; (ii) during the Second Restricted Period, exceeding 20% of
the Shares and Warrants held by Vision Blue on a partially diluted
basis; (iii) during the Third Restricted Period, exceeding 40% of
the Shares and Warrants held by Vision Blue on a partially diluted
basis; (iv) during the Fourth Restricted Period, exceeding 60% of
the Shares and Warrants held by Vision Blue on a partially-diluted
basis, without the prior written consent of the
Company.
Voting Undertakings
In connection with Transaction Documents, each of the officers and
directors of the Company, being Craig Scherba (President, Chief
Executive Officer and director), Marc Johnson (Chief Financial
Officer), Brent Nykoliation (SVP Corporate Development), Robin
Borley (Chief Operating Officer and director), Brett Whalen
(director), Christopher Kruba (director), and David McNeely
(director), entered into an Undertaking, pursuant to which each
such person shall vote any Shares held by such person
FOR
the Transaction Resolution approving
the Second Private Placement and shall not take other actions that
may frustrate the purpose, postpone, prevent or delay, impede or
interfere with the Transaction Resolution approving the Second
Private Placement.
Transaction Resolution Approval and TSX Approval
In order for the Second Private Placement to proceed, under the
rules of the TSX Company Manual, the Transaction Resolution must be
approved by a majority of the votes cast by the Minority
Shareholders present in person or represented by proxy at the
Meeting or any adjournment or postponement thereof. Pursuant to the
Undertakings, each officer and director of the Company has agreed
to vote all of such person’s Shares FOR
the Transaction Resolution approving
the Second Private Placement.
The Second Private Placement has been conditionally approved by the
TSX, but remains subject to final approval by the TSX.
12
Risk Factors Concerning the Financing Package (including the Second
Private Placement) and the Company
The following is a discussion of certain risk factors concerning
the Financing Package (including the Second Private Placement) and
is not intended to be exhaustive. Shareholders should also refer to
the risk factors outlined in the 2020 Annual Information Form and
in the Interim MD&A for additional risks relating to the
business of the Company.
Dilution of Shareholders of the Company
If the Second Private Placement is completed, the Company will
issue 232,142,857 Shares and 232,142,857 Warrants to Vision Blue.
Following completion of the Initial Private Placement and Second
Private Placement, Vision Blue will hold 352,142,857 Shares and
232,142,857 Warrants, representing 36.5% of the issued and
outstanding Shares, or approximately 48.8% of the issued and
outstanding Shares on a partially diluted basis, based on the
current issued and outstanding Shares. As a result, the current
holdings of the Minority Shareholders will be significantly diluted
following the completion of the Second Private
Placement.
Vision Blue will have significant influence over the Company on
completion of the Second Private Placement
On completion of the Second Private Placement, Vision Blue will be
the Company’s single largest Shareholder. If Vision Blue
exercises all of the Warrants, and assuming no other securities of
the Company are issued, Vision Blue would hold 48.8% of the issued
and outstanding Shares, based on the current issued and outstanding
Shares. In light of the foregoing, Vision Blue will be in a
position to exercise significant influence over matters requiring
Shareholder approval, including the election of directors and the
determination of significant corporate actions. In addition to Sir
Mick Davis acting as Chairman and a director, pursuant to the
Investment Agreement, Vision Blue will have the right to designate
one other person as nominee for election or appointment to the
Board of so long as Vision Blue holds at least 10% of the issued
and outstanding Shares. Additionally, Vision Blue will have certain
rights of first refusal to provide financing to the Company, as
well as certain participation and top-up rights in respect of the
Shares.
Accordingly, on completion of the Second Private Placement, Vision
Blue will have significant influence over the Company and there can
be no assurance that Vision Blue’s interests will align with
the interests of the Company or other Shareholders. The effect of
this influence by Vision Blue may limit the price that investors
are willing to pay for the Shares.
Vision Blue’s significant interest may impact liquidity of
the Shares
The Shares may be less liquid and trade at a discount relative to
the trading that could occur in circumstances where Vision Blue did
not have the ability to significantly influence or determine
matters affecting the Company. Additionally, Vision Blue’s
significant voting interest in the Company may discourage
transactions involving a change of control of the Company,
including transactions in which an investor, as a holder of Shares,
might otherwise receive a premium for its Shares over the
then-current market price.
Vision Blue may not maintain its equity interest
Vision Blue is not contractually committed to maintaining an equity
stake in the Company at current levels or at all. Subject to
compliance with applicable securities laws and its Lock-In
Agreement, Vision Blue may sell some or all of its Shares in the
future. If Vision Blue sells some or all of its Shares, including
the Shares to be issued under the Financing Package, or does not
maintain its equity stakes at current levels, the Company may not
realize the anticipated benefits of Vision Blue’s strategic
partnership. No prediction can be made as to the effect, if any,
future sales by Vision Blue of Shares or other securities will have
on the market price of the Shares prevailing from time to time.
However, the future sale of a substantial number of Shares by
Vision Blue, or the perception that such sales could occur, could
adversely affect prevailing market prices for the
Shares.
13
While the completion of the Second Private Placement is pending,
the Company is restricted from taking certain actions
The Investment Agreement contains certain negative covenants agreed
to by the Company, including, but not limited to that: (i) the
Company will not, prior to certain dates, encumber the property,
permits, and other interests comprising the Molo Graphite Mine
without prior written consent of Vision Blue; (ii) the Company will
not, prior to the earlier of the completion of the Second Private
Placement or May 28, 2021, complete any new issuances of Shares or
other equity securities without prior written consent of Vision
Blue, subject to certain exceptions; and (iii) the Company
(including its officers, directors, employees, agents or
representatives) will not, prior to the earlier of the completion
of the Second Private Placement or May 28, 2021, directly or
indirectly, make, initiate, solicit or encourage discussions,
proposals, inquiries or offers from another person relating to any
Alternative Transaction (as such term is defined in the Investment
Agreement) or participate in discussions or negotiations regarding,
or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any person to do
or seek to do any of the foregoing, and to the extent it is
currently doing so, shall cease and terminate any ongoing
negotiations or discussions regarding any other transaction that
would constitute an Alternative Transaction.
These restrictions may prevent the Company from pursuing attractive
business opportunities that may arise prior to the completion of
the Transaction.
Use of proceeds from the Financing Package
Pursuant to the Investment Agreement, the Company has undertaken to
use the proceeds from the Financing Package approximately as
follows: (i) US$24.1 million towards Phase 1 in respect of the Molo
Graphite Mine; (ii) US$1.5 million towards Phase 2 and the SG
Processing Plant in respect of the Molo Graphite Mine; (iii) US$2.4
million towards general corporate purposes, working capital and
further studies on the Green Giant Vanadium Project; and (iv)
US$1.5 million to fund the payment of the Financing Fee. Within
these purposes, the Board and management will have discretion in
the application of the proceeds. Accordingly, Shareholders will
have to rely upon the judgment of the Board and management with
respect to the use of the proceeds, with only limited information
concerning the Board’s and management’s specific
intentions.
Although the Company plans to devote its efforts to developing the
Molo Graphite Mine and its other mineral projects, there can be no
assurance that the Company will be able to deploy the cash
available to the Company following completion of the Financing
Package in an effective manner that is accretive to the Company and
its mineral projects.
There can be no certainty that all conditions to the Second Private
Placement will be satisfied
The completion of the Second Private Placement is subject to
certain conditions which are outside the control of the Company,
including the receipt of final approval from the TSX and approval
of the Minority Shareholders. There can be no certainty, nor can
the Company provide any assurance, that these conditions will be
satisfied or, if satisfied, when they will be
satisfied.
If the Second Private Placement or other components of the
Financing Package are not completed, the market price of the Shares
may be impacted to the extent that the market price reflects a
market assumption that the Financing Package will be completed. If
the Second Private Placement is not completed and the Board decides
to seek another strategic transaction, there can be no assurance
that it will be able to find an equivalent or more attractive
alternative.
If the Company is unable to complete the Second Private Placement
or if completion of the Financing Package is delayed, there could
be an adverse effect on the Company’s business, the ability
of the Company to bring Phase 1 of the Molo Graphite Mine into full
production, and the market price of its Shares
The completion of the Second Private Placement is subject to the
satisfaction of numerous closing conditions, some of which are
outside the control of the Company, including the approval by the
Minority Shareholders and the receipt of applicable TSX approvals.
A substantial delay in obtaining satisfactory approvals and/or the
imposition of unfavourable terms or conditions in the approvals to
be obtained could result in the termination of the Transaction
Documents. There can be no certainty, nor can the Company provide
any assurance, that these conditions will be satisfied or, if
satisfied, when they will be satisfied. If the Second Private
Placement is not completed: (i) the market price of the Shares
could be adversely affected, and may decline to the extent the
current market price reflects an assumption that the Second Private
Placement will be completed; (ii) certain costs related to the
Second Private Placement, such as legal, accounting and financial
advisory fees, must be paid by the Company even if the Second
Private Placement is not completed; (iii) the Company may not be
successful in finding another business opportunity that is of equal
or greater benefit to the Company; (iv) the time and attention of
the Company’s management will have been diverted away from
the conduct of the Company’s business in the ordinary course;
and (e) the Company may not be
able to bring the Molo Graphite Mine into full production at
all.
14
If the Investment Agreement is terminated by Vision Blue or the
Company, there could be an adverse effect on the
Company
Each of Vision Blue and the Company has the right, in certain
circumstances, to terminate the Investment Agreement. Accordingly,
there can be no certainty, nor can the Company provide any
assurance, that the Investment Agreement will not be terminated by
any of them prior to the completion of the Second Private
Placement. A termination of the Investment Agreement could
materially adversely affect the relationship between the Company
and Vision Blue, which the Company believes is important to its
successful growth.
Risk Factors related to the business of the Company
Whether or not the Second Private Placement is completed, the
Company will continue to face many of the risks that it currently
faces with respect to its business and affairs. A description of
the risk factors applicable to the Company is contained in the
Annual Information Form and in the Company’s other filings
with securities authorities. Shareholders should carefully consider the risks
disclosed in this Circular and in the 2020 Annual Information Form
and Interim MD&A before deciding how to
vote.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
Management
knows of no matters to come before the Meeting other than the
Transaction Resolution approving the Second Private Placement. If
any matters which are not now known should properly come before the
Meeting, the accompanying form of proxy will be voted on such
matters in accordance with the best judgment of the person voting
it.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
None of
the directors or officers of the Company, nor any person who
beneficially owns, directly or indirectly, shares carrying more
than 10% of the voting rights attached to all outstanding Shares of
the Company, nor any associate or affiliate of the foregoing
persons has any material interest, direct or indirect, in any
transaction since the commencement of the Company’s last
completed fiscal year or in any proposed transaction which, in
either case, has or will materially affect the Company, other than
as set forth in this Circular.
ADDITIONAL INFORMATION
Additional
information related to the Company, including the 2020 Annual
Information Form, financial statements and management discussion
and analysis (MD&A) for the most recently completed financial
year and the interim period, the 2020 Circular, and the Investment
Agreement is available on SEDAR at www.sedar.com or on the Company
website at www.nextsourcematerials.com.
Shareholders may request copies of such financial statements and
MD&A by mailing a request to: NextSource Materials Inc., 130
King Street West, Exchange Tower Suite 1940, Toronto, Ontario, M5X
2A2.
15
APPENDIX A
GLOSSARY
“2020 Circular” means the management information
circular of the Company dated November 20, 2020 in respect of the
annual and special meeting of Shareholders held on December 29,
2020.
“Feasibility Study” means the technical report
entitled “Molo Feasibility Study, National Instrument 43-101
Technical Report on the Molo Graphite Project located near the
village of Fotadrevo in the Province of Toliara, Madagascar”
dated May 31, 2019 and prepared for the Company by Erudite
Strategies (Pty) Ltd in accordance with National Instrument 43-101
– Standards of Disclosure
for Mineral Projects.
“Financing Fee” means US$1.5 million payable by
the Company to Vision Blue in connection with the Financing Package
pursuant to the Investment Agreement.
“Financing Package” means, collectively: (i) the
Initial Private Placement completed on March 15, 2021, pursuant to
which the Company received gross proceeds of approximately US$6.1
million; (ii) the Royalty Financing, pursuant to which the Company
will receive gross proceeds of approximately US$11.0 million; and
(iii) the Second Private Placement, pursuant to which the Company
will receive gross proceeds of approximately US$12.4
million.
“Green Giant Vanadium Project” means all
interests held by the Company or its subsidiaries in respect of the
vanadium deposits situated in south-central Madagascar which are
located 145 km southeast of the city of Toliara, in the Tulear
region near Fotadrevo, covering an area of 225 km2 situated in two
separate blocks.
“Initial Private Placement” means the private
placement financing completed by the Company on March 15, 2021 in accordance with
the Investment Agreement, pursuant to which the Company issued
120,000,000 Shares to Vision Blue at a price of C$0.065 per Share
for gross proceeds of approximately US$6.1 million.
“Investment Agreement” means the investment
agreement dated February 8, 2021 entered into between the Company
and Vision Blue in respect of the Financing Package, and as it may be amended, modified or
supplemented.
“Lock-In
Agreement” means a lock-in agreement entered into
between an officer/director of the Company, Vision Blue, and/or the
Company, as applicable, each dated February 7, 2021.
“Minority Shareholders” means all of the
Shareholders, other than Vision Blue and its
affiliates.
“Molo Graphite Mine” means all interests held by
the Company or its subsidiaries in respect of the flake graphite
deposits situated in the Tulear region of south-western Madagascar
which is located 11.5 km east of the town of Fotadrevo, covering an
area of 62.5 hectares.
“Phase 1” means, in respect of Molo Graphite
Mine, the construction, erection, commissioning and operation of a
graphite mine and processing plant capable of processing 240,000
tonnes per annum of ore in Madagascar, with expected saleable flake
graphite concentrate production of 17,000 tonnes per
annum.
“Phase 2” means, in respect of Molo Graphite
Mine, the design and costing for the expansion of mining and
processing equipment to target saleable flake graphite concentrate
with expected combined saleable flake graphite concentrate
production of at least 45,000 tonnes per annum but anticipated to
be well in excess of 50,000 tonnes per annum.
“Royalty Agreement” means the secured royalty
agreement dated February 8, 2021 entered into among the Company,
each of the Mauritian and Madagascan subsidiaries of the Company,
and Vision Blue in respect of the Royalty Financing, and as
it may be amended, modified or supplemented, and including any
ancillary security-related documents entered into in connection
therewith.
“Royalty Financing” means the financing
transactions to be completed by the Company in accordance with the
Royalty Agreement, pursuant to which, among other things, the
Company will receive gross proceeds of approximately US$11.0
million in exchange for a
royalty in respect of sales of SuperFlake® graphite
concentrate from the Molo Graphite Mine.
A-1
“Second Private Placement” means the private
placement financing contemplated to be completed by the Company in
accordance with the Investment Agreement, pursuant to which the
Company will issue 232,142,857 Units (consisting of 232,142,857
Shares and 232,142,857 Warrants) to Vision Blue at a price of
C$0.07 per Unit for gross proceeds of approximately US$12.4
million.
“SG Processing Plant” means a value-add
processing plant operated by the Company’s Group at
Madagascar capable of spheronizing and purifying flake graphite
concentrate into a spherical uncoated graphite suitable as battery
anode precursor with targeted production of 20,000 tonnes per annum
of spherical graphite.
“Share Consolidation” means a share
consolidation (reverse stock split) of the Shares in a ratio of
one-for-ten, to be completed at the Board’s sole discretion,
as approved by Shareholders at the annual and special meeting of
Shareholders held on December 29, 2020, as set forth in the 2020
Circular.
“Shareholders” means all of the holders of
Shares.
“Shares” means the common shares in the capital
of the Company.
“Transaction Documents” means, collectively, the
Investment Agreement and the Royalty Agreement.
“Transaction
Resolution” means the ordinary resolution to be
submitted to Shareholders for approval at the Meeting or any
adjournment or postponement thereof, the text of which is set forth
in Appendix B.
“TSX”
means the Toronto Stock Exchange.
“Undertaking”
means an irrevocable undertaking provided to Vision Blue by certain
officers and the directors of the Company, each on February 7,
2021, to vote in favour of the Transaction
Resolution.
“Units” means a unit comprising one Share and
one Warrant to be issued to Vision Blue pursuant to the Second
Private Placement.
“Vision Blue” means Vision Blue Resources
Limited.
“Warrants” means the common share purchase
warrants exercisable into Shares at a price of C$0.10 per Share at
any time prior to the date that is 2 years following the completion
of the Second Private Placement, subject to adjustment in certain
events as set out in the certificate to evidence such Warrants, to
be issued to Vision Blue in connection with the Second Private
Placement.
A-2
APPENDIX B
TRANSACTION RESOLUTION
BE IT RESOLVED that:
1. The
private placement issuance of 232,142,857 units of the Company (the
“Units”), consisting of 232,142,857 common shares
in the capital of the Company (the “Shares”) and 232,142,857 common share purchase
warrants of the Company (the “Warrants”) pursuant to the investment agreement
dated February 8, 2021 between the Company and Vision Blue
Resources Limited (“Vision Blue”), as the same may be amended, supplemented
or otherwise modified in accordance with the terms therein (the
“Investment
Agreement”), at a price
of C$0.07 per Unit, for gross proceeds of approximately US$12.4
million (the “Second Private
Placement”), and
including the issuance of up to 232,142,857 Shares, from time to
time, on exercise of outstanding Warrants, to Vision Blue (or its
affiliates or permitted assignees), as further set forth in the
accompanying management information circular of the Company dated
April 6, 2021, is hereby
authorized and approved.
2. Any
officer or director (each an “Authorized
Signatory”) be and is
hereby authorized and directed for and on behalf of the Company to
execute or cause to be executed, under the corporate seal of the
Company or otherwise, and to deliver or cause to be delivered all
such other documents and instruments and to perform or cause to be
performed all such other acts and things as such Authorized
Signatories determine may be necessary or desirable to give full
effect to the foregoing resolutions and the matters authorized
thereby, such determination to be conclusively evidenced by the
execution and delivery of such document or instrument or the doing
of any such act or thing.
3. Subject
to the terms and conditions of the Investment Agreement,
notwithstanding the foregoing approvals, the directors of the
Company be and are hereby authorized not to proceed with the Second
Private Placement and the transactions contemplated by the
Investment Agreement.
B-1