MLR Melior Resources Inc

Melior Resources Inc. (TSXV: “MLR”) (“Melior” or the “Company”) announces that it has entered into a non-binding letter of intent (the “LOI”) dated October 31, 2020 with Ranchero Gold Corp. (“Ranchero”) with respect to a proposed transaction (the “Proposed Transaction”) whereby Melior will acquire all of the issued and outstanding common shares in the capital of Ranchero (the “Ranchero Shares”). Ranchero holds an indirect 99.9% interest in a 22,367-hectare gold exploration property located in the Sierra Madre Occidental gold-belt in eastern Sonora, Mexico, known as the Santa Daniela property (the “Property”).

The Proposed Transaction will constitute an arm’s length reverse take-over pursuant to the policies of the TSX Venture Exchange (the “TSXV”), and following the Proposed Transaction, it is anticipated that the Company will be a Tier 2 Mining Issuer on the TSXV.

Proposed Transaction Summary

Pursuant to the Proposed Transaction, the Company will consolidate its outstanding share capital and acquire all of the issued and outstanding Ranchero Shares from the holders thereof in exchange for post-consolidation common shares (“Resulting Issuer Shares”) of the Company (thereafter, the “Resulting Issuer”), such that immediately following the closing of the Proposed Transaction and such other transactions described herein, the shareholders of the Company immediately prior to closing of the Proposed Transaction, as a group, would hold no less than 12.2% of the outstanding Resulting Issuer Shares on a fully-diluted basis.

It is anticipated that prior to the closing of the Proposed Transaction, (1) Pala Investments Limited (“Pala”) is expected to convert a material portion of its principal amount US$18,837,500 convertible indebtedness (plus the interest and fees accrued thereon) into common shares of the Company and thereafter forgive or assign any remaining indebtedness (including any interest and fees accrued thereon), and (2) Ranchero will complete a brokered private placement (the “Concurrent Financing”) of subscription receipts of Ranchero (each, a “Subscription Receipt”) at a purchase price of at least C$0.45 per Subscription Receipt for aggregate gross proceeds of up to C$5,000,000, subject to an over-allotment option exercisable by Haywood (as defined below) for an additional C$1,000,000 of Subscription Receipts at any time up to 48 hours prior to the closing date of the Concurrent Financing.

Each Subscription Receipt will entitle the holder thereof to automatically receive, upon satisfaction of certain escrow release conditions, one Ranchero Share, which shall immediately be exchanged for Resulting Issuer Shares upon completion of the Proposed Transaction. Ranchero intends to use the proceeds of the Concurrent Financing for exploration and development of Ranchero’s properties in Mexico and for working capital and general corporate purposes. Ranchero has entered into an engagement letter with Haywood Securities Inc. (“Haywood”) dated October 30, 2020 pursuant to which the Company will engage Haywood as sole agent and bookrunner to locate purchasers in the Concurrent Financing on a best-efforts agency basis. In consideration for the services to be performed by Haywood, Ranchero will:

(a)	pay Haywood a cash fee of 6.0% of the gross proceeds of the Concurrent Financing, excluding the sale of up to $3,000,000 of Subscription Receipts to purchasers identified on a list of purchasers consisting of strategic investors and business associates of Ranchero (the “President’s List”); and
(b)	issue to Haywood non-transferable compensation options of Ranchero (each, a “Compensation Option”) entitling Haywood to purchase that number of Ranchero Shares equal to: (i) 6% of the aggregate number of Subscription Receipts sold pursuant to the Concurrent Financing to purchasers not identified on the President’s List, and (ii) 3% of the aggregate number of Subscription Receipts sold pursuant to the Concurrent Financing to purchasers identified on the President’s List. The Compensation Options will be exchanged pursuant to the Proposed Transaction for non-transferable compensation options of the Resulting Issuer (each, a “Resulting Issuer Compensation Option”). For a period of 24 months from the closing date of the Proposed Transaction, each Resulting Issuer Compensation Option shall entitle the holder thereof to acquire, at an exercise price equal to the purchase price of the Subscription Receipts under the Concurrent Financing, that number of Resulting Issuer Shares as were exchanged for each Ranchero Share on closing of the Proposed Transaction.

It is anticipated that the Concurrent Financing will close on or about the end of November 2020.

The Proposed Transaction is subject to a number of terms and conditions, including, but not limited to: (i) the equity interests in the Company’s Australian subsidiaries having been transferred to third parties pursuant to insolvency proceedings under Australian law or otherwise disposed of, (ii) all indebtedness held by Pala in the Company shall either have been converted in accordance with its terms, assigned to Ranchero or forgiven by Pala such that the Company has been released from all liabilities associated with any Pala indebtedness, (iii) as at the closing of the Proposed Transaction, the Company will have no payables (less cash) other than ordinary course trade payables not to exceed an agreed amount and any expenses incurred by the Company in connection with the Proposed Transaction, (iv) completion of the Concurrent Financing and receipt of proceeds thereunder, (v) the approval of the TSXV in respect of the Proposed Transaction and the Resulting Issuer meeting the applicable minimum listing requirements of the TSXV, (vi) approval of the shareholders of the Company and Ranchero to the Proposed Transaction, (vii) the termination of the Company’s existing Mineral Property Option & Joint Venture Agreement with Bear Mountain Gold Mines Ltd. (the “Bear Mountain Agreement”), (viii) the execution of a definitive agreement in respect of the Proposed Transaction (the “Definitive Agreement”), (ix) the completion of mutual due diligence, and (x) receipt of any required third party consents.

It is currently anticipated that the Proposed Transaction will close in late December 2020 or during the first quarter of 2021.

Trading in common shares of the Company will remain halted until the resumption of trading is approved by the TSXV in connection with the completion of the Proposed Transaction. Further details concerning the Proposed Transaction and other matters will be announced if and when a Definitive Agreement is executed.

In connection with the Proposed Transaction, and subject to TSXV approval, the Company has agreed to cause Resulting Issuer Shares representing 0.793% of the Resulting Issuer to be issued to a third party in respect of a finder’s fee payable (the “Success Fee”). Such Success Fee shall only become payable upon the successful completion of the Proposed Transaction and shall compose a portion of the 12.2% interest in the Resulting Issuer attributable to existing Melior shareholders.

On October 30, 2020, the Company was provided with a notice of default under the Bear Mountain Agreement for non-payment of the first $25,000 instalment payment owing thereunder. Pursuant to the terms of the Bear Mountain Agreement, the Company may cure the default at any time within 60 days of receipt of notice by payment of the defaulted amounts owing thereunder. In the event the Company does not cure the default within such 60-day period, the Bear Mountain Agreement shall automatically terminate on December 31, 2020 in accordance with its terms.

Information Concerning Ranchero

Ranchero is a private company incorporated under the Business Corporations Act (British Columbia).

Ranchero acquired 99.9% of the shares of the Minera y Metalurgia Paika SA de CV (“Paika”), which owns certain mining concessions located in Sahuaripa and Yecora, Sonora, Mexico (the “Property”), pursuant to a purchase agreement dated June 5, 2020 between Ranchero and the previous shareholders of Paika.

Description of the Property

The Santa Daniela concessions composing the Property are located within the heart of the Sierra Madre Occidental gold-belt in eastern Sonora, Mexico. Nearby operating gold mines include Alamos Gold’s Los Mulatos mine, and Agnico Eagle’s La India and Pinos Altos mines.

The 22,367-hectare concession block is held 99.9% percent by Ranchero.

Under previous ownership, the Property had been evaluated and initial discovery drilling conducted at the Maíz Azul, El Rincon and Mesas Coloradas prospects within the concessions. Drilling at Maíz Azul resulted in a new gold discovery and subsequent efforts have been focused there. The historical drill results include as follows:

Drill Hole	From (m)	To (m)	Length (m)	Grade(Au gr/t)
MA-18-01	108.45	122.05	13.6	0.84
MA-18-02	115.55	128.90	13.35	0.56
MA-18-02	185.60	187.70	2.10	7.94
MA-18-03	71.90	108.90	37.00	1.56
Includes	94.25	108.90	14.65	3.74
MA-18-04	115.90	129.50	13.35	0.50
Averages are calculated on intervals greater than 0.1 g Au/t. Assays were capped at 10g Au/t. The intervals were calculated from existing logs and checked against primary assay certificates. No check samples have been collected but standards and blanks were inserted into the sample stream.

The foregoing exploration results are historical in nature and neither the Company nor Ranchero has performed any quality assurance or quality control measures in respect of these exploration results. Nevertheless, Ranchero has re-logged all drill core and selectively resampled certain intervals, which resampling was in accordance with reported results.

Since becoming involved in the Property in early 2020, Ranchero has begun an extensive review that includes re-logging of all drill core, new geologic mapping and three-dimensional modelling at Maíz Azul. It is now ready to begin a 13,000-meter drill program in two phases to confirm historical results, test newly identified targets and begin a resource definition program.

Ranchero has also begun a reconnaissance program of the entire concession block based on a proprietary analysis of satellite imagery to determine hydrothermally altered areas. Follow-up field visits are underway and have located at least one new area of potentially mineralized rocks similar to Maíz Azul.

As a condition of the Proposed Transaction, Ranchero is currently working to complete a technical report for the Property pursuant to the requirements of National Instrument 43‐101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).

Management and Board of Directors of the Company on Completion of the Proposed Transaction

Upon closing of the Proposed Transaction, the board of directors of the Resulting Issuer is expected to consist of Travis Miller, Gustavo Mazon, Steven Ristorcelli and William Pincus.

Mr. Miller is a successful entrepreneur with a strong background in finance and capital markets. He has a proven track record in successful business development, strategy and equity financing. He is the co-founder of Blue Marlin Capital Group as well as the Co-Founder and Director of Tonogold Resources. 

Mr. Mazón is the CEO of the Mazón family group of companies. He is an experienced executive and successful entrepreneur with a strong focus in growth. He is an expert in good management practices and control implementation. He has had exposure in a wide variety of industries and engaged in large-scale infrastructure projects. He is a director of Tonogold Resources. Mr. Mazón holds a Bachelor of Business and Finance from the ITESM in Monterrey, Mexico. 

Mr. Ristorcelli has over 40 years of experience in minerals exploration and development.  For the last 29 years, he has been a principal of Mine Development Associates.  His primary focus has been in deposit modeling, identifying and correcting sampling problems, conducting geologic evaluations, and directing exploration programs. He is a “Qualified Person” as defined in NI 43-101. He has worked with a wide variety of commodities including but not limited to gold, silver, copper, base metals and cobalt. 

Mr. Pincus was Founder and President of Esperanza Resources that discovered the Cerro Jumil (Mx) and San Luis (Peru) gold deposits. He has worked extensively in Mexico and elsewhere in South America. He is a graduate of the Colorado School of Mines with M.Sc. degrees in Geology and Mineral Economics. 

He is also a fellow of The Society of Economic Geologists and is a Certified Professional Geologist by the A.I.P.G. Mr. Pincus is a “Qualified Person” as defined in NI 43-101. He is also fluent in Spanish.  

Mr. Pincus is expected to be the President and CEO of the Resulting Issuer, and the other senior officers of the Resulting Issuer will be selected in due course prior to the closing of the Proposed Transaction. On the closing of the Proposed Transaction, all of the existing directors and officers of the Company are expected to resign, with replacement officers appointed as determined by the new directors of the Resulting Issuer.

Shareholder Approvals

The Company and Ranchero intend to seek shareholder approval for the Proposed Transaction and related matters as, and to the extent, required in accordance with the policies of the TSXV and applicable securities laws.

On behalf of the board of directors of the Company:

Martyn ButtenshawInterim Chief Executive Officer

For further information, please contact:

Martyn ButtenshawInterim Chief Executive Officer+41 41 560 9070info@meliorresources.com 

William Pincus, a qualified person as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects and the President and Chief Executive Officer of Ranchero, has reviewed and approved the scientific and technical disclosure in this press release.

This news release does not constitute an offer to sell and is not a solicitation of an offer to buy any securities in the United States. The securities of the Company and Ranchero have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws unless pursuant to an exemption from such registration.

Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to, the completion of satisfactory mutual due diligence, the negotiation and execution of a Definitive Agreement, and TSXV acceptance and shareholder approval of the Proposed Transaction. The Proposed Transaction cannot close until all necessary shareholder approvals are obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

The TSXV has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this news release.

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.

Cautionary Note Regarding Forward Looking Statements

This news release contains certain forward-looking statements. 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, using words or phrases such as “expects” or does not expect”, “is expected”, anticipates” or “does not anticipate” “plans”, “estimates” or “intends” or stating that certain actions, events or results “ may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be “forward-looking statements”. Forward-looking statements contained in this news release may include, but are not limited to, the Company’s intended consolidation, the terms, structure and completion of the Proposed Transaction, the intended conversion of outstanding convertible indebtedness of the Company, the terms and completion of the Concurrent Financing, including the anticipated closing date thereof, termination of the Company’s Mineral Property Option & Joint Venture Agreement with Bear Mountain Gold Mines Ltd., the execution of a Definitive Agreement, payment of the Success Fee, if applicable, the exploration on the Property, and the management and board of directors of the Resulting Issuer on completion of the Proposed Transaction.

Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to materially differ from those reflected in the forward-looking statements. These risks and uncertainties include, but are not limited to: liabilities inherent in mine development and production; geological risks, risks associated with the effects of the COVID-19 virus, the financial markets generally, the results of the due diligence investigations to be conducted by the Company and Ranchero, the satisfaction or waiver of the conditions precedent to the Proposed Transaction, the ability of Ranchero to complete the Concurrent Financing, and the ability of the Company to complete the Proposed Transaction and obtain requisite TSXV acceptance and shareholder approvals. There can be no assurance that forward-looking statement will prove to be accurate, and actual results and future events could differ materially from those anticipate in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.